The Advocate -- Seeking Interviews

[Advocate]

Hey everyone,

My name is Brian Smith and I am a writer for The Advocate magazine. I am currently working on a story about the gay porn industry. Lee was nice enough to invite me to join the group, thanks.

I would be very interested in speaking with anyone whose business is presently being affected by the economic downturn, by the over-saturation of content, by piracy, by 2257/DMCA laws/concerns, by the prevalence of free content -- and yes, I know that means most people.

I'm happy to speak on or off the record.

You can reach me at brismith@gmail.com.

Thanks for your time,
Brian

[Lee]

Brian,

What angle are you going for with the news story itself out of interest? Im sure that if we could get a little more background on how you ultimately see the story heading it would be a great help to many of the producers, paysite owners and content owners we have on the GWW Community.

Welcome btw, ive actually been trying to get someone from Advocate to post on the GWW Community for about 3 years now, hopefully you will be able to stick around and give us some advice on non-adult business related issues when it comes to publishing and other issues

Regards,

Lee

[Bill]

Yeah, what's the spin?

You read the recent WSJ article - think it was the journal, hope my memory isn't abandoning me - about the inherent problems in the free content model of the net?

No sorry - wrong article - that was Information Wants to be Expensive. http://online.wsj.com/article/SB123534987719744781.html which was pretty much your standard corporate polemic.

darn, sorry, can't find the link to this article - the thesis being the economic crisis will take the money out of the advertising model of the internet, forcing people back to the pay model or somehow otherwise completely changing the economics of intellectual property. maybe i can find it later...

Anyway, that same phenomena is smacking around the gay porn biz too.

[Lee]

You read the recent WSJ article - think it was the journal, hope my memory isn't abandoning me - about the inherent problems in the free content model of the net?

You know, i hate to flog an already rotten horse but i honestly wonder how much we would have been affected by the tanking economy if over the past 5 years we [the industry overall] hadnt been so quick to flood the net with free images and movies, slowly increasing in both quantity per site and quality per site.

Im almost certain that if for the last 5+ years we hadnt been migrated to beleive that more free content makes sales we wouldnt be feeling the effects we are doing right now across the broad spectrum of porn online.

The one thing people will (and have) always pay for is sex and liquor, yet it seems like people are still getting drunk but not spending like they used to when it comes to pornography, gay and straight.

I really cant help but think that despite all the warnings that have been posted by many over the past few years about the over-abundance of free adult content, we really have fucked ourselves long-term and there is absolutely nothing we're going to be able to do about it because most affiliates these days have the mindset that more quality and quantity equals more sales when it comes to 'free' content.

Regards,

Lee

[Bill]

Well, my feeling on that is that our best hope is going to be technological - basically, something like an open DRM and micropayments technology that is robust, secure, and as portable as the .jpeg.

Digitalism makes content that costs effectively zero possible - and when content costs nothing, content businesses are going to find themselves drowned in a sea of copies.

The problem with existing drms is that they are closed and unreliable. Nobody can trust them, and they tend to be too hardware or software dependent.

But if we could develop a drm that worked, that was fast and totally relaibel and opensource so that it could be ported to every kind of machine, browser, and viewer - that would be the killer ap of the next age of the internet.

Combine that with a real and workable micropayments system and we have the foundation of a new planetary economy.

But - we are no closer to that, apparently, than we were when this idea was first bandied about in the cypherpunks mailist in the 90s.

With a true open drm, the best copies of created content could be protected, while lower quality ones were released at lower costs or for free as advertising aids.

[Bill]

Found the article - was WSJ after all - The Economics of Giving It Away.

http://online.wsj.com/article/SB123335678420235003.html

Over the past decade, we have built a country-sized economy online where the default price is zero -- nothing, nada, zip. Digital goods -- from music and video to Wikipedia -- can be produced and distributed at virtually no marginal cost, and so, by the laws of economics, price has gone the same way, to $0.00. For the Google Generation, the Internet is the land of the free.

Which is not to say companies can't make money from nothing. Gratis can be a good business. How? Pretty simple: The minority of customers who pay subsidize the majority who do not. Sometimes that's two different sets of customers, as in the traditional media model: A few advertisers pay for content so lots of consumers can get it cheap or free. The concept isn't new, but now that same model is powering everything from photo sharing to online bingo. The last decade has seen the extension of this "two-sided market" model far beyond media, and today it is the revenue engine for all of the biggest Web companies, from Facebook and MySpace to Google itself.

[Advocate]

Thanks, Lee and Bill -- and thanks to anyone who takes the time to read and respond. Please excuse any naivety on my part, as my porn learning curve is still... (the puns in this industry are like a game of wack-a-mole)

Because of the complexity and uncertainty associated with the adult entertainment industry, I purposefully have not approached the story with a preconceived angle, other than trying to determine the general state of things...

I have, however, included several questions below and would welcome responses. Please e-mail me at brismith@gmail.com.

Thanks!

1) I was somewhat surprised to hear Phil Harvey's POV of the state of the adult industry when he gave the keynote address at the FSC meeting at the Xbiz conference a couple weeks ago:

"As far as I can tell, over a period of some 35 years, we're recession-proof. There may be other reasons our businesses are facing difficulties, but the economy does not seem to be among them.... Last year and the first few weeks of this year, our sales, while they're not booming and they're not growing, don't appear to have been impacted by the downturn in the economy at all..."

Do you agree with Mr. Harvey? How has YOUR business been affected by the economy, consumer confidence, credit tightening, decline in disposable income. (Since most adult entertainment companies are privately held, it has historically been very difficult to get hard numbers to support a case either way. Obviously I would welcome such data...)

2) I recently asked a group of college kids how they felt about porn. They unanimously agreed that porn is terrific -- and then unanimously agreed that porn is free. I then recounted the story to a 75 year old bartender who laughed and said "hell, I haven't paid for porn in years." Two questions: a) Do the demographic numbers in your business suggest that emotional attachments to tangible products (like DVDs) wanes amongst younger customers? b) if so, how can you create a long term business model if an ever-growing customer base believes that your product is free? Can the iTunes model work for porn? Will the $29.99/mo price point hold up as more and more sites continue to feature a seemingly endless pool of straight guys fucking for cash?

3) Is pornography art? Or is porn just a very profitable erotic masturbation tool? I ask this question in response to digital media entrepreneur Andrew Keen's contention that the Web 2.0 phenomenon is killing culture and assaulting the economy. He notes, "When amateurism is celebrated and anyone with an opinion can publish a blog, post a video on YouTube or change an entry on Wikipedia, the distinction between expert and amateur becomes dangerously blurred. We are facing the law of digital Darwinism, the survival of the loudest and most opinionated." Is amateurism sullying the art of pornography? Does classic porn has any relevance at all – the way that classic films and music do?

4) The Death of the Porn Star? There are some users I have interviewed who have over 6 million video views on xtube -- yet they have no interest in being paid a dime for their provided content. Has this affected the professional porn star? Did such a person ever exist? Is the porn star, as we know him, in danger of taking a back seat to – literally – the boy next door?

5) Niches and fetish -- many have said that the niche/fetish customer is the most loyal customer -- as close to guaranteed as you can get in this business. Do you agree? Are new fetishes being discovered or created? In 5 years will the naked guy popping balloons be as popular as the more traditional fetishes, like feet? Can companies or websites without big time name recognition compete in the vanilla sex market?

6) What does this industry look like in 5 years? What are the most significant factors? Mobile? Convergence? New technology like RealTouch and 3D? Live interactive?

[Bill]

Not bad questions. Some are a bit dated. The death of the porn star one is a debate that was happening last year, and started years ago with the invention of 'reality' - I guess it's still interesting.

and then unanimously agreed that porn is free. I then recounted the story to a 75 year old bartender who laughed and said "hell, I haven't paid for porn in years."

You'd have to be crazy not to be somewhat concerned about the proliferation of free and stolen content - that was pretty much the point of the wsj article.

But, the nature of porn consumption being what it is, there are still enough people who regularly reach the point of feeling "I want more like this, and if I pay for it, I might get it" to keep up prices.

Oddly, in some sectors the trend has been towards higher payouts from the paysite companies in the last 2 years - but thats another long story.

So, is the model of the 30-40 a month membership site threatened? Yes. But, paradoxically, many paysite companies are paying more for the surfers who do still pull out the plastic.

My bet is that trend will not continue - this year will bring some kind of change.

[Lee]

1) I was somewhat surprised to hear Phil Harvey's POV of the state of the adult industry when he gave the keynote address at the FSC meeting at the Xbiz conference a couple weeks ago:

"As far as I can tell, over a period of some 35 years, we're recession-proof. There may be other reasons our businesses are facing difficulties, but the economy does not seem to be among them.... Last year and the first few weeks of this year, our sales, while they're not booming and they're not growing, don't appear to have been impacted by the downturn in the economy at all..."

Do you agree with Mr. Harvey? How has YOUR business been affected by the economy, consumer confidence, credit tightening, decline in disposable income. (Since most adult entertainment companies are privately held, it has historically been very difficult to get hard numbers to support a case either way. Obviously I would welcome such data...)

First and foremost, you have to understand that for the most part, Harvey isnt in the business of 'internet porn' so for that reason alone i disagree with his assessment somewhat, Harvey runs a profitable and large physical product store (sex toys) both online and in 'real' bricks and mortar stores so his viewpoint that while sales are not booming so far in the first quarter of '09, you have to take in to account that he is selling sex toys, not 'porn' and physical goods product sales have been declining for several years, especially the DVD market place as the advent of VOD and PPV has seen great and greater growth in their market share over the past 5 years.

That being said, i agree that porn itself is recession proof however, i think there is a misnoma when it comes to this statement though, while it is certain there will always been online (and offline porn) the people buying it are clearly becoming not only more selective in their tastes, but also becoming aware that during the past 12 months and the coming 12+ months, their disposable income is no longer going to be guaranteed, they may lose their job at any given time and their credit card companies may cut their card balances to so i beleive we're seeing customers becoming a lot more discerning about what they are pulling their credit cards out for to make purchases and certain once a purchase has been made, they are not sticking around as long as they used to because of this perceived financial instability.

For this reason we're actually starting to see a trend where online porn companies are starting to work on methods to increase their profitability however, many of these companies also do not realize that as much as they would like to think they can control a members retention (how long they stay a member of any given paysite) they actually cant and for this reason a lot of companies are investing in to shooting more exclusive content, more updates to their members area and the harsh reality of it is, all they are doing is reducing their profits as they start to add more and more content to their sites which even after the economic downturn has ended, their members are going to continue to expect.

2) I recently asked a group of college kids how they felt about porn. They unanimously agreed that porn is terrific -- and then unanimously agreed that porn is free. I then recounted the story to a 75 year old bartender who laughed and said "hell, I haven't paid for porn in years." Two questions: a) Do the demographic numbers in your business suggest that emotional attachments to tangible products (like DVDs) wanes amongst younger customers? b) if so, how can you create a long term business model if an ever-growing customer base believes that your product is free? Can the iTunes model work for porn? Will the $29.99/mo price point hold up as more and more sites continue to feature a seemingly endless pool of straight guys fucking for cash?

In terms of the mindset by consumers that porn is free, unfortunately i beleive with the advent of web 2.0 several years back and the monumental growth of sites like YouTube, FaceBook, MySpace, et al, i beleive that todays 'new' internet users, and certainly internet users over the past 5 or so years have come to expect all the media they can get for free, whether that media be in the form of digital music downloads, pirated adult content from torrent sites or even DVDs that can be downloaded in minutes from places like The Pirate Bay, there has definitely been a growth in the mindset that consumers of porn feel they are entitled to get whatever they want for free when it comes to web porn, they do not realize that sometimes the studios creating this content is spending tens, if not hundreds of thousands of dollars on their latest DVD release, yet because it is available 'online' the perception is that it is of little or no value and thus should not be charged for.

As i mentioned above, specifically when it comes to physical product, dvds, toys, magazines, the market share for these types of pornographic products has been dropping over the past 5 years, more and more consumers are not wanting to be able to actually 'hold' a product, but rather use the download to own business model, digital media is the new physical product and yet,, while most people would not walk in to a Virgin MegaStore and steal a cart full of DVDs and walk out the door not expecting to have to pay for them, when it comes to the online realm, this is what consumers expect and do on a regular basis... Every time they download a pirated DVD, CD, porn scene.

Because piracy has become rampant, not only for the major Hollywood movie studios and record labels, but also for the owners of digital adult content over the past few years, as a company we are currently in the process of launching a DMCA service whereby users of the system can actively police their digital asset rights online when it comes to people sharing, download and stealing said digital content.

It isnt just a problem with piracy though, over the last 10 years the adult industry has pretty much fed the fantasy that all porn should be free, 10 years ago, you could not find a free porn site that had more than 20 pictures on it, heck, movies being used on free porn sites were unheard of, yet as more and more of the less than scrupulous companies (in the straight side of the industry no less) started to use and abuse their sites visitors, the demand for more and more to be given away for free grew and these days those promoting adult websites really do not seem to understand the concept of 'make them pay for pink'.

3) Is pornography art? Or is porn just a very profitable erotic masturbation tool? I ask this question in response to digital media entrepreneur Andrew Keen's contention that the Web 2.0 phenomenon is killing culture and assaulting the economy. He notes, "When amateurism is celebrated and anyone with an opinion can publish a blog, post a video on YouTube or change an entry on Wikipedia, the distinction between expert and amateur becomes dangerously blurred. We are facing the law of digital Darwinism, the survival of the loudest and most opinionated." Is amateurism sullying the art of pornography? Does classic porn has any relevance at all – the way that classic films and music do?

I beleive it can be both, in the right scenario. That being said 99.99% of internet pornography is just that, pure porn, pure fantasy, pure masturbation tool with little to no artistic merrit at all attached to it.

I think that the amateir vs. the pro discussion is also a very valid one, in the past few years we have seen countless 'nobodies' suddenly become famous overnight thanks to reality shows on tv and i beleive that the web has also made this possible to a certain extent especially sites like YouTube.

In the porn industry however, i do feel that there have always been two very different and very distinct audiences when it comes to adult materials, those that want to see the 'real' stuff as we (as producers) script it and those that want to see the 'real' stuff as uploaded by amateurs at places like XTube.

As for the place of 'classic' porn, yes, there is definitely a place for it and it is highly profitable, our ownn paysite http://www.retromale.com is constantly among our top 5 selling websites and it has been since inception.

4) The Death of the Porn Star? There are some users I have interviewed who have over 6 million video views on xtube -- yet they have no interest in being paid a dime for their provided content. Has this affected the professional porn star? Did such a person ever exist? Is the porn star, as we know him, in danger of taking a back seat to – literally – the boy next door?

The good thing here is that as a porn company owner, i know which of the two types i would rather have hitting my sites, because those looking for real amateur content are hardly ever going to pull out their credit cards thanks to being able to find a slew of free content in almost every imaginable (and some non-imaginable) taste, you want to see a guy jacking off in a clown outfit? XTube it, you want to see a dude getting penetrated by 2 guys at once whilst blowing 2 more guys? XTube it, you want to see a cute uncut college kid jacking off on to his motocross bike? XTube it.

There is no way that the professional porn companies can compete with places like XTube when it comes to the sheer variety of porn available to people visiting these types of video sharing websites, we can try, but we'll never get anywhere close to how popular these types of site are, but thankfully, we will also never get anywhere close to how much money these types of sites lose each and every day either.

For every $5 dollars spent on a site like XTube in costs, they are making (more often than not) only $1-$3 back, operating at a loss is no good for any business and because of this we are already seeing trends with companies moving away from the 'for free' business model on video upload sites.

5) Niches and fetish -- many have said that the niche/fetish customer is the most loyal customer -- as close to guaranteed as you can get in this business. Do you agree? Are new fetishes being discovered or created? In 5 years will the naked guy popping balloons be as popular as the more traditional fetishes, like feet? Can companies or websites without big time name recognition compete in the vanilla sex market?

Niches and fetishhes have been big money for many years, unfortunately most companies do not realize that niches and fetishes are more than just throwing a couple of pictures of a guy wearing leather, being tied up and whipped on a porn site.

New niches in the gay industry are being discovered (Is that really the right term?) and created (again, is this the right term either?) all of the time, i recently launched a private paysite that featured men taking showers, it sells fantastically well, when it comes to sites like Buster where he gets off on balloons i think we're always going to see sites like this, 'the classics' have a following no matter what their target demographic be, whether guys into watersports, fisting or even kissing (another of my private niche sites that work well).

So far as companies without a huge presence making money, yes they can, i know of several successfull individuals that have launch paysites in the last 3 years that have grown to become power houses in the industry, especially on the gay side of things, that being said, i beleive it is a lot more competitive on the straight side of the porn business because there is so much saturation of the same types of teen site, mature woman site, blowjob, facial, anal, site, etc...

6) What does this industry look like in 5 years? What are the most significant factors? Mobile? Convergence? New technology like RealTouch and 3D? Live interactive?

In 5 years time, we're going to have seen a significant amount of companies downsizing and merging together, from VOD companies all the way through to website operators, for companies to remain profitable in these economic and technological times, they are going to have to downsize their operations or merge with larger companies.

As site owners we're actually going to be going the way of full automation, many of us already embrace automation of our daily tasks as much as possible, whether it is adding new images or videos to our paysite members areas or building new free sites, galleries or adult blogs, we have scripts in place that enable us to concentrate on building our business whilst taking the tedious role of maintaining it out of the equation for the most part.

I would like to think that in 5 years time we're going to see less and less free content hitting the net but i truly beleive that this is never going to happen and stringly feel that within the next 12-24 months we're going to see a slew of companies actually starting to post entire DVD scenes or titles for free on their websites because of the misguided beleif that more free content being offered on their websites will translate in to more sales for them.

It is unfortunate but over the past 10 years i have seen the industry at its best and at its worst, increasingly more and more however the industry is becoming a cesspool, we need something to help clean our industry up, the industry that has made many of us successfull business owners, made many of us friends for life, made many of us understand that is isnt always all about the money but about something less tangible, something that you cant buy with a credit card or check, you cant walk in to a store and buy a sense of community, that only comes with working together closely to help one another build their businesses and better themselves/

I know i am fortunate to have met so many people over the years across a wide spectrum of business models in the adult industry, from that first tradeshow i attended to the last newbie that i greeted on GWW, we belong to something that many will never understand, we arent just a group of spotty teenagers in their bedroom or balding middle-aged guys operating out of their basements, we're serious business owners that have to overcome hurdles every day to remain profitable from both inside the adult industry and from outside it, but through it all, that sense of community will keep us going on, we'll keep running our businesses, we'll keep following the nonsensical laws that get passed bevcause quite frankly, in 5 years time, i still want to be here selling my smut to the masses, with my friends, talking about how 5 years ago we were told the sky was falling.

Oh and i do beleive this is my longest reply ever to a thread on GWW, excuse the typos, spelling and grammatical errors

Regards,

Lee

[Bill]

but thankfully, we will also never get anywhere close to how much money these types of sites lose each and every day either.

For every $5 dollars spent on a site like XTube in costs, they are making (more often than not) only $1-$3 back, operating at a loss is no good for any business and because of this we are already seeing trends with companies moving away from the 'for free' business model on video upload sites.

YAY for those losses!

I'm not sure we can really know how much money the porn tubes are making and losing - the porn tube owner/creators like to claim they aren't losing money.

Time will tell.

[Rich]

very cool i can not wait to see some porn article in advocate hehe