Porn Perspectives

When discussing the economics of the porn industry, a common question I am asked is how the Internet has impacted the ‘traditional’ industry. To the casual consumer or observer, it appears that one of the largest segments of the industry, the movie/DVD segment, is on the serious decline.

While it is certainly true that the Internet poses a significant threat to production studios and distributors, the threat is not fatal. It simply requires adjustment and reaction.

And the industry is doing it all wrong.

As a recent Financial Times article points out, the adult film industry has been responding to the Internet’s proffering of free, low-quality content by lowering production values and prices to compete directly. This, in turn, lowers profit margins. Another tactic is to prosecute known pirating channels like YouPorn and PornoTube. As we have seen in the film and music industry, this can have some impact, but at a great cost and questionable staying-power.

An alternate, more effective approach for movie producers is to differentiate the product from the junk freely available online.

A nugget of sheer brilliance:

"For years the industry has created very mediocre product and it has sold well because the consumer had no choice - it was all that was available. Now, the consumer has a choice and can get the mediocre content for free or for a very low price. We have to give consumers something they are willing to pay for."

This bit of wisdom comes from Ali Joone, founder of Digital Playground. Digital Playground is the company behind “Pirates,” the best-selling adult DVD of all time (released in 2006—right smack in the middle of the Internet Age). The movie was filmed in high-definition and included intricate costumes, special effects, and plot.

I would add to this the idea that brand differentiation can go a long way towards incentivising a viewer to pay for content. The more attached a consumer is to a specific woman, the less likely he is to be satisfied with grainy, amateur online porn.

This differentiation benefits female performers greatly. While actresses must contend with fervent competition and the brief lifespan of most careers, they also stand to make quite a bit of money—and if they play their cards correctly, extend their careers indefinitely.

Steven Hirsch, Vivid's chief executive, confirms my point. He says top stars can earn anything from $150,000 to $500,000 a year. Real entrepreneurs like Jenna Jameson have been able to earn more by producing their own movies.

Even actresses who are uninterested in running their own business can do quite well, if they are able to develop a distinct image. They command higher payments for movies, but earn several times this amount touring strip clubs as feature performers.

All said and done, the Internet certainly provides a challenge for the industry. But savvy producers and performers recognize this as an opportunity to innovate and rise above the fray with quality content. In the end, both the producer and consumer win.