Sex isn't selling

If the porn industry can't survive Web 2.0, what hope is there for mainstream media?

Diane Duke, a frank woman with short hair and big jewelry, was driving with her college-age son.

“Austin,” she asked him, “do you pay for your porn?”

He spluttered: “Um, yeah, I think so.”

His mother was unconvinced. “‘I think so’ means you don’t,” she chided, perhaps the one mom in existence disappointed not that her son looks at pornography but that he doesn’t plunk down a credit card beforehand, like an honest customer.

As executive director of the Free Speech Coalition, a Los Angeles-based lobby group for the porn business, Duke, who previously worked for Planned Parenthood, leads many of the industry’s anti-piracy efforts. She admits it’s difficult to convince the average consumer to feel guilty about cheating pornographers. For many viewers, it feels far less immoral if they’ve “happened upon” the material rather than paying for it. But that doesn’t change the fact it’s stolen property. This spring, her organization released a public service announcement warning: “If no one is willing to pay for the movies we make, they won’t exist.”

Predicting the extinction of an eons-old industry may seem hyperbolic, but the prognosis for the skin trade is indeed bleak. Smut peddlers once bragged their business was recession-proof; now they face tumbling profits, layoffs and salary cuts. Established producers report revenue has fallen by as much as 80% in the past three years. Playboy, the industry’s patrician grandfather, lost $1 million in the first quarter of this year and has shed more than 12% of its workforce. Vivid Entertainment, famed for its celebrity sex tapes, saw a 30% drop in its revenue last year, having once claimed $100 million in annual sales. Performers who commanded $2,000 for a single scene now make closer to $1,200. “Between 1986 and 2008, pornography could be a full-time job,” says Nina Hartley, an actress who started in 1984. “You could work full-time as performer, or in shipping, or in makeup. But we’re all hurting. It’s going back to being a part-time job.”

Porn’s woes can be partly blamed on the economy. In the years leading into the recession, estimates suggest the U.S. adult entertainment industry produced as many as 6,000 films annually, or roughly 16 new releases every day. “There was a bit of a porn bubble,” says Ernest Greene, a veteran director. This mad pace of overproduction could not be sustained as the economy worsened. Consumption dropped farthest in the United States and Britain. “It’s not hard to see that the guy who’s worried about losing his home or his job probably isn’t spending a lot of money on porn,” one producer noted.

But the industry is also the victim of a wider cultural shift. Media saturation has effectively killed the oldest truism in business: sex no longer sells. The porn industry’s current state is merely the most extreme evidence of that. The characteristics that once made sexual content a valuable commodity — the inaccessibility, the taboo — have evaporated. Cable television now offers naked vampires (HBO’s True Blood), naked gladiators (Starz’s Spartacus) and naked polygamists (HBO’s Big Love). Ads released last month for the Marc Ecko clothing line offer an excellent look at Lindsay Lohan’s breasts. Singers like Lady Gaga and Katy Perry wear outfits that would make Madonna blush. Even the CBC last year promoted its banal sitcom Being Erica with promises of a hot lesbian sex scene — and when the Mother Corp thinks girl-on-girl action makes acceptable prime-time viewing, it’s a sure sign that sex is no longer shocking.

This evolution has been swift, but dramatic. Consider that, two decades ago, sexy thrillers like Basic Instinct and 9-1/2 Weeks were considered the height of risque popular erotic fare; today, they would hardly raise an eyebrow. In 1995, Calvin Klein faced an investigation by the U.S. Justice Department on allegations its advertisements constituted child pornography; now, American Apparel can barely draw press coverage by using actual porn stars in porny poses in its ads. Just five years ago, Carl Jr.’s, an American burger chain, hiked its sales, albeit nominally, when ads featured a scantily clad Paris Hilton. Sales at the same chain tumbled 9% last year when it tried the same trick with a nearly naked Kim Kardashian. It’s hard to get excited about a nearly naked celebrity when you can check Perez Hilton’s gossip site on any day of the week for a “nip-slip” or an up-skirt shot of a nubile celebrity getting out of car. For the advertising world, our desensitization to sexual content poses creative challenges. For the porn industry, it’s a disaster. “Part of the dirty, naughty pleasure is gone,” says Hartley. “It’s become ubiquitous. The mere sight of a breast or a buttock is no longer enough to send people into a frenzy.”

As porn loses its illicit lustre, its producers also struggle with the same problems faced by other media companies. Piracy is endemic, and free content is easily available online, forcing many companies to give away their costly-to-produce goods. Like Hollywood, record labels and newspapers, the porn industry is now scrambling to reinvent its products. Some pornographers see future success in creating niche products, others think smartphones and tablet computers will offer new ways to attract consumers. But like mainstream media executives everywhere, pornographers now struggle with a simple question: once you give something away, will people ever pay for it again?

Contrary to the high-rolling images of Hugh Hefner and Larry Flynt, the daily lives of most adult entertainers are humdrum and middle-class. Their business is similar to any other industry, complete with headhunters, job fairs and trade conventions. “I’ve gone into Hustler in L.A. and you’d think you’re going into an insurance company,” says Eddie Kreider, who operates X Industry Jobs, a headhunting firm. Kreider manned a table at the Cybernet Expo, a convention for the Internet porn industry, staged at a San Francisco Holiday Inn in early July.

Participants sat at long banquet tables strewn with advertisements for the hotel’s breakfast buffet. Brownies were served at snack time. Folks talked about selling sex constantly, but it wasn’t until late on the second day that a nipple made an appearance. Even then, it was more awkward than sexy. Models for a photography seminar struggled into rubber in the corner of a conference room, hopping like vacationers putting on swimsuits at the beach. In the crowd, a mustachioed young man chatted with a trio of women. He sold bondage gear and dug in his pockets for free samples: clips, nipple suckers and a device resembling a metal hockey puck called an “electrogasm.” “Try it on your arm first,” he advised.

Steve Lightspeed, the nom du porn of Steve Jones, delivered the conference’s keynote. A dude in his 40s with a sparse goatee and a fondness for baseball jerseys, Lightspeed operates a string of solo girl websites, each focused on a particular performer. He opened with some mock advice: “Give up, quit, get out of the industry while you can. There’s no hope left.” The crowd chuckled, but the joke underlined the unsettled mood. AVN, an industry trade publication, once estimated the adult entertainment market in the United States was worth $13 billion, but more reasonable guesses place total revenue at the industry’s peak someplace between $3 billion and $5 billion. “It’s very well possible that domestic revenue has dropped below $1 billion,” says Alec Helmy, publisher of Xbiz, a trade journal of the status quo.

Lightspeed delineated myriad reasons for the industry’s woes: the economy, shady billing practices, poor customer service. He even argued the World Cup had occupied valuable time that consumers might otherwise have spent with porn. The list was exhaustive, but what most people fretted about was the item at the top: free content.

Since the Internet’s inception, pictures of naked women have been available for those willing to dig. “There’s an old saying that goes, ‘If you paid for porn, you flunked the Internet,'” says Patchen Barss, author of The Erotic Engine, an upcoming book on the way pornography shaped modern technology. Historically, finding the free content took time and effort. For many consumers, it was simply easier to pay for the content they wanted. These days, free porn is plentiful and easily accessible, thanks both to piracy and a competitive marketplace that forces companies to give away more and more content for free.

Technological advances have abetted this devaluing of pornographic content. Video-sharing sites with names like YouPorn and YouJerkIt make it just as easy to find free pornography as YouTube makes it to find videos of people’s cats. The content posted on these video-sharing sites, called “tube sites” by the industry, is a mixture of illegally pirated material, legally licensed material and amateur performances.

Porn has been at the forefront of every modern leap from VCRs to the Internet, but Web 2.0, dominated by these tube and file-sharing sites, is the first technology in a century that pornographers have failed to exploit. “There was a threshold that was crossed,” says Barss. “People wanted access that was fast, convenient and private. And [tube sites] became the quickest, most convenient and most private way to acquire pornography because there were no transactions involved.”

Tube sites make it easier for anyone with a webcam to share their sexual exploits, although few pornographers think amateur content is hurting revenues. “They’re just getting their ya-yas out. They’re not trying to make a living,” says Hartley, the veteran performer. But the fact is, there is a market for amateur content — socialites Paris Hilton and Kim Kardashian became full-blown celebrities when their sex tapes “leaked” onto the web — and it’s eating away at the professionals’ market share, much to their chagrin. “People think they can just shoot themselves having sex and other people will watch,” notes Duke, the industry spokeswoman, “but there really is a bit of skill in it.”

Stiff competition has forced the porn industry itself to offer more free content to attract customers. Producers used to offer 30-second teasers of their material for free. Now, 10-minute clips are commonplace and 30-minute productions are easy to find. “Companies started one-upping one another at a very rapid pace and more and more content was being given away as a means to gain more market share,” says Helmy. “Now we’ve reached a point where there’s such a glut of free content that it’s becoming very, very difficult to acquire new customers.”

Adding to the mounds of free content are the legion of pirates offering quick access to bootleg booty. Internet piracy is a problem for all filmmakers, whether they traffic in hardcore sex or fairytale princesses (or films that combine the two). Hollywood executives estimate movie piracy costs the U.S. economy more than $20 billion each year. In recently filed court documents, Barry Meyer, the head of Warner Bros., said that Sherlock Holmes, the Robert Downey blockbuster, was illegally downloaded 1.78 million times in the 30 days following its release last Christmas. Greene, the veteran porn director, has seen his films similarly stolen. Bootlegs of his 2007 film The Surrender of O, the second in a series based on the classic novel, appeared on the Internet on the film’s release date. When he checked, the first eight items offered on one search engine were pirated versions of the films, meaning consumers needed to dig for the legal ones. “We’re competing with ourselves,” he says. “Everything that we make is pirated within 10 seconds.”

The industry has gone to increasingly surreal lengths to stop the piracy. U.S. and Japanese porn studios last July sued 10,000 South Koreans whom they accused of being “heavy uploaders” of pirated pornography. South Korean prosecutors chose to charge just 10 people with breach of copyright, which carries jail time. The studios redoubled their campaign, announcing plans last fall to pursue charges against an additional 65,000 suspected pirates.

Perhaps the biggest challenge in pursuing these copyright cases isn’t the litigation itself but the sheer volume of piracy taking place. The Free Speech Coalition (FSC), the industry lobby group, in April launched a new anti-piracy program that enables producers to identify and track pirated copies of their material. In its first three months of operation, the program documented 287 million viewings of just the 1,700 pirated clips it monitored. And the initiative is a pricey one — it costs at least $36 each month to track a single title, a significant cost when you consider some studios have thousands of titles in their catalogues. “We told ourselves ‘People will always want porn.’ And that’s true,” says Greene. “But thinking they’d always get it from traditional sources? That turned out to be a dangerous fantasy.”

As with other media, it’s clear the survival of the pornography industry will only come with reinvention. This may seem an impossible task, but it’s happened before. With its superior distribution system, Apple’s iTunes wooed millions of music fans who may have previously stolen songs. And even in the porn industry itself, there are examples of entrepreneurs who have convinced consumers to pay for free content by offering them quality and convenience. For instance, there’s the Danni Ashe model.

Danni Ashe, an American stripper and nude model, discovered in the mid-’90s that unauthorized pictures of her were floating about Usenet groups, the Internet’s progenitor. The images were free, but surfers needed to waste time tracking them down. Seeing a business opportunity, Ashe launched Danni’s Hard Drive in 1995, a collection of photos of her ample bosom, and started to charge for subscriptions. By 2001, she was making $6.5 million in revenue. If it is to survive, porn must repeat her trick. “Everybody thinks the pornography makes money because they’ve got pornography to sell,” says Barss, author of The Erotic Engine. “What she offered was convenience. People had to work hard to find those pictures. She made it easy.”

Following a similar logic, others, like, are exploiting the Internet’s ability to deliver a highly specialized product to a niche market. The San Francisco-based company, which operates 17 websites like Sex and Submission, and Hogtied, may be the case study that demonstrates how porn can survive. The company has suffered its own setbacks, laying off 13 of its roughly 100 employees in 2009 and delaying plans for new sites, but nonetheless will continue growing, slowly, over the next few years.

Four years ago, purchased a former National Guard armoury in San Francisco for $14.5 million and converted the 200,000-square-foot building into a production studio. The armoury is listed on the National Register of Historic Places and maintains a shooting range and stockade, both now used as sets for the company’s films. (The Mission Creek, once used as a water source by soldiers, flows through the building’s basement.) A walk about the castle-like structure is part history lesson, part business seminar and part guided tour of other people’s predilections. After showing off the companies’ editing suites and marketing department, John Sander, vice-president of marketing and business development, opens a door that reveals a green-and-white wrestling ring, the soundstage for Ultimate Surrender, a site that crosses fornication with mixed martial arts. There is also a padded cell, a doctor’s office and a props room filled with medieval torture devices, crops and restraints. Sander, who once worked in supply-chain management, marvelled that each prop had a bar code. “Every whip and paddle has its own scan tag,” he says. “Everything here is scanned in and out.”

In the woodworking and metal shop, Sander gestured at a metal grill. “This is a cage,” he says. A worker corrected him. “It’s just a pot rack,” he said, explaining it was destined for the company’s kitchen. “Someone will be hanging from it at some point,” Sander said. “Everything’s a set at some point.”

Part of what may allow to thrive while more “vanilla” sites collapse is that it has found a niche for “discerning” consumers. The average visitor to a site is a little older, a little richer than the average porn consumer, according to Sander. “They’re really into this fetish, they know what they want and they’re willing to pay for it,” he says. is also investing in live-streaming sites, where customers pay to watch an event unfold in real time, or to interact with a favourite model. They are busy converting an entire floor of the armoury into a sort of Real World set for the fetish set; on the day of the tour, a crew was laying hardwood in the dining room. The next room featured oriental rugs, plush couches and X-shaped bondage rack in one corner. “We have some contract slaves already,” Sander explained. Moving to business models that capitalize on live events and interaction with models is one way the industry can battle the pirates. “Live feeds are impossible to steal,” say Greene. “If somebody wants to make a recording and sell it, so what? You’ve already made your money.”

Live streams aren’t the only technological advancements being touted as “Porn 2.0,” although some emerging technologies that seem like natural tools are being met with skepticism. Both 3-D television and haptic or RealTouch technology are seen as overly complicated. Consumers don’t want to waste time fumbling with special glasses or bodysuits. But smartphones and tablet computers both look promising.

Apple makes a show of blocking adult applications from its iPhone and iPad, even barring a version of James Joyce’s Ulysses that contained nudity. The puritanical streak, however, can’t stop its customer from visiting porn sites. TopBucks Mobile, a technical support company for the industry, created an iPad-friendly site on the same day the device launched. The company expected a couple of customers that day — more than 50 signed up, TopBucks’ Kristin Winters told Cybernet. Another firm, Pink Visual, celebrated the launch of the iPad 3G with a dedicated photo shoot in which 3G stood for “girl-girl-girl.” North American companies are looking to Japan, where wireless companies have complained their networks are strained by customers downloading adult movies to their phones. The appeal is self-evident. Going mobile means less chance of getting caught by your spouse.

And while Steve Jobs is clearly disdainful of the adult entertainment industry, his company continues to offer pornographers new ways to make money. As soon as Apple announced its newest iPhone would allows video conferences, ads appeared seeking models for video sex chats. Pink Visual plans to offer chats at a rate of $5 to $6 per minute. Video chats take niche marketing to its logical extreme — content is tailored for an audience of one. And, just like live feeds, “human interaction can’t be pirated,” says Sander. “Is that the future? It’s certainly part of our future.”

One-on-one video chats have the potential to smudge the distinction between pornography and prostitution, but it’ll also undeniably recapture some of the titillation once associated with the skin trade. In the 27 years since films like Deep Throat and Behind the Green Door nudged pornography toward the mainstream, sexual content has gone from scandalous to stale. “It’s become the background noise of the culture,” says Greene. Indeed, there are now reality shows starring Playboy bunnies. Teen comedies like The Girl Next Door and The House Bunny play the porn industry for gags. Luke Wilson will star this fall in The Middle Men, a film about the pioneering geeks who made it possible to buy porn online. Against this backdrop, few consumers can muster outrage at a nipple slip anymore; those who express shock usually belong to some sort of family-values group or work in talk radio.

At the CyberNet Expo in San Franciso earlier this summer, members of the adult industry gathered on the Friday night for a “Players Ball.” The ball, in truth, was folks in T-shirts and jeans sitting around a half-filled conference room and drinking beer. In the dimly lit room, a disc jockey played anonymous pop. There was a floor show: women in bikinis and what looked like neon mukluks dancing on a low riser. The women gyrated without enthusiasm, looking bored. The crowd wasn’t paying attention. There was nothing shocking to be seen here.