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.
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