VOD: The Place to Be
Many online sites like Adult DVD Empire, WantedList, Sugar DVD and Gamelink that started with online rentals are now seeing that VOD is the future — but still will continue to provide online rental and DVD sales, because they aren't completely dead horses yet.
Anh Tran, founder of WantedList, sums it up best about why VOD is the preferred method of delivery: "Getting a physical disc through the mail is a great thing, but at the end of the day, who wants to wait for a product? Especially porn, where instant gratification is one of the main driving factors."
AEBN is the biggest player to offer only VOD.
All these sites offer a variety of plans including per minute, downloads and streaming video.
Sugar DVD offers their customers the ability to purchase per-minute plans — this is best for customers who want to pay for what they watch. Gamelink, Adult DVD Empire and AEBN offer similar per-minute plans. Customers also are given the ability to download movies for three or seven days, or download-to-own. Prices for these services range depending on title, studio, genre and how new the title is. No matter what viewing or rental option the customer chooses, it's cheaper than buying the movie.
For strokers who just can't get enough porn and want an all-you-can-eat buffet, there are sites like WantedList, which charges its members a flat fee for unlimited access.
The Path of Profitability
How do the studios profit from sites like these? They generally get a percentage ranging from 20 to 50 percent. It's usually based on minutes watched and the agreed percentage — the more titles a studio has on a site, the popularity of the titles and the traffic that site attracts all figure into what how a studio can cash in.
Sites like WantedList, Sugar DVD and Gamelink offer revenue sharing programs. According to Gamelink's Jeff Dillion "it gives incentives studios to produce high quality porn. The more successful a movie is, the more successful the studio's revenue. Also, this model helps smaller studios develop a steady revenue stream month after month instead of the one-time fee some VOD platforms issue to studios for the licensing of content."
How can the studios track its revenues? AEBN, Gamelink and Sugar provide studios with the ability to track their stats. Sugar DVD has one of the best programs available. Studios are able to see the exact amount of views and time viewed for each title, along with how each title has performed historically.
"It is important to provide a great deal of transparency to our studios," said SugarDVD's content manager Justin Brand. "We encourage each and every one of our studios to test the system and make sure that the stats really do reflect their revenue in real time. Other online VOD/rental sites only provide monthly statements along with the checks. So, studios have to trust the amounts reported and paid to them are correct."
The Trust Gap
Of course, there are trust issues. Even when stats are supplied, it's still a matter of trust. And each studio has varying opinions about this hot button issue. Ralph Ceglia, owner of Platinum X, trusts sites like WantedList, HotMovies and AEBN, whether he can see the stats or not, and believes most are above board.
Dan O'Connell, president of Girlfriends Films, is pleased with the business model HotMovies provides. "Our first VOD contract went to HotMovies," he said. "It has been one of the best things we've ever done. We can easily check our stats. Payment is like clockwork. This year we signed on with a few other VOD companies such as AEBN and that's going well."
Digital Playground's President Samantha Lewis said "trust is always an issue. All we want is for everyone to be honest. We won't do deals unless we can see live stats."
Evan Seinfeld CEO of Teravision is quite wary. "It's a double-edged sword. As a producer, you are at the mercy of the online VOD distributor for an honest accounting. We have audit rights in all our contracts, and we have our own ideas about who we think has the 'best' reporting and the 'worst.' In the end, I imagine the whole business model will have to change, because most of the studios are really not happy, no matter what anyone says.
"The studios should be getting the lion's share of the revenue, not the VOD companies. It doesn't make sense for the studios to be fans of a medium where the distributor makes more than the producer."
Another important question in the VOD market is whether or not exclusive contracts are the most beneficial to the studios. Many studios believe non-exclusive is the way to go and an industry standard overall, including Graham Travis, general manager of Elegant Angel.
"We value all of our VOD partners equally, and overall we find it much more productive to have an even playing field," he said. "Ultimately, the bigger VOD sites seem to have established their own market base, so I think exclusives just limit your potential business on VOD."
WantedList never has exclusives. "I don't think exclusives have ever done any good for studios in general, even in mainstream," says Anh Tran.
Feed Me, Baby
Using the vehicles of webcams, photos/images, movies and feeds, sites like Sexentertain, World Wide Content, Webmaster Central, The Content Store and Matrix Content lease and sell content to paysites and adult webmasters so they can build their own sites.
In 1998, Matrix Content began offering magazines, design, tours, galleries, and free-hosted galleries and has one of the most expansive libraries (literally thousands of images). Not only used by webmasters, these images are used for online rental and VOD sites, as well. Within the last five years, they began to offer video content in HD along with webcam and live chat. Their exclusive licensing gives the clients 100 percent rights to the content. It's been a very profitable road — their anime and VCX vintage lines do really well, as well as the more hardcore content.
"Other than theft, copyright infringement and the incredibly high cost of producing content there really there are no drawbacks in producing content," Matrix President Stephen Bugbee said. The company shoots its own content for the libraries, but pay the studios 30 to 40 percent of gross revenues for the feeds.
Founded in 2004, The Content Store offers licenses on adult DVD titles for use in paid membership sites. Offering 26 studios' content including Mach 2, Metro and CalVista, webmasters can purchase the movies encoded or receive physical DVDs to encode themselves.
Studios want to do business with them because they know "they need to adapt or die," according to founder JStyles. "My studios individually sign each agreement and know of every single deal, so there are 100 percent checks and balances. They know who is licensing the content and they know what domains and affiliate programs have purchased the rights. Not only are the studios comfortable knowing that everything I do is 100 percent transparent, my clients know they are licensing from the most reputable source, the actual content owner."
Percentages vary according to a studio's popularity and other factors. Customers visit the site, shop the titles/studios, put them in their cart, download the agreements from each studios and sign them, and initiate payment.
When SexEntertain began 10 years ago, they were pioneers in content licensing. They offer two important services: providing content to webmasters and serving as a managed services provider to major adult studios creating and operating their leased content businesses including Vivid, Private, KBeech, Adult Source Media and Falcon Studios.
Working with the studios, they extend the life and value of their productions. Webmasters pay monthly fees based which studios they choose and overall consumption.
"Webmasters understand that they can more effectively convert surfers and retain members by including hugely popular brand name content inside their member sites," Sexentertain owner Michael M said. "The surfer is more willing to pull out that precious credit card and make a purchase when they see Vivid, Private, Hustler or Falcon content is inside the member area they plan to join."
Living up to their name, World Wide Content started licensing content in 2002 and is one of the biggest providers of VOD. With over 250 studios (and 50 exclusives), the company has more than 12,000 titles available to webmasters and online VOD websites.
Recently, WWC discontinued nonexclusive content distribution contracts with studios — exclusivity means more money because WWC can control the prices. There are three ways to purchase content from them: a onetime up front licensing fee, a monthly revshare basis or by charging per bandwidth usage of content through WorldWideFeeds.
According to Raffi Vartanian, CEO and coowner, trust isn't an issue with the studios.
"When we sign a studio, we treat it as a long-term relationship," he said. "We pride ourselves in always building and maintaining trust with our clients. In any business, you have to have trust in the companies you work with and our studios have 100 percent trust. We know that we are one of the most reliable content providers out there. At the end of the day, it's the people you work with and the companies you choose to partner with that will reflect on you. We have always been a good reflection of our studio partners and plan to keep it that way."
WWC currently is working on a new back-end for studios to check their stats that will debut at the end of September.
There is no doubt that VOD, streaming video and feeds are the wave of the future. With DVD sales on a downward spiral, studios are reviewing how they can continue to bring in the cash they used to. A weak economy and free sites like YouPorn.com have forced studios to rethink their game plan. Some of the studios are doing it for themselves and creating their own VOD websites.
Digital Playground uses high-quality product and production values to cash in on hosting its own VOD site. They license their movies out, but make considerably more on their own.
"There's so much content out there that it's hard for people to find us," Samantha Lewis said. "It's too much work for the consumer. We try to make it as simple for the end-user as possible. And having big-name talent like Jesse Jane, Shay Jordan, Stoya and Katsuni, also brings tons of traffic to their site.
Teravision knows the name Tera Patrick is a goldmine. It has several white-label sites and works on continuously building VOD traffic. "We make so much more money from TeraPatrick.com and our other paysites," Evan Seinfeld said. "People would rather get a membership and have total access to the entire Teravision library for a flat monthly fee, rather than visit a generic pay-per-minute site. Now I can't speak for other studios, but Tera Patrick is a nichedestination brand in herself."
Hustler also knows how popular its titles are, especially the "Barely Legal" line. HustlerVOD.com is hosted by AEBN. The choice to do this was simple, according to LFP President Michael Klein.
"If you have the resources, including people and software and time to do your own VOD site, that would be a wiser choice," he said. "But if VOD is just one part of your business and your activities are geared more towards other parts of the Internet world, then finding a strong partner with a lot of affiliates is wise move for a lot of content providers."
Studios like Girlfriends Films never considered hosting their own VOD. They do, however, link the movies on their site to HotMovies. "The technical process is incredibly complicated. Any glitches on the part of our customers would invariably have a negative impact on our image. We have a very active website. It got almost 18 million hits last month," said studio president Dan O'Connell.
Whatever vehicle studios choose to license content, they need to do as Stuart Wall, vice president of Smash Pictures suggests: "Hold on to your content. If you license it out create your own contract and always have a lawyer review it first." Hopefully the licensing of content will change with the times and become a fair playing field for everyone involved. Otherwise to quote Evan Seinfeld, "Something has to give or the industry will swallow itself." Here's hoping for a bright future.