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Recession 2008 and the Adult Industry

Recession 2008 and the Adult Industry

December 26, 2008
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" This economy is the worst that I've seen in my life. "

This year has seen no shortage of turmoil on Wall Street. Bear Stearns collapsed and was sold to JPMorgan Chase. Lehman Brothers filed for bankruptcy protection, and Merrill Lynch was acquired by Bank of America after suffering losses of $51.8 billion in mortgage-backed securities. Wachovia Corp. (one of the largest banking institutions in the U.S.) was rescued by Wells Fargo. The Dow Jones Industrial Average has continued to plummet despite the financial bailout package that was passed by Congress on October 3 and signed into law by President George W. Bush that same day.

Many economists believe that the U.S. is experiencing its worst economic crisis since the Great Depression of the 1930s, and the question on the minds of people in the adult entertainment industry is, "What does all this mean for me?" The adult industry has a reputation for coping with recessions better than many other industries; some adult-oriented entrepreneurs have, over the years, theorized that the adult industry is recession-proof, or at the very least, recession-resistant.

But in 2008, there has been a lot of concern that the current global economic crisis could prove to be much harder on adult businesses than previous recessions.

Jeff Booth, president of the Los Angeles-based EroticUniversity.com, recalled that the adult industry generally performed well during the U.S. recession of the early 1990s. When a considerable amount of corporate downsizing was occurring in aerospace and other mainstream industries, many adult businesses continued to prosper.

But the 2008 recession, Booth asserted, is much worse than the recession that President Bill Clinton was facing when he took office in January 1993 – and Booth fears that the adult industry could be seeing an abundance of layoffs in the near future. "We're talking the worst economy since the Great Depression – there's no question about it," Booth stressed. "This is a terrible, terrible economy, and people know it. They know that things are really bad when they hear, 'Hey, you have to pony up billions of dollars – or maybe a trillion dollars – to bail out the economy.' When they hear that, they know things are apocalyptically bad.

"This economy is the worst that I've seen in my life. It's worse than previous recessions because of the weakness of our currency and the massive amounts of debt we've accumulated. We have a president who has run up the federal deficit more than any president in history; we have a war we can't pay for – and I don't think we can predict what will happen in the porn industry, because this economy is unlike anything we've ever seen in our lifetimes.

"Our economy has been brought to the brink by eight years of complete mismanagement and fiscal irresponsibility on the part of the Bush Administration, and it's going to take a lot of effort and a lot of pain to turn this ship around."

Does the 2008 recession challenge the theory that adult entertainment is recession-proof? Harlan Yaffe, president of the gay-oriented, Miami-based affiliate program PrideBucks.com, replied: "I absolutely think it does. In the recession of the early 1990s, you didn't have the pain at the gas pump every Friday and then have it compounded by even more pain at the checkout counter.

"This current recession – because so much of it is centered on the price of gas and the price of food – hits people in their pocketbooks on a weekly basis, which makes it much different from other recessions. Having to spend so much money filling up their gas tanks and then having to spend so much buying groceries immediately translates into less discretionary spending of any kind. The fact that banks are failing and that thousands of foreclosures are occurring every day – coupled with what's happening on Wall Street and the whole bailout – gives people so much bad news to process."

Proponents of the theory that adult entertainment is recession-proof argue that when times are bad economically, people need the escape that erotica provides more than ever. But Booth pointed out that even if financially embattled Americans do view porn as a necessity, they won't necessarily want to pay for it. Booth pointed out that with Americans (and people in many other countries, as well) facing so much economic uncertainty, adult webmasters need to be highly aggressive in their marketing efforts if they want their customers to keep choosing membership adult sites over free adult sites.

Booth added, however, that as bad as things are economically, the good news is that the adult industry still has plenty of astute, innovative, technologically savvy entrepreneurs – and those innovators are the type of businesspeople who are the most likely to come out ahead in the long run. That combination of technological savvy and business savvy, according to Booth, will continue to be a major asset for the adult industry.

"This is an industry that has always been at the leading edge of technology," Booth noted. "Look at the whole social-networking phenomenon, which is one of the most transformative things on the Internet; the adult industry was there first. Who knows what next great technological innovation is going to energize the porn industry? But you can be sure that some new innovation will energize the industry, because this industry has always been about technological innovation."

Creative marketing, Booth said, will be the thing that separates the adult companies that survive this recession from the adult companies that go out of business. Adult companies in the U.S. will need to realize that we are in a global economy and increase their marketing efforts in Europe and elsewhere, Booth said. They will need to have attractive value-added features on their websites, such as a strong social-networking component.

A Denver-based adult company that recognizes the need for creative marketing in a rough economy is the Holistic Wisdom Corp., which sells sexually oriented products online. Holistic president/founder Lisa S. Lawless, who also heads the National Association for Sexual Awareness and Empowerment (NASAE), said that the 2008 recession is making it harder and harder to be successful in the adult industry – and part of Holistic's current marketing plan has been to emphasize the sale of environmentally friendly sex toys. The green movement, Lawless predicted, will continue to grow, and she has been promoting Holistic as the go-to company for green sex toys.

Yaffe said that as bleak as the economic picture looks in 2008, there will eventually be a light at the end of the tunnel – and the adult webmasters who have the best marketing plans will ultimately be the ones who not only survive this recession, but also, grow and prosper. "What you need to do more than ever is optimize your websites so that the overwhelming thing a member says is 'yes,'" Yaffe stressed.

"Your models have to be hotter than ever, your tours have to be sharper than ever – and you have to make the user experience so great that when surfers get to your tour, they know that 'yes' is the way to go. You have to be smart so that you will still be around and will be there to capitalize when things get better. In bad economic times, maintaining a smart business model is more important than ever."


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