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An Industrial Revolution

An Industrial Revolution

March 18, 2009
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" The profitable pairing occurs when the consumer is sold a ticket to an inherently unpiratable service "

Every January members of the adult entertainment business gather in Las Vegas for the Adult Entertainment Expo, the AVN Awards and Internext show. The yearly meeting of thousands of adult business owners, their staff, porn stars, wannabe performers, attorneys, fans and other participants has become something akin to a tribal ritual where the industry introduces new products and innovations, recognizes the achievements of its members, does a hellava lot of business, and parties even more.

This year, as usual, I made my annual pilgrimage to Sin City to speak on legal panels, help my clients negotiate deals and generally hob knob with my fellow legal wizards.

But from the start, I noticed that this year's gathering had the look and feel of what I can only describe as a kind of intense ambivalence. In fact, if this year's shows were reflective of the industry as a whole, I'd say they revealed that the adult business currently has a split personality. Everywhere one could see and feel the exuberant celebration of the end of the Bush Administration, and with it, years of living under the constant threat of widespread criminal prosecutions. But at the same time, seemingly everyone was also expressing great stress and trepidation regarding the economic hardships and uncertainties facing the industry due to a deepening recession that is exacerbating the problem of shrinking revenues due to a free content glut and rampant piracy.

But this "best of times, worst of times" backdrop could not have been a better setting for AEBN to introduce the first truly revolutionary adult entertainment adaptation of high technology since the advent of the World Wide Web. That technology, known as haptics, involves the sensing, digitization, transmission and regeneration of tactile or "touch" sensations. The industry's first truly haptic product, called "Real Touch™", was debuted by AEBN at the Adult Entertainment Expo where I can accurately and proudly say was simply the hit of the show.

I make mention of the fact that I am personally proud about the successful introduction of the Real Touch™ technology because it is, in fact, the culmination of over five years of efforts by me, and a company called ISLLC, to bring the underlying heavily patented technology to an adult entertainment company.

But the reason why I have chosen to highlight the introduction of the Real Touch™ technology at this year's shows goes well beyond my pride and delight in AEBN's successful introduction of a product and technology with which I have been involved. I believe that the Real Touch™ product is one of the best examples of the kinds of solutions that are available to the industry to address the problem of diminishing value of adult content in a world where such content is literally freely available to consumers in unlimited quantities because of piracy and low production entry barriers. Here's why.

Since nearly the beginning of the Internet age, the greatest challenge faced by the content producing segments of the adult entertainment industry, and, in fact, all other content producers (music, motion pictures, software, etc.) is the development of a business model that profitably functions in a market where perfectly pirated copies of content is becoming ever more readily available, nearly instantaneously, and for free, to potential consumers via the web.

To address this problem, one model, suggested by myself and others for over five years, is predicated on the view that rampant piracy is inevitably a virtually unstoppable by-product of digitized entertainment content.

Acknowledging this likely reality, the business model myself and others have suggested can be best described as simply pairing piratable content with non-piratable or less easily piratable goods or services that can be profitably sold.

Put another way, the model utilizes either free content or the fact that a potential consumer will obtain the content for free (by stealing it, for example) as the means of affecting a profitable sale of another good or service.

In recent years, we have begun to see successful implementation of this type of model. For example, in the music industry, companies are partially compensating for traditional content sales revenue lost to piracy by increased revenue generated from participation in live show ticket sales at dramatically increased prices to the consumer.

Here the pirated music functions to introduce or promote a music artist to a potential consumer. The profitable pairing occurs when the consumer is sold a ticket to an inherently unpiratable service, specifically, the experience of attending the concert given by the music artist.

In the adult entertainment industry, over the last couple of years live chat companies and social networking sites have been successfully employing a variant of this model to pair free content at tube sites with the offering of their live services.

In one case, the inherently unpiratable experience is the live interaction with the chat performer. In the other, the inherently unpiratable experience is the hooking up with a person contacted through a social networking site.

In late 2003, when I was first approached by ISLLC to assist in their efforts to introduce remote sexual "touch" technology to the adult industry, I immediately recognized that the system would afford adult businesses an opportunity to create a similar piratable/non-piratable pairing. The haptic system envisioned, that was ultimately realized in Real Touch™, would allow for remote sexual contact between users.

One party would use a dildo-looking device with motion, suction and ultimately heat sensors that would detect and transmit information regarding how the device was fellated or manipulated in the vaginal or anal orifices. The other party at a remote location would use a device that would instantaneously transmit the information from the dildo device to a penis stimulation system using sophisticated modern gaming technology to reproduce the actions (motion, pressure, suction, heat, etc.) of the first user around the second user's penis.

Shortly after I was introduced to the patented technology, I quickly realized that ISLLC's haptic technology could, in fact, provide a dual means of pairing piratable content with non-piratable components: first, by pairing the non-piratable device with piratable content enabled to provide the touch experience, and second by pairing piratable recorded content with a haptically enabled live chat performance in the manner we now commonly see used by video chat companies with tube sites to market their currently non-haptically enabled video chat services.

Given the apparent instant success of the Real Touch™ product, judging by its reception at the Adult Entertainment and Internext shows, it may seem difficult to believe that virtually every major adult entertainment company I introduced the technology to over the last five years passed on it.

But that is exactly what happened until I introduced ISLLC and its haptic technology to AEBN, who to their great credit, got it. Now that so many adult production companies are signing up to have their content touch-enabled, or "hapticized," as I say, I am reminded of the fact that nearly every record label turned down the Beatles as well.

The Real Touch phenomenon is also illustrative of another set of opportunities available to, but relatively infrequently exploited by, adult entrepreneurs.

These opportunities are those that arise in conjunction with the fact that the adult entertainment industry has been and continues to be an early adopter of new technologies that often improves or reinvents such technologies. As such, opportunities have always abounded for the securing of patents by adult entertainment companies.

As one of the two licensed patent attorneys I know practicing in the adult entertainment law area (one of my partners being the other), I have had the privilege of helping many adult clients obtain valuable patent rights.

One, a well-known industry player, assigned his rights in one such patent portfolio for more that $10 million. I think that it is truly unfortunate that, like the many companies that passed on ISLLC's technology, so many innovative adult companies pass on the opportunity to protect and more broadly exploit their technology by obtaining patent rights.

Hopefully, AEBN's success with its tactile devices, which are subject to a very substantial patent rights portfolio, will motivate more companies to similarly seek and acquire patent rights of their own.

But above and beyond AEBN's introduction of the Real Touch™ device, I believe it is important to understand that the device is probably only the beginning of a real revolution in entertainment that is likely to have begun at this year's Adult Entertainment Expo.

I believe that what we are witnessing is something analogous to the revolution caused by the 1927 debut of the first "talking" motion picture entitled "The Jazz Singer."

The movie was the first to combine and synchronize audio and video and simultaneously stimulate both the visual and hearing senses of movie patrons.

Because the "talkies" were so much more "realistic" than silent films, Hollywood.

Gregory A. Piccionelli is an adult entertainment attorney. He can be reached at Piccionelli & Sarno at (310) 553-3375 or at greg@piccionellisarno.com.


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