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Pulling in Profits From Foreign Licensing

Pulling in Profits From Foreign Licensing

November 19, 2009
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" One content distribution platform that’s taken on increased importance is international licensing. "

With the rise of online and DVD piracy accompanying the sales slowdown brought on by the current recession, more and more adult production companies are feeling the pinch. Both newer startups as well as old stalwarts remaining from the Golden Age of porn are finding their profit margins shrinking beyond what they imagined possible, even as they struggle to rebrand their company images to an ever-changing landscape driven by unpredictable trends.

While some companies have adapted well to the fierce competition, others have put on a happy face while doing their best to simply stay afloat. Yesterday’s burgeoning DVD market has slowed, and despite technological advances such as Blu-ray, it will continue to dissipate with the rise of streaming clips, cell phone content, and IPTV.

One content distribution platform that’s taken on increased importance is international licensing. From hotel rooms abroad to native satellite and broadcast systems, the world of licensing content in foreign territories represents lucrative markets that can be tapped by synching up with a content broker or licensor that has contracts to supply these systems with adult content.

“We are seeing the last days of selling DVDs to a retail video store in the near future,” offers Marc Bruder, president of BRI & CED. “The times where a producer would sell 20,000 units and receive six-figure broadcast royalties, then buy a block in the San Fernando Valley are long gone. The times they are a changing.”

That’s why more and more companies are turning away from being labeled “adult movie studios” and moving towards redefining themselves as content producers. Exploring every single available outlet for their product isn’t merely forward thinking business anymore. For some companies, fighting to stay relevant in an increasingly divergent and niche-saturated market, it’s the first step towards survival.

With the slightest adjustment to production, embattled companies are easily ready to spring back to life as content providers, throwing open a seemingly endless array of licensing possibilities both in America and abroad.

Still, turning content into cash isn’t simple, and dealing with other countries can be intimidating with their various languages and laws. Barring a law degree or an expensive and erudite attorney, the terrain can be too daunting to pursue, which is where having an expert on foreign licensing can be invaluable.

“The opportunities are really endless,” explains Amy Lew, vice president of acquisitions and licensing at Pulse Distribution. “Studios can license their content for cable/satellite broadcast, DVD rights by territory, IPTV, Internet VOD, paysites, download-to-own, clips on mobile phones, magazine publishing rights (image galleries for print or promo insert discs), hotel PPV, digital kiosks, and more.”

Navigating these rough waters and reaping in all the rewards can be trickier than it seems. The possibilities for taking advantage of these outlets may seem as overwhelming as they are unprecedented. Then again, if it were easy business to simply hock your wares and rake in the cash, you’d already be doing it.

Why Should I Use a Broker?
Now more than ever producers can take their pick between different brokers who can assist in licensing their content to foreign markets, most charging a modest fee for their considerable expertise. Reputable brokers have developed relationships over years and have a solid grasp on what different markets around the world are looking for.

They also know where the ceiling is and most are careful not to take on too many clients, picking and choosing studios based on what they think they can best sell abroad.

sales can still be lucrative for producers if they play their cards right,” Lew said. “Times are tough for everyone so it’s all about strategy.”

Lew explains that when producers or other agents sell for way less than market value in order to turn a fast profit, they often devalue not only their own line, but lower the bar for the entire industry. It’s just one of the reasons, along with navigating legal issues and knowing the terrain and profitability per market, that she believes it is more important than ever before to use a reputable broker.

“It puts the rest of us in a position to either significantly lower our license fees or watch the buyer go next door and get the titles from a competitor who will sell for what they want to pay,” Lew said. “I agree that it’s a buyers market, but there’s money to be made if the content is handled correctly, which is why you should use an experienced broker.”

David Kravis has been licensing adult product for decades through Coastline Licensing International, which was established in 1981 as Coastline Films, racking up deals worth more than $100 million over the years.

“The reason studios come to us is because we have relationships with buyers themselves,” Kravis said. “We have pipelines to different broadcasters in different countries and they look to Coastline to act as an aggregator to supply their content or programming needs, but also to give them some diversity, not just from one studio, but from one studio that’s good for gonzo, one that has features, another that might be all Asian or Japanese or black, so we act as a facilitator in putting together the content that the buyers are looking for. Subsequently we then become the pipeline to that buyer, so the studios come to us.”

What to Shoot
When it comes to what type of content to create, the answers vary, but only slightly. Different brokers have different opinions.

“Most savvy adult studios and producers who grant rights of their properties to foreign licensees will consult with their distributors prior to establishing their production schedule,” Bruder said. “Specifically, if an adult manufacturer has been creating six sex scenes in their 90-minute feature then perhaps at least one sex scene depicting anal interaction might be produced with a more graphic nature for the German, Western Europe and Latin markets.”

One thing they all agreed on was that going hard meant limiting the content’s sales potential. Sometimes softer, instead of harder fare, is what is called for to clinch the deal.

“With other territories in parts of Asia, Europe, Australia and the U.S. a softer version is needed due to censorship and broadcast restraints from government, clergy and civic organizations dictating how explicit the showcasing of sex will be allowed,” Bruder added. “The producer’s key is to stay tightly informed by the distributor and for the distributor to be constantly researching changing tastes and programmer requirements.”

Depending on the markets one is trying to hit, demands can vary wildly, sometimes even within a certain country. For example, nearly anything goes in Germany on the bookstore level, but broadcast content must pass a censorship board with tough standards, but for those that make the cut, it’s also one of the most lucrative territories.

“Canada has different boards in every province,” offers Ajax President Dani Duran. “So does Australia. Each country in Europe has different things they can show and the master is edited accordingly.”

Amy Lew further illustrates.

“The U.K. and Australia are two good examples of territories that only license soft versions for broadcast,” Lew says. “In Japan, mosaic, or layers of pixelation, must cover all genitals. Canada, the U.K., Australia and Germany all have strict censorship boards that must approve a title before it is released. In Germany the characters must have prior relations before having sex. In other words, if your movie has a scene where two people meet at a bar and then decide to leave and have sex, it will not be approved to broadcast.”

“Keep in mind also that many markets will need to re-edit your content to fit their country’s standards. A producer sells it to them as-is with the right to edit it. While they can’t make a new movie and there are no compilation or derivative rights (unless those rights are included), they can alter it so that it can be shown in their country.

What’s Hot Now?
While certain trends, like the rise of parodies, are catching consumers eyes, Amy Lew insists that feature movies — those with story lines — will continue to be the big winners across the board.

“The most popular genres right now are reality, transsexual, parodies and amateur or new girls,” divulges Lew. “But the easiest thing to sell are features, because they aren’t available like they used to be. Anything produced by Michael Stefano sells great because his titles are very broadcast friendly. Across the board, Devil’s Films and Cezar Capone titles sell themselves; Porn.Com is also becoming a favorite with our buyers.”

Bruder agrees.

“It seems that big budget adult movies with big contract stars still sells,” he points out, adding with a chuckle, “just ask [Digital Playground director] Joone.”

Lew adds that she still believes that consumers worldwide will continue to crave the American dream of pornography.

“I don’t think foreign-shot content has slowed the sales of American-made content much at all,” Lew explained. “Buyers always want American content with American girls. Now they just have the option to diversify their offerings with content shot elsewhere.”

For some, this sentiment leads to visions of a bright and shining new future. For others, the thought of foreign shot content stirs nightmares. Dani Duran thinks that the glut of foreign shot content has lowered the bar, adding to the decline of sales.

“Americans can now get free porn all over the Internet,” she bemoans. “This hurts everyone.”

But not everyone is afraid of foreign producers flooding the market with cheap, free content. Some believe that the advent of international adult product introduced to North America creates a wider adult selection for the consumer, thus expanding the reach of adult content in general.

“Adult titles of all categories and genres are produced in many parts of the world,” Bruder points out. “CED is fortunate to represent various broadcast rights for companies like Marc Dorcel in France, Pinko in Italy, studios in the Far East producing live-action and animated (Hentai) Asian adult content, producers based in Mexico, Argentina, Brazil and throughout Latin America, the Iberian Peninsula, Spain, Turkey, Russia and around the globe.”

What’s Next?
Despite all the doom and gloom of the current economy, and some companies packing it in, many foreign licensing agents still cling to the optimistic belief that the market will continue to grow and expand.

“There are always new developments in foreign licensing,” Lew said. “I can’t give away all my secrets! I welcome anyone interested in expanding in foreign markets to contact me at Pulse Distribution.”

When Bruder dreams of the future of providing clients with adult entertainment, his sights turn towards the heavens.

“The new frontier for adult foreign licensing seems to be strategic and concrete alliances,” Bruder posits. “Including affiliations and partnerships with telcos, mobile operators, IPTV platforms, cable stations and directly to the subscriber through Internet alliances. We are very excited about the new technological breakthroughs in Europe and parts of Asia with soon-to-launch plans in North and South America. One of the channels that CED books exclusively for many years is called SEX ZONE carried by SkyDirecTV Brazil which has recently launched in HD. All of Latin America will soon be HD capable and this is very exciting.”


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