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Business Beyond Borders

Business Beyond Borders

November 21, 2012
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" VoD revenues represent close to 30% of our income, where DVDs have slipped closer to 20%. It has been a valuable part of the replacement of DVD income to us. -Chris Norman, Harmony UK "

Hardcore content is produced and consumed internationally — that is, mostly in Europe — with at least as much gusto as in the U.S.A. But it’s a more heterogeneous market, thanks to different countries, languages, laws, customs. That multiplicity can create obstacles, but also opportunities.

The verdict from Peter Reynolds, an American known for his foreign sales expertise, is that the European porn market is “healthy, even though there are challenges that all the companies face.” Reynolds’ Plaid Bag Media has for several years marketed content in Europe for a variety of clients, primarily Adam & Eve, and he knows the playing field.

For specifics on both the health and the challenges, XBIZ contacted some major players in international porn, starting with the men in charge of three of the top brands, Marc Dorcel, Private and Harmony UK. They agreed that, yes, DVD sales have declined in Europe as they have in North America.

Gregory Dorcel, CEO of Paris-based powerhouse Marc Dorcel, said: “The DVD downfall is as important in Europe as in the U.S., if not worse. But the volume is quite different: in the U.S., you can go from 3000 sales per title to 700, whereas in Europe, the market is fragmented on 20 countries. Therefore, each of these countries sees its potential go down from 1000 sales per title to 300. This is quite an issue, as 300 sales per title is not a profitable model and many distributors, wholesalers and shops have had to stop their activities. This is a vicious circle: the phenomenon has therefore speeded up.”

Charles Prast, president and CEO of Barcelona-based Private, agreed. “As in the U.S., the market for DVDs has been in sharp decline for a number of years.” But he pointed out: “Nevertheless, the lack of hardcore television in the U.K. and Germany, as well as the slow uptake of digital cable in many countries has resulted in continued DVD sales by recognized brands such as Private to the ‘lean-back’ audience.”

He also emphasized that “Private’s DVD sales have not declined as dramatically as the overall market. However, margins have been squeezed due to the glut of product which in the past would not have merited DVD distribution. Although we have been affected, our DVD business is still a strong and profitable line for us.”

“DVD sales have declined mostly all over,” said Chris Norman, CEO of Harmony UK. “Certainly here in the U.K. market I think it reflects what is happening in the U.S.A. Germany seems to edge forward in sales and is possibly the only of my European markets that continues to grow in DVD sales. Nothing that’s exceptional, but a steady, buoyant increase. As a European studio I think Harmony also benefits from ‘stable’ European sales; the Europeans tend to close ranks and support the business close to home over importing from the States in abundance.”

Nick Spillum, new media director of Portugal-based VivThomas.com, said the DVD market is “dwindling faster than ever in Europe. Many companies have switched to digital only or as least a combination of digital and physical DVD distribution. We offer full HD films for download alongside our DVDs in our online shop.”

Regional Markets

European producers definitely aim for their own market, according to Plaid Bag’s Reynolds. “We’ve also seen a rise in regional companies producing for their region. There’s obviously German companies aimed at the German market, Dutch for the Dutch, etc. But generally speaking European producers have Europe as their target. They’re not making content for the American market, although they’d like to. You pretty much find that most Euro producers want to crack the American market. Only a few have.”

“Very few European companies have taken that step to find a U.S. distributor,” said Helen Clyne, managing director of A2Z Services of Krefeld, Germany. “I would say largely due to compliance issues.”

A2Z, founded in 2004, represents Hustler, Penthouse, Pulse and Smash Pictures for DVD sales. They’ve had particular success with “true HD, 3D and Blu-ray releases,” starting with Hustler’s “This Ain’t Avatar XXX” in 2010. “Europeans, especially German and Swiss, have always been early adopters of new technology.” She also cites the “Fifty Shades of Grey” phenomenon as a sales booster for European adult stores and websites. “We are having tremendous success with the Smash Pictures XXX adaptation.”

“Private,” said CEO Prast, “has always considered Europe our core market where our brand benefits from strong recognition. As a result, the vast majority of our sales occur in Europe. Our strategy, while giving high priority to Europe, is to deliver to consumers globally. Execution of this strategy is greatly facilitated by technology and cross platform sales. In general, European adult studios generate sales in the U.S. in line with sales generated by mainstream foreign films. In other words, strong sales within a niche segment of the market.” He stressed that these are not considered supplemental sales but “sales to a strong and stable market segment.”

Norman, on the other hand, pointed out that DVD income from the U.S. is, for most European studios, “a supplementary income. With margins so fine these days it’s still an important part of month-to-month income, but certainly not considered a primary revenue.”

North American Sales

According to Gregory Dorcel, “Very few European companies produce content that is interesting enough to cross borders, and very few can afford to market their films in the U.S. Moreover, the U.S. is really not open to foreign content; historically, U.S. cinemas and TV channels have never been used to broadcasting foreign movies. They’re not used to dubbing.”

He added that although Dorcel’s DVDs have been U.S.- distributed for 15 years by Wicked Pictures, American cable and VoD buyers “seldom work with foreign companies and content; they’re not used to it. In terms of content, the States are a bit of homebodies.”

“As European companies rely more on web income, naturally their demographics are going to spread into the U.S.,” said VivThomas.com’s Spillum, “It depends on what companies you’re talking about, as some companies produce in one language and design their product just for their home market; others are more internationally oriented.”

The distribution deal his company just signed with Girlfriends Films “promises to up our exposure in the U.S. DVD market and other areas of the globe. Originally our primary market was the U.K., but when we launched our pay site in 2000 this slowly changed and now the U.S. is our primary source of sales from our pay site, www.vivthomas.com.”

Smaller Companies In addition to the big players, such as mega-distributors Scala and Playhouse and the German-based Beate Uhse retail network, there are many smaller companies that, according to Reynolds, are “doing a good job, all across Europe. That’s where the market is. They’re still rolling along.”

“The big guys kind of put you on the backburner,” said Moose, vice president of Girlfriends Films. That’s why Girlfriends owner Dan O’Connell remains loyal to the “mom and pop” distributors who welcomed his product when he first took it to Europe. “We’ve had opportunities to go with the big distributors over there, but we can’t abandon the people who gave us our start.” They’re the reason the Euro market now accounts for “probably 25%” of Girlfriends’ DVD sales.

International Down Under

When talking “international” you can’t overlook Australia-New Zealand, the only major porn market outside of North America and Europe. According to Michael Bassett of Cal Vista Australia, that market is “experiencing the same declining trend in DVD sales. When I first heard of this in the E.U. and U.S.A., the decline hadn’t commenced in Australia, we were still selling strongly. I think it took 12 to 24 months after the U.S. to kick in here.”

To cope with the decline, Cal Vista has “adjusted the entire back catalogue structure, we’ve reduced the amount of titles we release, we’ve reduced the amount of studios that we carry and we’ve had to reduce costs and retrench staff associated with media editing, production and distribution.”

Unlike Europe, Australia does not produce homegrown content. “The laws here are prohibitive and the environment definitely not conducive,” Bassett said.

New Revenue Streams

“Everyone is looking at all the other revenue streams,” Reynolds emphasized. “Adult content is still in demand, it’s just the delivery methods that have changed.”

Private’s Prast confirmed that assessment. “VoD continues to become more and more relevant to our Internet, cable TV and IPTV clients, and Private’s brand recognition on a pan-European basis is a significant selling point to operators and end users alike.”

Harmony’s Norman agreed. “VoD in both its online and broadcast/set-top box offerings is certainly an increasingly important part of our revenue. VoD revenues represent close to 30% of our income, where DVDs have slipped closer to 20%. It has been a valuable part of the replacement of DVD income to us.”

“Europe is still a very formidable market,” Reynolds concluded. “I feel positive about where it’s going. It’s definitely not in decline.”


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