Contributing to this explosion is the advancement of technology. It wasn't so long ago that cellphone minutes were over a dollar, and we were limited to seven broadcast channels. With the advent of the Internet, we are in a global community with instant communication. Every person with a cellphone can now capture video. Cable and satellite are providing hundreds of channels of programming. And this is just the beginning. What began in the hotel industry with video-on-demand (with mostly adult content) will soon be the wave of the future for instant access to programming for the consumer.
Entrepreneurial Spirit
In the last 10 years, the Internet has exploded. This has been due to the development dollars and entrepreneurial spirit of the adult industry. There would be no e-commerce, pay-per-minute technology or downloads without the unique engineering financed by the early adult pioneers of the web. Benefiting today are companies like Amazon.com and others whose technology is derived directly from the foundation built by the adult community.
For the first time, however, our industry is benefiting from the development of traditional business models, which is what leads into the idea that "porn is dead." We are seeing broadcast television pushing boundaries sexually. ABC, NBC and CBS ignored cable as a fad, and now networks such as HBO and Showtime are creating original content that has won awards for shows like "Sex in the City," "Queer as Folk," and "The L Word."
At the same time that traditional broadcasters are pushing the content envelope, the adult industry has increased its own budgets and production values. It is not uncommon to have fully developed scripts and stories today. Many productions are now being shot and designed to be edited in hardcore and softcore versions. Production audio is being mixed, just as in the feature industry, with separate dialogue tracks for duping into multiple languages.
So what does this mean that "porn is dead"? Just a few decades ago, the only venue for adult material was a seedy bookstore or theater in the bad part of your neighborhood. With the explosion of the Internet, the crossover of adult content into softcore versions and broadcast entertainment becoming more explicit, the lines are blurring.
With this crossover comes social responsibility. The brick-and-mortar adult bookstore was a specific destination, but search engine optimization has exposed us to a wide audience, hence putting the adult industry in the spotlight of concerned parents. Content is available on the web, via handheld PDAs and now even simple wireless devices like cellphones.
Thankfully, many studios and content providers operate responsible sites that are on the cutting edge of addressing these concerns. The RTA, ASACP and the FSC are but a few that help us self-regulate. As an industry, it is our responsibility to protect our own best interests by preemptively managing community standard concerns.
Many in the industry have breathed a collective sigh of relief that the Democrats are back in power, but there will still be a lot of jockeying for power over the next few years, and we probably won't see an extreme shift in policy.
Aaron Sorkin, a brilliant Emmy Award-winning writer, recently penned a script for the new series "Studio 60 on the Sunset Strip." In a battle with the Federal Communications Commission, one of the characters remarked on a newscaster who used the "F" word in a live newscast. It was considered obscene and subject to a multimillion-dollar fine. The network head replied that a few days of being embedded in a military unit would redefine what was truly obscene. This is a hopeful representation of what may be possible with the new Democratic leadership. Maybe we can address poverty, education, crime, drugs, AIDS, genocide, environmental and homeless issues before we worry about someone seeing a breast or the flash of a butt.
At the same time, to allow this agenda to become a reality, it is imperative that the adult industry continues to exercise responsibility with adequate safeguards and documentation. One magical Election Day will not stop the legitimate prosecution of blatant abusers, and those blatant abusers deserve to be held accountable.
This brings us to the next generation of the adult industry. This is not an industry in its infancy. And while it is still a growth industry, it is now a mature industry. It's not like the old days where any upstart could carve a niche easily, quickly and cheaply. Today, the marketing budgets are equal to, if not greater, than the production budgets. With website software so readily available, the new thrust is now SEO and marketing.
Embrace Change, or Fade
Some companies will be reaching the end of their business cycle unless they are willing to embrace the changes and opportunities that lie ahead. For others, we are stepping into a new future that will bring back the same growth experienced in the beginnings of the industry. This time around, however, it will require business savvy and strategic planning.
Given the track record of the adult entertainment industry, it is truly a viable business, and that attracts top business opportunists. With an expanded base of customers, content delivery models will change and competition will increase. As with any other business, this means competitive pricing and crushed margins. The successful adult company for the next decade must implement sound business practices.
With a sound foundation and solid structure, a few tremors and storms won't knock down your company. The Japanese are well known for their 100-year business plans. Sony was not bankrupted when the Betamax failed. In the next two to five years, the adult industry will see a shift in content delivery from hard goods to electronic delivery. This is not to say that the demand for hard goods will decline, but electronic delivery will increase dramatically, shifting the source of earnings. Those with one-, two-, five- and 10- year plans will thrive, grow and prosper.
Consumer Patterns
This should not be any kind of shock or surprise. A businessman who hasn't seen the signs simply hasn't been awake for the last five years. VHS died fast and hard when the DVD was introduced. Internet DVD rentals then became available, and many retail rental stores, including prominent chains, went out of business. The remaining few have dropped late fees to stay competitive. Over Christmas, Apple's iTunes site was so successful that traffic spiked more than 400 percent.
To succeed during the transition over the next two to five years, it is imperative to run a lean, tight operation. Get your expenses and overhead under control. Be aware that a lot of people may not survive the shift. Stay on top of your receivables and maintain a 90-day cash reserve. Avoid debt and credit lines. Don't have all your eggs in one basket — for customers or vendors. You don't want one account to cripple your operation.
The future certainly is bright for the adult entertainment industry. Those with a plan, who understand their niche and have a passion for the business and their product will thrive over the next decade of dynamic growth. It certainly is not a time to rest on one's laurels or trust in the success of the past. This is an era of branding. No one asks for a soda, they ask for a Coke.
Apple may not command the computer market, but it has helped define digital delivery with its 99-cent music and $9.99 video downloads. With the introduction of its set-top box interface, the computer and television are finally connected. The final piece of the puzzle is in place.
For 2007, begin by standing back and looking at your business model. A few moments now will affect your entire future. Know and understand your competition and the changing market.
Keep advised by reading your trade journals, and study industries outside your own that have already successfully made it past certain growth phases. Empower your managers and staff to greatness. Sharing in growth develops loyalty and creativity that no competitor can replicate. Be socially responsible, and give back to the community.
Finally, have fun. You should wake up looking forward to your day. This is, after all, the entertainment business. Porn is dead. Long live the adult entertainment industry.
Mark Hovanec is the director of marketing and corporate communications for Marina Pacific Distributors and the executive in charge of production for Jet Set Men. He produced the groundbreaking series "Wet Palms."
