The Subscription Model is Still in Full Effect
There is no way to candy-coat the precipitous plunge in profits endured by adult paysite owners in the wake of multiyear stagnation — where consumer fickleness, prolonged economic uncertainty, rampant piracy and shortsighted marketing conspired to topple premium Internet porn from its once lofty perch.
An overall decline in paysite revenues does not equate to the death of this tried-and-true business model; however, with professional operators continuing to see attractive and even increasing profits — with new offers and technologies coming to the marketplace.
XBIZ recently discussed some of the current market trends affecting the adult paysite business with several of the industry’s frontline operators.
Jack Avalanche of CherryPimps told XBIZ that although the overall state of the paysite business today is still very competitive, he sees the confrontational behavior of the last few years changing back to an atmosphere of innovation.
“Instead of constantly bitching and moaning about the tubes, torrents, and piracy, operators are focusing more on their core business and how it can evolve to better suit their customers,” Avalanche explains. “We see this as the best opportunity to re-acquire past users and show them that once again our primary goal is to entertain them, and retain them, making them fans — as opposed to maxing out their credit card on the first click.”
Avalanche notes that going into 2016, the company is entirely focused on its customers and its content, which he sees other market-leading firms doing as well.
“Satisfying our customers is the single most import too to making our business successful, so we’re listening to what they want, what they like, and trying to deliver it,” Avalanche says. “We couple that with our own internal innovation to deliver them our content in the most efficient way and highest quality possible.”
“We see this as being the core philosophy necessary to succeed in this market,” Avalanche explains. “Because ultimately, if we can’t keep our customers happy, then we should all find another job.”
According to Mansion Productions’ CEO Oystein Wright, a shift in the adult paysite business occurred around 2010-2011, when paysite programs began going out of business, or were being acquired by larger programs, in a market shakeout and consolidation process that continued for several years.
“However, in 2014, this trend seemed to slow down, and new programs emerged — especially in the cam and dating side of the industry,” Wright explained. “Affiliate programs needed to get smarter on how they could entice users into buying memberships in order to compete against the large number of free tube sites that popped up everywhere.”
Wright told XBIZ that paysites offering exclusive and high definition content began to be the norm, and provided a way to compete against the lower quality tube sites — but he is quick to note that advances in payment processing also played a significant role in extending the life of the paysite business.
“At the same time we saw billing companies continue to come out with new and better ways of converting new sales, as well as offering new programs to keep retention at a decent level,” Wright says. “This included opening up many new billing methods specific to the country the buyer is from.”
As for the near future of the adult paysite business heading into 2016, Wright says that operators should be on the lookout for smarter, more efficient ways of working with content and traffic, using technology to gain a competitive edge — such as by using a good CMS platform to stay ahead of the pack, and keep the site constantly updated.
“In addition, it is crucial to have a good affiliate marketing platform such as MPA3 or NATS,” Wright says, noting that there are some good hosted solutions provided by top billing companies, with more coming. “I think more billing companies will adopt such solutions in the year to come to stay competitive.”
He also predicts that 2016 will see more consolidations, as well as new opportunities.
“The big will continue to get bigger,” Wright concludes. “In addition, we see the flow of traffic increasing through paysite affiliate networks, which is why we have integrated some of the most popular networks into MPA3 for CPA based marketing.”
Celine from TotemCash told XBIZ that following the havoc caused by free tube sites against the profitability of premium adult paysites, the paysites that survived and thrived were those selling very specific niche content that they were able to maintain a high membership price for — as well as those selling “non-tubeable” content — such as cams, dating, or Totem’s own VirtualGirl desktop strippers.
“The pay-per-content business model used by these sites has been a key of their success: pay-per-scene, pay-per-minute, pay-per-striptease, etc.,” Celine says, noting that the same thing happened to the music business when sites such as Spotify and Deezer started offering a lot of free content, killing a part of the market and forcing the remaining companies to start up new business models. “The only way for paying sites to survive has been to offer better-quality content, plus a wider range of content and better service than free sites.”
Some of these new premium offers featured much lower monthly subscription fees, while still providing unlimited access to content — not only in terms of how much content could be viewed, but how, when and where it could be viewed — as well as how it could be paid for.
“Quickly, free sites (and tubes) started to propose similar premium services — offering UHD content, better delivery, no ads, etc.,” Celine concluded. “In parallel, the rise of the mobile market reinforced the changes in consumers’ habits, who are increasingly used to micro-paying for applications and services.”
According to Elevated X CEO AJ Hall, paysites are far from dead, and the subscription model is still in full effect and working quite well for site owners who are able to tap into customer needs and to give folks exactly what they want.
“Paysites today are all about niche content, sub-niche capitalization and immersive experiences that connect the viewer to the content in more than just a purely visual aspect,” Hall told XBIZ. “We’re seeing a major upward trend among sites offering content that isn’t competing head to head with the majority of what’s being offered for free en masse on tube sites, and I expect to see this continue as the industry continues to consolidate, and old methodology gives way to new techniques.”
Vendo Managing Director Thierry Arrondo told XBIZ that efficiency and ease of use are the two keys to profitable mobile billing — the cornerstone of serving today’s tablet-toting paysite customers.
“How do you deliver both? That’s the challenge,” Arrondo says. “The answer? A machine learning (artificial intelligence) approach to delivering the right design for each visitor.”
Arrondo says that not only is it important to know your customers and to understand your own offers, but to segment them based on language, location, device, operating system, day of the week, time of the day, etc., and to always be testing the pricing, offers and audiences to deliver the right experience that allows more consumers to buy and stay longer.
Mr. Skin’s Sam Rakowski told XBIZ that he agrees that one of the biggest trends occurring with companies that continue to thrive in the paysite business is the evolution of price points, membership types and billing models.
“Free content has certainly made it unrealistic to charge the high prices that paysite memberships commanded years ago,” Rakowski explains. “We’ve also learned a lot from the successes of dating and cam sites, by adopting and adapting the ‘freemium’ model to great success.”
Rakowski notes that savvy companies are also finding more ways to increase their average revenue per user by making it easy and attractive for members to add additional memberships and add-ons.
“Despite all of the talk over recent years that the paysite model is dead or dying, it’s not,” Rakowski concludes. “It is clearly a tougher market, however, [and] to compete with free content you must provide a unique and truly premium experience at a reasonable price.”
Clearly the good old days of just slapping up any old porn on the Internet and laughing all the way to the bank are long over, but new business models and new technologies, combined with good old fashioned customer service, are renewing revenues for professional paysite operators who have found that if they do it right, the dollars will follow.