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Regs Putting the Squeeze on Industry

Regs Putting the Squeeze on Industry

December 20, 2007
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" just another cost of doing business "

In June 2005, the adult entertainment industry seemed thrown into a near-panic when the U.S. Justice Department, then led by staunchly anti-pornography Attorney General John Ashcroft, released a new set of regulations governing how the age-verification and production records required under 18 U.S.C. §2257, the U.S. record-keeping and labeling act, were to be created, filed and made available for inspection.

In theory, the law and its associated regulations are intended to ensure no minors appear in sexually explicit adult content. Similar regulations existed previously – in fact, they had existed for at least 10 years – but the regulations promulgated by Ashcroft's Justice Department introduced a slew of onerous new requirements the industry viewed as a government conspiracy to put it out of business.

Notwithstanding that assessment, it didn't take long for creative entrepreneurs and selfless free-software mavens to begin crafting digital recordkeeping solutions that seemed to ease at least some of the industry's concerns. A few became available by the end of 2005; by mid-2006, at least nine full-fledged compliance packages were on the market. Ranging in price from free to $1,000 a month, they addressed in different ways the common needs for indexing, filing, cross-referencing and retrieval, some more effectively than others. Some were based soundly in contemporary legal theory, and others were bare-bones efforts to gather all the required information into a small space using as few man-hours as possible.

FAST-FORWARD TO 2007
About two years after the Ashcroft regulations appeared, a new-and-improved set of regulations was proposed by a Justice Department helmed by Ashcroft's successor, Alberto Gonzales, who shortly afterward followed his predecessor into the annals of former-attorney- general infamy. Precipitated by the enactment of the Adam Walsh Child Protection and Safety Act of 2006 (which some feel was Congress' attempt to make an end-run around adult-industry trade group the Free Speech Coalition's then-thriving legal challenge to 2257), the proposed new regulations changed the rules in some essential ways.

Among them were the expansion of the definition of "sexually explicit conduct" to include "lascivious exhibition of the genitals or pubic area of a person" (making even non-nude imagery subject to record-keeping in some ill-defined instances) and mandating record-keeping for so-called "secondary producers," who had hoped to be exempt under disputed federal district court case law.

What the new regulations mean for purveyors of adult content – including those who only distribute, resell or republish content produced by others – is that almost every provocative image created after July 3, 1995, and circulating in the adult entertainment universe may require fairly extensive documentation that no minors were harmed in its making. It is worth noting that mainstream producers of sexually suggestive content need only submit to the Justice Department a statement affirming lack of actual sexual activity or denying the involvement of actual minors in order to comply with the regulations and providers of telecommunications services, Internet access services and "Internet information location tools" are exempt from the regulations altogether.

While adult content producers and distributors may not have become adept at records maintenance in the intervening years, at least they're trying. According to FBI Special Agent Charles Joyner, of the 19 adult companies inspected between June 2006 and June 2007, only three were in complete compliance with 2257 requirements at the time of inspection, but 14 others were able to bring their records into line within a week after they were told "issues" existed. At the time he commented, Joyner indicated computerized records databases seemed to be quite valuable in helping companies to bring their 2257 records up to par.

While most adult content producers continue to decry the onerous nature of the current and proposed new 2257 regulations, they nevertheless have begun to view compliance as "just another cost of doing business."

"It's just another one of the hoops we have to jump through to work in this industry," said one adult affiliate program owner who asked not to be named. Like all of the others contacted for this report, he said he didn't want to draw any undue attention to himself or his company. "Our records are in order and we don't fear an inspection, but I don't want to invite one, either," he said.

The affiliate program owner said his company – a primary producer of adult content – employs a proprietary digital records-maintenance system designed to meet its specifications.

"We looked at some of the out-of-the-box ones and they were all quite good, actually," he said. "But they weren't exactly what we felt we needed, so we designed our own."

Although the company maintains a file of backup documentation (the original model releases and copies of photo IDs, for example), the digital system allows quick and easy cross-referencing and location of records by a variety of parameters, he said.

His company isn't alone in its stance. One secondary producer who works with many primary producers said he maintains his own proprietary digital database for similar reasons. He also keeps hard copies of all the digital records, and both the digital database and the hard-copy files are backed up off-site in case of emergency.

That's a common practice, too.

"In case of a natural disaster or something like that, we back up everything off-site: digital and hard copies," said the owner of a company that functions as both a primary and secondary producer. "We like to be prepared."

That's why his company keeps both proprietary digital and hard copies of all 2257 records, as well, he said. "I think we're like a lot of people in that so many regulations have been proposed for so long, now we're at the point, 'Just tell us the diagnosis and let's do it.'

"With both kinds of records, we're prepared either way, no matter what the regulations come down to be," he said. "As things stand now, inspectors can view whichever format they prefer, but if the regulations specify one format or the other in the future, we're ready."

CHANGING THE RULES
As it turns out, keeping both digital and hard copies of 2257 records probably is a good idea. Despite Joyner's apparent pat on the back for computerized records, the proposed new regulations include a provision mandating hard copies be available for inspection. That's something new.

"As proposed, the new regulations require hard copies," Chicago-based attorney J.D. Obenberger said. "Previously, everyone assumed digital records were OK. In fact, there's never been a [2257] regulation requiring hard copies."

Obenberger said he believes digitized records are a good idea, because mechanical indexing to meet the regulations' exacting standards can be beyond onerous. Digital systems present their own challenges, however.

"Segregation requirements for the records are unclear," he said. "By segregation, do the regulations mean in different directories [on a computer that also is used for other purposes], on a computer that is used solely for 2257, or …?"

For others, the Justice Department's intentions are so clear as to be transparent. "They want to put an onerous burden on producers to essentially get rid of the affiliate model on the adult Internet," said Robert S. Apgood, an attorney and the designer of digital 2257 compliance system TrueCompliance. "What do any of the regulations do to serve the stated goal of protecting minors?"

If the powers that be want to kill the affiliate model, they may have to rethink their approach. The record-keeping regulations already have caused evolution in that realm. Partially to ensure their affiliates are in compliance with the law and partially to protect models' sensitive personal information, most adult affiliate programs have migrated to hosting promotional content so it never has to be in the hands of affiliates. In that way, they hope, affiliates who otherwise might be considered secondary producers may be able to claim exemption under the Internet service provider's "safe harbor" in the law.

"It's the only sane way to [distribute promotional content]," one affiliate program owner said. "It just isn't worth it to put anyone at risk – us, them or the models."

Models' information is a particularly sensitive subject when 2257 records are discussed.

"People can be crazy," the producer who exists in both the primary and secondary realms said. "We have a duty to protect our models, and it's not unheard of for jealousy among producers to lead to some tragic results."

Even though the proposed new regulations say some personal information can be redacted from the records primary producers share with secondaries, "some secondaries won't accept partial records," he said. "We won't. We only accept un-redacted records, and if we can't get them, we don't use the content."

FUTURE CONSIDERATIONS
It's not just un-redacted records that are difficult to obtain. One secondary producer averted that every primary producer with whom he works provides 2257 compliance documentation in digital form only. Because there are so many database formats in use within the industry, producers typically transmit their records to each other as PDFs or JPEGs, he said – which simplifies the process of printing them out in order to maintain hard copies, but it complicates data-entry issues on the receiving end. That's one of the reasons his company decided to employ a custom 2257 solution instead of purchasing one off the shelf.

One relatively new entrant on the compliance software scene hopes to revolutionize the interoperability issue. Metrosharp Corp. in May purchased Psyance LLC's 2257MadeEasy, one of the original 2257-compliance software products. Las Vegas-based Metrosharp is in the process of revamping the software from the ground up and plans to release version 2.0 in January.

"Everything in the original product will still be there, but we're adding some things and porting everything to our powerful EKKO database," Metrosharp President Victoria French said. French also said her company either has bought or plans to buy several other competing products and will release a back-end framework to sync legacy and homegrown systems with EKKO. Interoperability is the name of the game, as she sees it, and she indicated the company's 1,200 existing 2257MadeEasy clients (including the "Bubba the Love Sponge" show and Entertainment Networks) form a good base for expansion even further into the market.

Metrosharp thinks like a big company – which isn't surprising, given the founders are former Microsoft employees. In order to make its product appealing to the average adult entertainment producer, the company plans to position 2257MadeEasy much as more-familiar software has been positioned: Its purchase price will include a support lifecycle, free records-inspection support will be provided, and it will be cross-platform compatible. In addition, "we're not going to charge for what you're legally required to do," French said. "We will charge only for enhancements – things you're really going to want. Also, there will never be a monthly maintenance fee."

So far, French said, ZEI Ltd. is Metrosharp's only real competitor in the space – but ZEI could be formidable competition. ZEI recently announced an alliance with the Free Speech Coalition under which it will offer product discounts to FSC members. FSC Director of Membership Services Scott L. Lowther said the adult industry trade group entered the nonexclusive partnership with ZEI after the company's ZEI2257 software passed muster with attorneys on the FSC's board. At press time, ZEI counted adult entertainment companies like AEBN, Bondage.com, BurningAngel.com, California Exotic Novelties, Danni.com, Hustler, LegitCash, Metro and Naughty America among its clients.

Regardless of how companies and individuals in the adult entertainment sphere approach 2257 compliance, one fact remains clear: they must approach it. Compliance may not be "fair," it may involve a lot of work, it may be expensive and there may never be an industry standard digital format. Failing at least to attempt compliance, though, invites disaster.


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