Niche Marketing and Distribution
One of the ways that many adult businesses have been prospering in an increasingly competitive industry is by turning to niche marketing and being very specific — or even flat-out esoteric — when it comes to content.
If a small or medium-sized adult company believes that it is impossible to compete with the erotica giants of the San Fernando Valley, one recipe for success may be offering the types of niche-driven content that those giants are not offering. That content could be anything from a variety of BDSM niches to alternative porn niches (such as Goth porn or tattoo porn) to various gay niches. And for adult companies that are taking a niche-oriented approach, one of the most important questions is, "How shall we distribute our material?"
There are many possibilities when it comes to distribution methods, ranging from online digital downloads and streaming to DVDs to providing content for mobile/wireless devices. A niche-minded adult company might offer its customers DVDs as well as online downloads, or it might offer downloads exclusively and stay away from DVDs altogether.
And if it does sell DVDs, the company might sell them in brick-and-mortar video stores and/or offer mail-order sales via the Internet (some adult companies that put out DVDs only sell them online). XBIZ previously discussed niche marketing and distribution methods with six people in the adult industry — and a variety of opinions were expressed. Some interviewees said that DVDs remain an attractive option for niche-minded adult companies, while others believe that digital-only distribution is the future of niche marketing in the adult industry.
Jeff Booth, president of the Los Angeles-based EroticUniversity.com, firmly believes that DVDs are becoming more and more a thing of the past for niche-minded adult companies. Booth, who focuses on educational erotica, told XBIZ that while DVDs are still profitable for large adult companies like Vivid Entertainment and Wicked Pictures, they are not cost-effective if you are a small niche-oriented adult company and your focus is something very specialized such as Japanese rope bondage or lesbian Goth porn. Booth asserted that for adult companies catering to micro-niches, digital distribution makes a lot more sense than DVDs.
"Most of the people I talk to in the adult industry who are putting out niche porn are strictly into online distribution," Booth said. "The majority of niche content is strictly online—and that is only going to increase. I was at a party recently with people who produce BDSM content, and they are pretty much all moving to digital delivery. It's so much easier for them. For these niche companies, it just doesn't make sense to put out DVDs anymore. For Vivid and Wicked, doing DVDs still makes sense; they have the distribution channels. But for the smaller adult companies that specialize in the niche stuff, making DVDs is too expensive. Ultimately, the niche adult content is all moving to the Internet."
Booth added that while BDSM DVDs commanded steep prices in the early 2000s, those days are long gone.
"People used to be able to charge $50 or $60 for a niche-market BDSM DVD," Booth recalled. "Fifty or 60 bucks for a niche DVD was a good profit, but you can't get that anymore; the niche markets are more competitive now. So most of the niche companies are only selling downloads now because in order to make a profit, they have to cut costs wherever they can."
Chelsea Pfeiffer is a perfect example of a BDSM-minded, adult-oriented entrepreneur who has done well with niche marketing (her spanking-oriented websites include GoodSpanking.com and CPEntertainment.com). Pfeiffer, who has offered both DVDs and digital downloads, said: "It's actually easier to distribute online when your content is very specific. I've just started venturing into the straight porn world, and (it's) a killer to get your content out there. When it comes to spanking, someone goes to Google and types in 'spanking videos'— and my site comes up right away. The more specific, the better because it cuts down the number of search terms that are going to typically be employed by a potential customer."
Pfeiffer said that it isn't surprising that so many niche-oriented adult companies are opting for digital-only distribution. With that method, Pfeiffer said, "you don't have to have physical DVDs on hand, don't have to have someone in a mailroom and don't have to pay postage. I think another advantage to the digital-only approach is it can allow you — within the small niche market you're working with — to be big while still remaining small, as in a cottage industry style of operating. You can keep more of your profits or put them into staying on top of the latest technology."
Sam Phillips, publisher of the London-based affiliate program ProfitX.com, predicted that DVD sales will continue to decline not only for niche-oriented adult companies but adult companies in general.
"It's definitely more cost-effective and quicker to get your product to a wider audience through the Internet, although there is currently room in the market for both methods of distribution," Phillips said. "We expect that within several years, DVD sales will only count for a minute percentage of the market. We distribute content exclusively via digital methods, and one of our partners, AdultDesign.com, has seen an exponential increase in orders to convert traditional e-commerce stores to download-only stores."
One adult-oriented entrepreneur who is a niche marketing success story and remains a strong proponent of DVDs is Phillip Bleicher, president/owner of the Miami-based Flava Works. Specializing in gay erotica with an African-American and Latino focus, Flava Works is known for its popular websites ThugBoy.com (which employs the imagery of gangsta rap), CocoBoyz.com and CocoDorm.com as well its printed magazine FlavaMen — and Bleicher estimated that the distribution methods for his company's video content are presently "about 80 percent DVDs, and the rest would be digital downloads."
Bleicher stressed that when it comes to niche marketing and distribution methods, digital technology does not automatically render tangible goods obsolete. Not only does the Internet not eliminate the need for adult DVDs and adult magazines, Bleicher said, it also gives adult-oriented entrepreneurs more ways to promote those tangible goods.
"Many people still like to have a tangible purchase and have something they can hold in their hands," Bleicher said. "There are a lot of people who still don't have high-speed broadband, and on top of that, there are a lot of people who don't have Internet connections at all in their homes. That is why the DVD market is going to survive. I point out that when the Internet came of age, a lot of people thought that newspapers and magazines were going to go out of business, but they didn't. People thought that the magazine we produce, FlavaMen, wouldn't survive because of the Internet, but in fact, FlavaMen has thrived because now, there are two places where people can purchase it: they can get the online version or they can get the physical version at the newsstand. It's the same thing with a video; you can get a physical DVD, or you can get a video through electronic distribution."
Bleicher added that until TV technology and computer technology are thoroughly integrated, DVDs will have their place in adult entertainment.
"We are still many years away from reaching the point where the TV and the computer interact more with each other so that you can have a full movie on your computer and watch it on your TV [without burning a DVD-R]," Bleicher said. "Right now only a very small percentage of households have the Apple TV or the HP media centers."
Bleicher went on to say that while he understands why a small niche-oriented adult company would opt for digital-only distribution if it is just starting out, even the most specialized adult companies shouldn't rule out the possibility of getting into DVDs at some point.
"I can definitely see how someone with a smaller audience would want to offer nothing but digital downloads and avoid the expense of producing and distributing DVDs," Bleicher said. "DVDs are doing well for us and even though we are a niche with black and Latino gay porn, I don't think we are anywhere near cutting DVDs off. I can honestly say that we are going to be producing DVDs for many, many years to come."
For adult companies that opt for digital-only distribution and embrace the membership website model exclusively, an ongoing concern has been the possibility of credit card chargebacks — which, of course, must be kept to a bare minimum if an online company wants to stay in business. SilverCash Albert, vice president of business development for Price Communications, SilverCash and Silver Sinema, said that one major advantage niche-oriented websites tend to have is fewer chargebacks. Internet surfers who are willing to pay for very specific niche content — be it niches within the gay market (twinks, bears, daddies) or BDSM niches like spanking, steel bondage and tickling — tend to be more loyal customers, he said.
"Niches are advantageous because in the BDSM realm, for example, there is retention," Albert said. "Once someone in the BDSM lifestyle finds something they like on a site, they stay for a long time. So there are fewer chargebacks. Traditionally, there are fewer chargebacks with niche-specific adult sites because the consumers are so specific when it comes to knowing what they want. If you are in credit-card processing and you want to deal with a market that has low chargebacks, very niche-oriented traffic like BDSM is advantageous because traditionally there aren't as many chargebacks."
According to Albert, another thing that makes BDSM niche sites and gay niche sites generally more chargeback-resistant is their ability to appeal to upscale consumers.
"You have to look at demographics in order to understand why things are the way they are," Albert said. "Gay customers, in my experience, tend to have a lot of disposable income, and they don't have to worry about children as much. That type of consumer means less chargebacks. And in the BDSM realm, going to the BDSM events and living the BDSM lifestyle is not cheap. So you might be dealing with managerial people who are very well educated and have a lot of disposable income; again, that means less chargebacks. I think that niche-driven adult companies have an added advantage online because of the demographics and because of the consumers."
The Australia-based CuriousToyBoy, business development manager for LionDollars.com, said that for small, niche-minded adult companies, digital distribution offers many promotional and marketing advantages.
"It is far easier to find a concerted buyer for micro-niches online than it is to get them in front of the specific shelf space you may be able to garner for your DVD product," CuriousToyBoy said. "DVDs cost money to produce, then to ship and to distribute. The returns to the producer after everyone in the chain has taken their drink can be low, especially so if the product is not moving in high quantities. Smaller producers can and do also feel intimidated by the larger DVD 'networks' and distributors and have little or no control over their product. Online, controlled by them, gives them ownership and control at every phase of the marketing stream."
Niche-oriented adult companies, CuriousToyBoy said, will need to be as digital-minded as possible in the future — and that means thinking not only about computers but mobile/wireless technology as well.
"The way of the future is not the DVD player," CuriousToyBoy said. "We are already seeing leaps and bounds in digital technology and even more so in the mobile technology market. The way multimedia entertainment of all shapes and forms will be delivered in the future will be the digital medium. The Gartner Group, a well-respected international IT research organization, has already proposed that the DVD/video store as we know [it] will be extinct by 2020. I would suggest that has a fair modicum of truth. Content will still be content— it is the delivery mechanisms that will continually develop, change and alter."