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Stimulus Package

Stimulus Package

September 30, 2008
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I prefer the term stimulus package to the word bailout. It’s sexier and implies a positive outlook and outcome. A bailout is something you do when the ship is sinking, with the express goal of keeping the thing afloat. On a more visceral level, most people like to be stimulated but few get excited about propping up something that is failing. It’s only human nature.

In the case of the legislation defeated yesterday in the House, I think it is safe to say that either term is applicable and probably others as well. The bill was presumably crafted with several goals in mind: to save threatened institutions, restore a semblance of confidence in Wall Street, add liquidity to jump start the flow of credit and perhaps most important of all, send a message domestically as well as internationally that the United States still knows what it is doing when it comes to the exercise of free market capitalism. [insert laugh track here]

Not surprisingly, even as the bill was being rejected the market went into a free fall, losing well over 700 points and more than a trillion dollars by the close of trading. Commentators this morning questioned whether the $700 billion in spending contained in the bill now looks like a deal, but I’m not so sure the losses yesterday were real. In the same way that the value of so many homes has been so gratuitously inflated over the past several years, is it not likely that yesterday’s “losses” are more a correction than an actual loss, a reflection of reality rather than desire?

In truth, I could be way off-base with that. I'm not an expert, but one fragment of truth that I have taken away from all of this is that when we can no longer trust the value of things, the first casualty is confidence. It’s only human nature.

This brings us to pornography, the value of which has always been more or less apparent. Whatever else one might say about the interaction between provider and consumer, a porn transaction has historically been a relatively straightforward proposition whose desired outcome is rarely unclear. The trouble usually comes with the mechanics of the deal, such as being overcharged by fraudulent billing practices, not receiving in a member’s area what was promised in a tour or actually being ripped off for goods being sold under false pretenses. But these rip-offs happen in every business, and porn consumers have long since been trained to exercise caution. This is not meant to excuse the perpetrators of these schemes, of course, but to propose a realistic picture of the marketplace.

Today, however, it is becoming increasingly difficult for the industry to establish a predictable valuation of many of its products, with good reason. Adult fare now can be viewed in so many different formats and mediums across so many delivery platforms that getting a reliable gauge on worth is almost impossible. In lieu of valuation the market rules like a benevolent dictator, which is preferable from a consumer’s standpoint but somewhat problematic for a potential investor. Add in the stampede to free content, and the value of the content must now be evaluated against the value of the traffic, whether any sales are ultimately forthcoming or not.

Ironically, the time is ripe for more rather than less investment in adult entertainment. After all, if you can’t trust Wall Street, the housing market, banks or your mattress, where are you going to invest?

I would argue that with due diligence, adult entertainment is not the worst place to put some money that is looking for a return. Let me repeat, with due diligence money can and will continue to be made in porn. While not recession proof it is recession resistant, and if an investor is serious about finding and working with people who take a long view of the industry and bring professional values to bear, the potential to realize returns or better is as real today as it will be tomorrow.

Even in the presumably barren arena of free, new revenue-generating models are being conceived that show a way to the future. You will need to stay ahead of the curve to exploit them successfully, but isn’t that often the safest place to be, as long as you are not under or overestimating the value of the products and service you provide, even if it is human nature?


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