Resisting the Recession

Stephen Yagielowicz
At this point in time, despite governmental reassurances that the recession is officially over, there's no use in denying that times are tough for many companies in America and beyond; both mainstream and adult. On the adult front, despite their best efforts, "board whore" facades continue to crumble; and a number of high-profile (along with many lesser-known) program closures and downsizing maneuvers have resulted in a rapidly dwindling number of adult entertainment websites — and in the number of affiliates and webmaster / owners that drive traffic to them.

For one example, the number of gallery submitters has dropped considerably according to several site owners I've spoken to, as has the number of sites that the remaining submitters have available to submit their galleries to… Sure, some of this may be attributed to gallery post sites that no longer accept submissions; gallery posters that now only fuel their own sites; and the conversion of some of these properties to "tube" sites or other types of adult sites. Regardless of any of these factors, however, the number of adult websites is obviously declining — and doing so across most if not all industry segments.

Rather than being the end of the world, however, this escalating "thinning of the herd" may be one of the best things to happen to the industry in the last few years; as uncompetitive and poorly managed sites give up market share to operators that can not only satisfy consumer demand, but can successfully run an adult entertainment business. And one of the things that these savvy operators are doing to fuel their businesses is to offer an increasing array of technologically advanced, customer pleasing features.

Private Media Group, one of the largest adult entertainment companies and a publically traded one at that, knows this lesson well; as demonstrated by its earlier acquisition of Gamelink and recent moves on Sureflix — two additions to the Private portfolio that will leverage its strengths worldwide and in new markets where Private's presence was lacking. Awesome moves that instantly bolstered the company's technological infrastructure and that will position this powerhouse brand for even more success in the future as the economy stabilizes and purse strings are once again loosened.

While the adult entertainment industry was one of the last market segments to be hurt by the global economic malaise — and will likely be among the first to fully recover — the strength of our industry in comparison to many others is now irrefutable, simply because we were able to hold on for so long; but that doesn't mean there are no worries.

Although the Dow is finally poking its nose back above 10,000 for the first time in what seems to be an eternity, offering some spark of hope for adult operators, the ongoing worldwide credit crunch is still dramatically impacting businesses of all types — and premium paysite operators in particular.

The reason for this is simple: the dropping or outright closing of credit lines is further knocking the wind out of the sails of those who rely on recurring billing for their revenue stream; as the original billing mechanism used by the customer (a specific credit card, for instance), may no longer have any value to it when billing time comes around again. Indeed, many Americans may have found that their credit cards have been withdrawn or limited to their existing balance: in other words, a card that originally had a $10,000 limit may now have a $1,000 limit based on the amount you currently owe, i.e., if you're carrying a $1,000 debt on it, then that's your new limit— no more credit, just the card — and a bill.

Consider how this affects affiliate programs that rely on high pay per sale payouts to get traffic: some of the "declining ratios" some affiliates see may indeed be "increased shaving" to offset the cost of those payouts when the expected renewal revenues aren't coming through. Of course, the revenue sharing payout on a trial membership that was declined on renewal isn't that hot either…

But there's another factor in this equation that is overlooked as well — rather than crunching credit, some banks are "hiding" it. Here's what happened to me: I have a number of recurring monthly items on my business account — things like hosting, domains and other services. It was third-party recordkeeping service that tipped me off to the problem, sending me emails that my account was unable to be billed. Then I heard from Network Solutions — sorry, we're unable to bill you…

This of course was of great concern to me as I (should) have more than enough money in my account for these purposes; and indeed, upon logging into my account online, there was a pile of cash.

What was the problem?

The answer came in the mail the next day when I received a new card for my business account, with an entirely new number and new expiration date. Apparently, my business account was part of a list of potentially compromised accounts and as a precaution the bank sent me a new card. This had happened before with my personal account a year or so ago and I was pleased that the bank was actually looking out for me. I then set about updating my billing information at the relevant companies.

But I had to do that, as I need those services.

If I was a punter, however, would I hurriedly skip from porn site to porn site; making sure that they had my new billing information? No way — I'd be eyeing them all with suspicion, worried that one of these sites was the source of my "compromise." Bang. Another ex-member causing a curtailed revenue stream and an unprofitable PPS payout for a paysite operator or disappointing payout for the revenue sharing fans in affiliate land.

It would take a most compelling website indeed to make me revisit, new billing info in hand, to re-join in hopes of not missing another update. If such a site exists, I haven't seen it — and I'm certain that I'm not the only consumer that feels this way. I'm also certain that any list of compromised accounts that I was on also likely had a few million other names on it.

The moral of this story is that there are many reasons why sales and rebills may be down for you; and those reasons are not always easy to discover or to combat. While some reasons may be tied to the economy, other factors are contributing to this "perfect storm" which is mercilessly pruning away the dead wood of our industry — and the only way to survive this storm will be to ensure that your roots are strong and holding fast — and that you have room to grow when the storm subsides.