The Winds of Change

Stephen Yagielowicz
Well, just when you start getting used to bi-annual business plan revisions, sweeping changes in the adult market place are causing operators to make a soonerthan-expected re-evaluation of their plans and approaches. To help readers with their own evaluations, we will look at several of the factors impacting the adult market today and what folks are doing about them.

Past being prologue, it’s important to have a context for any analysis. One exercise is to visualize what it is that you think of when you think of “adult entertainment?” Among the possibilities that quickly come to mind is a reputation for embracing the cutting edge.

Adult entertainment has long been associated with advancements in technology — with an easy example being the explosion of adult video content that accompanied the home video revolution — and in no small part led to the dominance of VHS over Beta.

The Internet realm offers examples such as affiliate marketing and innovative billing mechanisms, along with the rapid consumer adoption of broadband Internet services — in part to view adult content and its many media types. Graphical web browsers, JPEG images and online video, plus video-on-demand services, all received significant boosts from adult — although it is hard to say that they “came from adult.”

As with many of the relevant technologies and techniques, it is more a case of early adoption and growth alongside of what then became commonplace methodologies and media used by consumers, than it is a matter of the adult industry being responsible for their invention.

This, ultimately, reflects on the “I’ll try anything once” mentality of many of those who work within the highly competitive adult entertainment industry, where the bleeding edge is simply “business as usual.”

But has this drive and talent been subdued — and with it, industry revenues?

Unfortunately, the size of the market is impossible to accurately measure, mainly due to its lack of transparency and the closely-held privately run companies that make up its bulk, with estimates ranging all across the board — but globally, even in today’s market, the annual sales are certainly measured in billions of dollars. It’s just that fewer folks now seem to have more of the pie — and that pie may not be as big as it once was.

Getting your slice of the pie means staying on top of current events and how others handle them. The various factions that exist within the adult industry (as well as those outside entities seeking to influence it) manifest themselves in their responses to the hot-button issues most relevant to their concerns and operations.

For example, studios and other rights holders are banding together to fight content piracy in aggressive and innovative ways, while grassroots efforts by some site owners, social activists and religious groups to fight the .XXX initiative, are making for strange bedfellows across the board.

Although many operators will find that their interests overlap these areas of concern, it seems that specialization is the key to progress. There is an old saying used within this industry to describe the folly of organizational attempts: “You can’t herd cats.” Perhaps not, but it seems that you can indeed get a small group of cats to eat out of the same bowl.

As a result, piracy may be reduced (although this is a short term ‘band aid’ solution to a problem that will only be solved through new business and marketing plans) and .XXX could be defeated — but there will still be plenty of challenges to go around, especially in lieu of any profound changes to the aforementioned adult business and marketing plans.

For example, the ongoing as of this writing uncertainty surrounding ePassporte and its Virtual Visa solution illustrates the vulnerability of the adult industry on a micro level that some traditional business observers might find surprising — and insiders disturbing.

The payment mechanism you see is a preferred option for many overseas webmasters that cannot easily (or inexpensively) send or receive foreign transactions otherwise. This user group includes lone affiliates, individual marketers, program operators of all sizes and service providers such as designers, web hosts and traffic providers. Of course, many of these companies are domestic entities that serve a broad, global clientele and audience. Many of whom are now unable to readily pay each other.

This means that sites are not built or updated; content feed, web hosting providers and others are seeing more late payments and canceled orders; while some of those affiliates that were living paycheck to paycheck have had to leave the industry to find “real jobs.”

The domino effect of these business complications have rippled across the adult biz, wreaking havoc — all because of an unrevealed problem in one company’s operation — underscoring the fundamental instability of the adult ecosystem.

Will this be the motivator that ushers in a new means of adult-friendly P2P payments?

Affiliates have the additional challenge of dealing with sudden program closures and declining sales from those that remain, making the issue of “who can you trust?” amongst today’s most important business considerations.

These problems do not come without a bright side, however, as this evolutionary house cleaning is freeing up new sources of revenue and traffic for the remaining players while paving the way for future initiatives. This renaissance may be seen as the peak of a wave and we are now floating along in the wake of the previous, great wave, climbing to the new wave’s crest. It may take a few more years to play out — and it may end up with new players altogether, but if adult can revive its previous skill at adopting and inventing new technologies and business practices, then the winds of change will blow it to shores of success. Those unable to adapt, will be pulled under as the wave passes.

How seaworthy is your ship? With today’s announcement that the recession is now officially over, consumers may feel more comfortable with discretionary spending; but without a compelling offer and a high level of salesmanship, it may be too late for the casual marketer to profit. This may, of course, bring adult entertainment to its highest level of quality yet — pleasing punters and driving renewed sales for the survivors.