In March, Business Week interviewed Richard Cohen, the founder of HotMovies parent National A-1 Internet. Also that week, a piece in the Boston Herald described an ad campaign in the city's weekly newspapers promoting 30-minute prepaid cards from HotMovies and spin-off site GayHotMovies.com.
Even an attempted hatchet job on Philadelphia-based National A-1 by a local ABC affiliate probably helped more than it hurt. In a breathless sweeps week headline, Channel 6 News hyped "Philadelphia Porn: Exposed."
The report's most serious claim was an allegation that National A-1's phone-sex operation and HotMovies demean women. With no evidence to back it up, the story mainly served as a free ad for HotMovies and its library of more than 30,000 "legal porno movies, all online, all on demand."
National A-1's public relations efforts support Cohen's short-term goal of expanding worldwide awareness of pay-per-minute billing and the digital delivery of adult content.
"Only a fraction of adult Internet users have tried pay-per-minute," Cohen says. "When people do, they no longer have any interest in traditional membership sites. People want to watch what they want when they want it and pay as they go."
National A-1's Director of Business Development James Seibert agrees.
"We've been pushing ourselves out there, getting as much news into the hands of the mainstream media as we possibly can," Seibert says.
The company's recent press releases focus more on issues involving adult VOD than on product. Along with informing the public about pay-per-minute and micro billing, Seibert wants HotMovies to be a voice in the overall discussion on the future of adult media.
Death of DVDs?
"The adult DVD market is dying," Seibert says. "The huge growth is all in IPTV, Internet delivery of video. Twenty years from now, kids aren't even going to know what a DVD is."
Seibert added that HotMovies' "Death of DVDs" press release got picked up by TechWeb and local papers around the country.
Cohen and Seibert are naturally in sync on the issue. "HotMovies.com is working on integration with IPTV and expanding digital delivery of DVDs," Cohen says. "Eventually 50 percent of all content, both adult and general, will be sold digitally. Shipping or renting a physical product will not be necessary."
With 35,000 downloadable adult films and a push to add more than 100 new titles a day, HotMovies is poised for dramatic growth as broadband continues to penetrate the market. Seibert figures that half of all American high-speed users probably like adult entertainment.
"If I can get that half to at least try my site once, I know that I can convince 75-80 percent of them to stay with me for life," he says. "It's just a matter of getting in front of them."
Moreover, HotMovies might be just the type of site to drive newcomers to broadband, not unlike the way early TV programs like "The Milton Berle Show" and "I Love Lucy" fueled demand for television sets or the way Howard Stern is drawing new users to satellite radio.
Pretty good for a website that started out as Seibert's "side project" in 2000 when he joined National A-1 and eventually came to "consume" his life. Not that Seibert seems regretful. With the gusto of a boxer at a pre-match press conference, he says, "We're just flaming the fire. HotMovies is gonna get hotter!"
Founded in 1988, National A-1 grew into one of the nation's largest providers of adult audio text services. As the Internet boomed, the firm began registering and acquiring hundreds of one- and two-word URLs — adult and non-adult — with strong type-in potential, like Diet.com, Singles.com, Girls.com and Teens.com. In 1998, the firm launched a variety of paid membership sites. But by 2002, falling conversion and retention rates prompted the company to shift away from the paid membership model and focus on the new pay-as-you-go model represented by HotMovies.com.
National A-1 continues to operate a few of the earlier domains, like Diet.com and Singles.com, but most of its premium URLs now point to affiliate programs and pay-per-click search engines.
"Audio text is still the largest part of our business," Seibert says. "But we have to work a lot harder to make the same amount of money we did five years ago. There's been a lot of consolidation in that space. A lot of the smaller people have been getting out. We just keep buying people up, and our competitors buy people up."
On any typical day, National A-1 runs one of the two busiest phone chat firms in the country. Out of the firm's estimated 350 employees, about 150 work for the audio text division. HotMovies forms the next largest slice, with about 90 employees.
Seibert's success strategy for HotMovies is to try to give customers what they want faster.
"Let's say all someone wants is lesbians," he says. "We should make it as easy as possible to find lesbians and have as much lesbian content as you can ever want in your life — ready for you in the next two minutes."
That type of niche appeal is evident on the site's "categories" page, which allows customers to browse by genre and fetish.
One niche that converts really well are classic adult movies. "The Taboo series from the 1980s, for example — that's always in our top 10," Seibert says.
Another hot niche is older women, notably movies with cheating housewives and MILF themes.
"Anything the studios send us with MILFs seems to do really well," Seibert says. "People watch them for long periods of time."
Reality porn also converts well. HotMovies just started carrying titles from reality producer Shane's World Studios.
"They've been rocking all over HotMovies," he says. "People are really eating up reality porn."
Currently, the site's five "Most Popular" downloads are "The Princess Has Come of Age," "Real Female Orgasms 5," "Taboo 2," "Big Booty Moms" and "Little Asian Transsexuals 4."
"I think some of the shock value of these niches actually causes people to hang around a little longer, watch it a little longer than maybe they like to admit," Seibert says.
The real surprise might be Black Widow Productions' animated "The Princess Has Come of Age," HotMovies' all-time moneymaker.
"We put it on as an editor's pick, and it skyrocketed," Seibert says. "It has outsold everything else by leaps and bounds. It has been in our No. 1 spot since the week after we got it in."
Seibert, who has a degree in programming, lauds the film's use of 3D CGI. "It's one of the most beautifully computer animated porn films that I've seen, and it really shows you what the future might hold for porn in general, where a greater variety of things can be done using simulated people."
HotMovies also offers customers a range of buying options. Pay-per-minute packages allowing viewers to watch streaming video start at 10 minutes for $2.45 and go up to 620 minutes for $49.95. The latter includes 15 minutes of free phone sex — a nice tie-in with National A-1's core business. Customers also can purchase unlimited access to a specific film for two days, a week or a month. Recently, the site began offering permanent downloads of about 1,000 titles.
"But the major force is all pay-per-minute," Seibert says. "That's what drives our business and makes us money."
Among HotMovies' promotional tactics is giving customers a half-hour free on Thursday nights. The site also has a "pay-as-you-go" plan geared to prospective customers who want to test the waters first.
"It helps to get people through the door," Seibert says. "We really try to focus on giving the customers as many ways to purchase as possible."
Another key initiative involves the 30-minute prepaid cards discussed in the Boston Herald story. Seibert hopes to print 10 million this year. The cards are distributed through trade shows, video retailers, adult magazines, weekly newspaper inserts and affiliates. The latter can even hand them out on the streets, as long as they qualify recipients on three criteria: They must be over 18, enjoy adult entertainment and have high-speed Internet.
In the meantime, HotMovies is aggressively targeting foreign markets. The site is available in eight languages. A Russian version will be online soon. China, though further down the list because of censorship issues, "is definitely on our radar," Seibert says. "A couple of billion people can't be wrong."
HotMovies recently started offering iPod downloads, giving customers a small taste of the site's possible future as a mobile content king. Although Seibert acknowledges the widening impact of mobile media, he says "we don't believe that the audience is there yet. We don't think the American market is ready for porn on their phones."
Not that HotMovies is sitting on its hands. "Our focus has been on the Microsoft Smartphones," Seibert says. "We think that they are the future. We're just not going to show our hand until the demand is there. Then we'll come out and market the shit out of it. That's where we excel. HotMovies is a brand name now. It's recognizable in just about everywhere in the space."
Seibert thinks adult companies that are already pushing their mobile offerings in the U.S. market "might be shooting their load a little bit early. We're thinking another year."
If and when HotMovies makes its move into mobile, one thing is certain: The adult industry will be paying close attention.