Remember the good old days when the only way to get your gay porn was through the mail, the kind that a postman had to physically deliver? Neither do most of the gay porn consumers who have drastically altered the industry’s business model over the last decade, forcing companies both big and small to adapt or die as technology has opened a new world of options to get online — and get off faster and more efficiently than ever before.
And that’s just one key component when it comes to staying on top of the trends that are currently shaping the lusty landscape. It’s a brave new world from the DVD flood of just a few years ago — one that is quickly drying up. But it isn’t just the alpha dogs that have felt the squeeze of change, as the seemingly never-ending parade of pretenders has also had to wake up and smell the cum.
The business is never settled, If you think it’s settled, you’re about to hit an iceberg. -Tim Valenti, president of Naked Sword.com
“There is nothing settled or comfortable about the gay adult industry,” says Mark Bower, vice president of strategy and business development for Next Door Entertainment. “We are at that stage in the lifecycle of this industry where there is a lot of change happening, and it will continue to happen. You have early entrants who are now looking to exit, you have business models that have not adapted or changed and are fading away, you have consolidation of entire parts of the industry. These will all drive a dramatically different landscape in the next few years. There are plenty of changes to come.”
Tim Valenti, president of Naked Sword.com, notes that content now starts out online and moves to DVD as an ancillary market. “That’s a huge shift. DVD buyers often see online success as an impetus for purchasing a project. Five years ago, it was the opposite. Studios feared that success online would take away from their DVD sales.”
It’s just one of the clues that confirms Valenti’s assertion that consumers have gotten smarter. “A few years ago, anyone with a camera and an internet connection could make a sale. Today, consumers want HD, they want easy browsing, they want multiple sizes, they want a wide variety. There’s tons of free porn out there — there are tons of tube sites. So people are interested in value, but if you’re going to win members you have to do things that a thousand free sites don’t — provide not only great movies, but do it in a way that is enjoyable to use, that makes them feel part of a community.”
THE CHALLENGE AHEAD
Bower says there is no question that the past few years have presented challenging times for the adult sector, and it doesn’t just boil down to declining DVD sales. “Piracy, a flood of low-quality content, a recession, legal issues and a changing affiliate environment have not made life easy for anyone in the gay adult industry,” he says. “But despite these negatives, I remain very optimistic about the future. Experience has shown that you can still grow an adult business in this environment. It is all about providing value for the consumer. If you provide quality content, deliver a great user experience and continually invest in marketing and improving your business, the customers will come and you will grow.”
In order for companies to have long-term success these days, Valenti says they need to think beyond the old distribution model. That means vertical integration — producing, shooting, editing, distributing and marketing all in house. Naked Sword does this on a macro level through its partnerships with AEBN and Raging Stallion/Falcon, but also with original content.
“You also have to move beyond the factory model of producing porn, producing original content that’s distinctive and correlates with your overall brand,” he says. “There used to be exclusives who were really exclusive; today, everyone shoots for everyone. If you want to distinguish yourself, you have to have a look and feel that’s not only different, but interesting. We’ve partnered with independent filmmakers, we’ve got sites like The Sword that constantly challenge the old model. Gimmicks can get you by for a little, but if you want to move forward you need to have reason for being that people believe in. We like to be the rebels, the ones who believe there’s a new way of doing things.”
THE EROTIC EVOLUTION
Douglas Richter, senior authorized consultant for Adult Webmaster Empire and director of business development for Bright Guys Inc., advises that the business model is constantly evolving.
“Things that worked one month or year ago might not [work] the next. You have to be aware of and pay attention to upcoming legal, procedural and even possibly economic factors that could impact your business. For example, the looming EU cookie law changes will have a significant impact; White label programs who use cookies rather than domain-based tracking will severely impact partner profitability,” he says. “Programs like AWE that offer a true domain-based tracking solution will not have a negative impact on partner profitability. Programs that claim ‘our cookie can handle that’ really show they have no clue. Keep up with and use technology as it evolves.”
Richter notes that the playing field has been leveled, especially if companies are strategic about business — and the industry has changed a lot with respect to who is playing and who can play. That’s because the barriers for entry have all but dissolved for the niche content producers but have dramatically risen for all other areas.
“Finding success today usually means figuring out something that nobody else is doing, then filling that vacuum better than ‘the other guys’. Many companies that 15 or 30 years ago were titans are now finding themselves streamlined or absorbed into much larger mega-programs. Companies and brands that were once competitors are now owned by the same parent conglomerates. Still, new companies and sites are being launched regularly. Keep in mind that streamlining also clears a path for the ‘new guys’, who will create compelling content wrapped around solid technology.”
THE “T” WORD
Bower says that thanks to the iPhone and the overall popularity of smartphones, the industry has seen steady growth of mobile commerce over the last couple of years. He expects that to keep growing as smartphone penetration of the market increases. “While the overall numbers are still relatively low, there is a steady trend towards growth. Mobile can account for 3 to 7 percent of purchases in some categories. For those companies with more forward-thinking mobile strategies, the gains will be there down the road.”
According to Richter, it’s technology that drives sales — and companies that are developing it are leading the pack. Those that aren’t must adopt and license technology to remain competitive.
“The most significant recent advances are the methods for delivery to mobile, tablets and pretty much anything that will increase interactivity, like breaking down language barriers. I cannot stress enough that a site must be both intuitive and interactive to be successful with today’s consumer,” he says. “I see this trend continuing to evolve: as computers, displays and sensory systems catch up, virtual reality is going to become very interesting.”
Richter adds that technologies and trends like HQ to HD cameras; DSL to fiber optics and LTE; lighting and special effects; and sound and audio improvements are evolving at breakneck speeds and will continue to impact the industry. The two key words, he says, are “intuitive” and “interactive”: things like live cams provide a touch of social interaction, and the experience can’t be pirated. “Programs must deliver what consumers are looking for if they wish to remain competitive in their business. Mobile, tablet and other personal devices are the future.”
HOWDY, PARTNER!
For a long time, the thought of studios joining hands in harmony was just a fan’s dream. But the current climate has mandated that everybody needs to just get along.
“You see a lot of partnerships that you wouldn’t quite expect,” Valenti says. “Studios have realized that they need a strong online partner, the same way that in the era of DVD they needed a distributor. You can do a certain amount on your own site — the equivalent of the old mail-order business — but you need retail and wholesale as well, and that’s where we come in. We can reach a much wider market. The other thing you see all over the place are studio/studio partnerships. Titan has its content on Lucas, and vice versa; same with Bel Ami and Corbin Fischer. I think it’s becoming harder and harder for the smaller producer, unless they’ve got a strong distribution partner.”
Richter concurs, nothing that companies can’t fall victim to one of the seven deadly sins: pride. “Realizing that none of us can do it alone holds great power,” he notes. “If you are a content producer, don’t try to build a live cam or dating site. Focus on your core. Follow the saying, ‘To be successful, one should focus on one thing and do it better than anyone else.’ I believe that the culmination of technology and smart people — who structure their businesses such that they are able to achieve a core focus and then create partnerships where each entity is bringing something valuable and unique to the table — will always be the success stories.”
Bower says that Next Door Entertainment is lucky to be part of such a solid partnership team of industry leaders such as Falcon, COLT, Male Digital and Hot House.
“Adapting to a changing landscape is key for adult companies. I believe that the future of our industry will belong to those who build communities of like-minded business interests. This is exactly what is unfolding now, whether it is through consolidations and acquisitions undertaken by some or through our business model of building partnerships. There is more to be gained by joining forces and working together than trying to do it alone. Whether it is defeating pirates, building expertise in tapping new sources of sales or developing unique and differentiated content, there is a great benefit in cooperation.”
STAYING SAVVY
Overall, Valenti notes that many of the bigger studios aren’t producing as much as they used to. “There are only a few studios—Falcon/Raging Stallion is one of them, and I don’t say that because we’re partners, I say it because it’s true—that really produce the old volume that consumers were used to. More, even, between all the lines. And NakedSword produces new content weekly, original series that have a point of view and a distinctive look and feel. We’re producing at a level that the old studios used to, and we’ve got the volume of content to back it up for a consumer.”
Michael Lucas notes that his company has stayed ahead of the trends by employing only the most business savvy individuals, noting that over the years they have carried out several shifts in product and technology — all the while delivering top-quality content.
“There are so many companies, big and small, that have gone bankrupt. Some of them just disappeared and others, who have a brand name, were sold or overtaken by bigger companies. We don’t take loans to stay in business. Lucas Entertainment is completely selfsufficient and thriving in the industry. The good profits that we make we put back into our products like the website. LucasEntertainment.com is the best in the industry and is constantly evolving.”
And constant evolution is the name of the game, particularly in the always shifting online marketplace.
“The business is never settled,” Valenti says. “If you think it’s settled, you’re about to hit an iceberg. This is a tremendously innovative industry, Darwinian sometimes, and people don’t realize we’re on the dawn of something big. We’ve been hitting the same brick wall for so long; those of us who’ve worked in tech and porn sense that the world is about to be inverted. I have some ideas, but you’ll have to wait and see.”
