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Karl Bernard

John Scura
The year was 1996. The place: Montreal. An 18-year-old techie named Karl Bernard had just dropped out of school, where he'd been studying to be a computer engineer, to pursue his hobby.

"I started collecting images and put them on a web page," he recalls, "and suddenly people were visiting my site."

Now, 10 years later, Bernard sits behind the president's desk in a Montreal building that is home to Gamma Entertainment, one of the most endearing success stories in recent adult Internet history. His teenage hobby has turned into a thriving business that employs 65 people and allows webmasters to promote more than 29 adult paysites, hundreds of standard banners and thousands of free hosted galleries. It's the result of a forward-thinking and innovative business strategy that has kept the firm ahead of the pack.

"We were one of the first companies to start with an affiliate program," Bernard explains. "Our core business has always been running membership sites and promoting them through an affiliate network. Our niche back then was young women, the teen category, which was very hard to find on the Internet at that time. That's why we started the 'Web's Youngest Women' and 'All Teens.' It was for people who wanted to see models 18-21 years old."

The affiliate business structure was like a sea change for the adult Internet, before which people were paid by the click. But Gamma and other adult companies gradually migrated to a membership model that proved highly lucrative for both the paysite owner and the affiliate.

Gamma has used this strategy while keeping a finger firmly placed on the pulse of the ever-changing adult Internet market. Just two years ago, Gamma's main presence was in the field of reality sites. The company's chief moneymaker back then was a site called BrunoB.com, which used an actor to play Bruno and a new female model each week, shot in a reality format. But the copycat nature of the adult industry produced so many reality sites that Bernard had to find a new gambit.

"For the last year, our focus has been developing partnerships with brand names," he says.

And so, Gamma Entertainment recently unfurled its newest affiliate program, FameDollars.com, at the August 2006 Internext show in Las Vegas.

"We've partnered with some well-known porn stars like Peter North and Silvia Saint," Bernard says, "We'll do all their marketing and make it possible to find their websites and subscribe. We've also partnered with Devil's Films, which already has about 500 DVDs available in stores."

The Big Splash
Gamma's big splash at Internext made Bernard marvel at how much things have changed in the adult entertainment business since he got his start. Not just the business strategies have evolved but the sheer size and nature of the adult entertainment industry have rendered it almost unrecognizable from what it was like when Bernard started his firm. And there is no place where this is more evident than at industry trade shows.

"I remember the trade shows six or seven years ago," Bernard says. "Everything was about 900-numbers, and there were only about 80 people there. Back when we started, people would go to these shows wearing jeans and T-shirts and didn't worry about how their companies were perceived. Now it's much more serious and corporate."

Of course, the downside to this change is the astonishing increase in competition, he points out. When Bernard kicked off Gamma in 1996, he was competing against only a handful of players. Now he has to deal with thousands of other outfits chasing the same consumer dollars. This has produced change in the affiliate business structure, because it has become much harder to convince affiliates that any given product is considerably better than a competitor. And over the past 10 years, Bernard believes the consumer has undergone radical changes, too.

"Now consumers have so many choices that they really shop and try to find the best deal," he says. "Customers are really more savvy than they used to be. Also, 10 years ago, customers who subscribed to a site would remain a member for up to 5-6 months. Now people stay less than two months on the average."

Another concern is the industry's dependence on the credit card processors. Bernard reveals he had real fears two years ago that credit card companies would pull the plug and stop accepting any kind of adult transactions. Fortunately, the billing companies seem to have worked out matters with the processors, and the adult industry has matured to the point where Bernard no longer worries about having the rug pulled out from under him.

What the Future Holds
Bernard, who has made Gamma Entertainment successful by staying one step ahead, thinks he sees some interesting changes ahead.

"I think we might see a consolidation over the years," he predicts. "The adult industry is not perceived as it used to be. Ten years ago, it would have been impossible to imagine an adult public company, so people are more inclined to take the industry seriously and invest in it. So I think we might see bigger players buying out their competitors."

In addition, Bernard sees more use of interactive media in the future of the adult industry.

"I think you'll see companies that produce for the web start to produce magazines and TV," he says. "You're going to see more media converging, so when you buy a membership to a paysite, you'll receive a DVD by mail and a magazine at the same time. Also, I expect advances in interactive. One of our projects is called 'Pornication,' a live one-on-one service where a guy can chat with a girl and make requests. I think you'll definitely see an increase in video-on-demand, and companies will make it easier for people to navigate websites on their TVs or Xboxes, rather than having to use their computer. I think we'll see the web expanding from the computer to the TV and every other electronic entertainment outlet."

Whatever happens in the brave new future of adult entertainment, you can be sure that Bernard and Gamma will be leading the way.

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