Phantom Study
Many articles referencing the inflated DVD/video sales figures cite a 1998 study by Forrester Research. But there's one major problem: Apparently, no such study was conducted by Forrester. In 1998, Forrester did publish a report on the online "adult content" industry, in which it claimed that revenue reached $750 million-$1 billion — nowhere close to the $10 billion figure later connected to that report.
"The $10 billion aggregate figure was unsourced and mentioned in passing," Dan Ackman wrote in a May 25, 2001 Forbes magazine article. "According to Adult Video News, Americans spent just over $4 billion to buy and rent adult videos last year. This figure is baseless and wildly inflated. From there, the numbers get even more obscure."
Ackman's article went on to point out that one of Forrester's rival research outfit, Net Ratings, tracked the number of visitors to adult websites and reported that in April 2001, there were 22.9 million "unique visitors" to these sites.
"This says nothing about how long each visitor stayed or whether they spent a dime," Ackman's article continued. "In any event, the number of visitors is less than the number who visited news sites (41.1 million), finance sites (34.2 million) or greeting card sites (25.5 million). When was the last time you heard anyone talk about how greeting card sites dominate the web?"
A recent Wall Street Journal survey placed total online adult industry sales anywhere from $250 million-$2 billion — far below the figures touted by industry trade publications.
"I don't know how they've come up with their figures," says Ford, who bases his estimates on direct contact with various distributors. "I get median averages of units sold and at what price. Most of my work is just calling distributors and bouncing their views off one another."
Ford is not alone in his mystification. Many distributors are equally confused about the sales figures they read in the trades.
"I don't know where any of these people get their numbers from," X-Worx co-owner Dave Gallegos says. "[They do] seem awfully high. The figures seem to be kind of arbitrary, and they fluctuate so much."
Roy Karch, president of Empire Video, also is non-plussed by the much-published sales figures.
"I'm supposed to be one of the biggest distributors," he maintains, "and I hear about this $12 billion industry, and I think, 'Boy, I'm not too big a piece of that.' We've always laughed about it. It's just a number. They love to say that our business actually does more business than legitimate Hollywood."
Karch ran an informal poll of his own, talking to his customers and other people in the business, and he came upon a disturbing trend.
"New release sales are down as much as 50 percent over the summer," he says. "I think sales are down altogether. It's not just a case of new stores hurting old stores because if that was the case, the manufacturers wouldn't be down 30-50 percent."
So if the figures commonly put forward in the media are inflated and unreliable, why do publications continue to use them?
"The porn industry tends to inflate its size because that makes porn seem more powerful and respectable," Ford hypothesizes. "That's a widely held view from all the articles that claim it's a $20 billion to $50 billion-a-year industry."
It's easy to shrug off the exaggerated stats, but if you look below the surface, you'll see that they may be doing the entire industry great harm by creating a gold-rush mentality among investors looking for "the sure thing."
"The notion has gone out that you make one of these movies and you get rich," Ford says. "It just doesn't work that way. There aren't any billionaires in the porn industry, and, frankly, there aren't that many millionaires. You just have to go around these companies and look in the parking lots to see what these people drive and see the homes these people live in, and there's nowhere near the wealth that you see in Hollywood — despite all the claims to the contrary."
Aside from the notion that making an adult production is "Fool's gold," there is a darker side to the myth of instant riches. The lure of the quick killing is bringing new competitors into an already overcrowded arena, and some industry insiders think that inflating revenue is more than just bad judgment. Karch's discovery that sales may be down by as much as 50 percent could be just the tip of the iceberg.
"I'm hearing from a lot of distributors, 'Oh, we're not picking up these studios,'" says Megan Stokes, vice president of foreign and domestic sales for Shane's World. "People just aren't picking up what isn't known to sell anymore. They're being much more sensitive about what they're putting in stores. They only have so many spots on a wall they can fill, and they don't want to fill it with stuff they're taking a chance on.
"This is the most competitive industry in the world, in my opinion. If you come up with something original, there are 10 copycats following you the next week. Oversaturation of product is a bit harsh right now."
Jeff Mullen, president of All Media Play, sees a direct correlation between the new, oversaturated market and the inflated sales figures being published in ridiculously optimistic reports.
"People who try to paint a rosy picture about this are just cutting their own throats," Mullen says. "That's because they're inviting new competitors.
"I get calls about once a week from investors who say they want to get into the adult industry and ask me for advice on how to start. I always tell them: 'Don't do it. We don't need you.' Why would you encourage others to come in and build another ice cream store? I personally think it's suicide for any new people to attempt to come into this business as a producer of adult content. They might as well flush their money down the toilet."
