International DVD Market Remains Viable Part of Revenue Puzzle

Jared Rutter

Without the foreign market the porn industry would be in a woeful state. The fact that American-made adult video is gobbled up eagerly by consumers in Europe, Latin America and other far-flung territories is a blessing for its manufacturers.

But what shape is that market in now, and how are producers and wholesalers exploiting it? We asked some questions and got some answers.

I think foreign sales vary being 10 percent and 50 percent of the total revenue for various studios. -Bob Christian, Adam & Eve

First of all, just how important are foreign sales to American companies?

According to Evil Angel CFO Adam Grayson, “Foreign territories have always been tremendously important to U.S.-based adult companies, especially Europe. While the DVD market in the U.S. has contracted significantly over the last number of years, the DVD market in Europe has contracted much more slowly, at least for Evil Angel.”

“Foreign revenue is an important part of our business,” echoes Hustler Video/LFP President Michael Klein. “We still have strong DVD sales throughout Europe and we are the largest distributed adult broadcasting network in Europe with numerous linear channels and broadcast VOD services. And our Internet sites have strong sales in foreign markets as the Hustler name is a strong worldwide recognizable brand.”

Bob Christian, general manager of Adam & Eve Pictures, says, “I think foreign sales vary being 10 percent and 50 percent of the total revenue for various studios. So the range of reliance varies. But I believe that the figure might average about 20-25 percent of total revenues (real data is not available of course!). But I think it is very accurate to say that foreign sales of content in various channels are meaningful to virtually all U.S. studios. It is an important part of the business, not a sideline or ‘just’ an incremental part.”

Marc Bruder, owner of Cable Entertainment Distribution (CED), which has long specialized in the overseas market, puts it even more bluntly. Sales, he said, “could be like 40 percent U.S. and 60 percent foreign—but with some companies it is more like 80 percent from foreign. Some companies did not venture in to foreign distribution and rely on U.S. dollars almost exclusively… Those companies are dying.”

Peter Reynolds, whose Plaid Bag Media has marketed adult content abroad for several years, says simply, “American companies are relying more and more on foreign sales because of dwindling DVD revenue.” He estimates that the decline in DVD sales has been “even worse in Europe.”

Helen Clyne of A2Z Services, a distributor based in Germany, asserts that U.S. companies rely “hugely” on foreign sales. “I would say 99.9 percent of our business is USA exports.” She adds that although DVD sales have slackened “even more so in Europe, the DVD market isn’t dead yet. Volumes are higher — but margins are smaller.”

“DVD sales have declined worldwide over the years with the growth of internet and broadcasting delivery,” says Hustler Video’s Klein, “but there are still some strong markets in Europe and other territories where there are still robust DVD sales. But worldwide, DVD sales have declined every year.”

In the light of these often irksome realities, European markets are doing the same thing as their American counterparts, turning to digital delivery.

“The world is rapidly going digital for content delivery, screeners, everything,” says Reynolds. “Companies want to avoid paying excessive shipping costs to Fed Ex, UPS etc. The challenge is still uploading a file that doesn’t crash midway through, though. Server speed is the key on both ends. Customers will not wait two-three days for one film to upload, only to have it crash halfway through.”

“Digitally delivered content is certainly faster, cheaper and easier to get in customers’ eyeballs than DVDs,” says Adam & Eve’s Christian. “Those are the pluses. However, despite the ‘margins’ being arguably much larger, the overall monetization is still currently fewer dollars for digitally delivered content than for DVDs. And the most important part is, of course, what does the customer want? How do they wish to receive and view their adult content. So, don’t stop offering DVD, but yes, I believe digital delivery is indeed the way to go.”

He adds, “I wouldn’t say we have seen changes in delivery methods. The changes have been in the share of the sales that are digitally delivered (higher), and in the continued trend toward higher definition as bandwidth and adoption have grown.”

Evil Angel’s Grayson is even more emphatic. “The universality in the developed world is the broadband connection, which will be the lifeblood of our industry for the foreseeable future. The question is just about what devices are connected on the consumer end, how they pay for content, and what local laws limit the scope of that content.”

And then there is Video on Demand. “Besides our several linear channels that we have out in the marketplace such as Hustler TV and Hustler HD, broadcast VoD is really starting to take off,” says Klein. “It has a strong penetration already in the USA, but the number of cable, satellite and telco homes in Europe and Latin America with VoD is quite small in comparison. But now that is starting to grow and become a strong revenue source for our VoD packages such as Hustler VoD.

“Besides DVD distribution and broadcasting services and Internet sites, there is stronger growth of IPTV delivery in Europe than what you see in the USA. Also we have explored apps within smart TVs offering our services and that is starting to expand overseas.”

CED’s Bruder goes even further. “VoD, NVoD, AVoD (Advertiser-supported VoD) and subscription as well as pay-per-view are still viable delivery mechanisms — but soon it will be all internet-based where a consumer can access everything with a simple access code and be charged monthly or yearly or even a-la-carte.”

No matter how it’s delivered, it’s the content itself that still counts. And with content trends, crossover seems to be the name of the game.

As Bruder see it, “Adult (not porn) programming has always attempted to ‘cross over’ to a mainstream larger market, and with the productions of parodies a few years ago (Jeff at X-Play being the modern age trendsetter) and the recent popularity of the ‘romance’ movies (mostly from Wicked and New Sensations) are turning the porn-adult-and-mainstream audiences into adult viewing subscribers, which is the trend in the U.S. and international. Of course the parody genre is not as desirable by programmers any more since it seems to have run its course.

“The romance high-budget movies are very much in demand. So are all the other categories (older MILF/younger man and vice-versa, teens, interracial, gangbang, etc.). As always, hot women doing hot stuff with great production value will always sell, even if shot on masking tape. Companies like Mile High in Canada research trends, create a line and produce high quality content and market to the exact demography.”

In conclusion, Reynolds sounds a cautionary note for foreign as well as domestic distributors. “In Europe, as it is here in the U.S., there is a significant impact by illegal downloading. Until governments do their part and help increase the criminal penalties for abusers and devote time and resources to prosecute the worst offenders, the problem will continue to significantly impact studio revenues.”


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