Looking Back – and Ahead

Stephen Yagielowicz
With 2007 already going into its second month, I've been reflecting on the recent past and planning for the near future. As part of this process, I've looked back at the most important factors that impacted my operation in 2006, as well as the factors likely to do so this year. Here are some of those issues. Let's see if you can identify with — and learn from — some of them:

2257 Inspections
Perhaps the news highlight of 2006 for operators in the adult entertainment industry was the commencement of 2257 inspections — the first such occurrences in the 18-year history of the statute. With a number of operators both large and small enduring a visit from the Justice Department, the specter of impending inspection has forced many operators to take the 2257 compliance situation more seriously, tightening their compliance measures and ensuring the greatest chance of successfully passing such an inspection.

For my own part, one of the measures that I undertook in this regard was to re-encode my video clips, this time with the addition of a 2257 statement and warning screen. Many of the clips that I commonly see posted far and wide, including on my own TGP/MGP, still do not have such notices, illustrating that the adult industry still has far to go in order to become fully compliant. While some may feel that simply having a link or statement on the page that your videos are linked from is adequate, the reality is that once these clips are "out there," they will be shared far and wide, making an embedded statement not only smart but a necessary compliance measure. As an added benefit, while re-encoding, I did so at a higher quality level to better take advantage of the rapid increases in broadband penetration, which according to my stats, covers more than 85 percent of my site's visitors.

Increased Competition
This past year also marked an increase in competition in what is already a fiercely competitive market. But unlike years past, these increases were not so much manifested through continual program and website launches but through the refinement of existing programs. Indeed, much of 2005 seemed marked by a constant flurry of "new site" announcements, which is contrasted by 2006's flurry of "re-launch" announcements. Perhaps it's just the nature of the business — where casting a wide net has turned into casting a smart net, as the webmasters who focused on speed-to-market have gone back to revisit the "cut corners" and incomplete, un-optimized approaches they tried in an attempt to gain market share.

For my own part, and that of other small operators, the outward evidence of the process is fewer new domain names — perhaps lapses of previous names — and an overall campaign of focusing on the polishing of the best-performing properties and shelving of incomplete or under-performing sites and services. This is something that I touch on repeatedly in my blog at XBIZ — there are only so many hours in the day and focusing on "bigger, better, faster, more" isn't a strategy that lone operators can keep up indefinitely; and now, 10 years down the road, many are feeling the pressure. Some webmasters have quit, most have scaled back, and the smart have invested in what's proven to work or walked away from projects that haven't. As for speculation, I believe that this process will continue throughout 2007 and beyond.

Coping With COPA
As if 2257 inspections and everything else weren't enough to deal with, at the time of this writing, COPA, the Child Online Protection Act, is being revisited. It amazes me that according to a recent XBIZ poll, 37 percent of you are either unaware of or simply not following this vital development.

Rather than rehashing what already has been quite extensively covered by the adult press, I'll provide the short course: This legislation has been working its way through the court system since 1998 and, if upheld, may put an end to the domestic "free porn" industry — no more free sites, TGPs, MGPs, etc. Why? Because failing to require a credit card or other age-verified access code will result in a penalty of $50,000 and six months in prison per infraction.

Sorry, kids, nobody's making enough money on free porn to justify that kind of penalty, and as such, the real business people operating in America will quickly pull the plug on these types of operations — or dramatically change the face of them.

For example, surfers who are used to visiting any of the thousands of TGPs and MGPs for their daily free porn fixes may find that these outlets now require a payment for access, however nominal. Those who balk at the idea fail to consider the profit potential of paysites offering hundreds of thousands of FHGs, containing millions of images and countless video clips.

Of course, overseas operators who could care less about the actions of U.S. lawmakers will quickly fill the void, making it a case of "business as usual" for the criminals while eliminating any last chance at control over this worsening situation.

With a final ruling on COPA slated for the early part of 2007, I fully expect the outcome of this ongoing saga to set the tone for the entire year — and beyond. More of our ranks will deem it no longer worthwhile to exchange the increasingly high level of risk for the decreasingly profitable enterprises forming the status quo.

But there's hope on the horizon with the continued broadening of the domestic mobile market, IPTV and other technologies well suited to the distribution of adult entertainment. Let's just hope that enough of us can hang on to realize the profits of this brighter tomorrow.

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