State of the Industry at Phoenix Forum

Gretchen Gallen
PHOENIX, AZ – The overall message at the State of the Industry panel at The Phoenix Forum was that the prognosis for the online adult industry looks good, if not great, but that the importance of sticking together as an industry and making sure that sites remain in compliance with federal regulations has never been more crucial.

“We need to think more like an industry,” said Chris Mallick of Epoch/Paycom, one of the panelists. “Tell the truth, think long-term, act like we’re going to be here for a while. The first step is showing up to events like this and then going out and taking action.”

The five-member panel concluded the first official day of the forum and managed to successfully drive home the issues facing the adult entertainment industry, what the industry needs to do to better protect itself, and how it has never been more important for webmasters to be responsible in their business practices.

Some of the central issues the panelist red-flagged as being paramount to the industry included maintaining Visa chargeback ratios, 2257 compliance, getting truthful information out to webmasters, and letting innovation lead the way for the industry.

"I’m excited,” said Ron Cadwell of CCBill, one of the sponsors of the weekend. “I don’t see doom and gloom for us because we’re becoming more of an industry. There is a changing mentality, there are corporations being formed, larger, more sophisticated staffs. We are plateauing and maturing, not flying by the seat of our pants. I think 2004 will be a great year.”

Tony Morgan of National Net shared a similarly optimistic outlook for online adult:

“The reality is this industry has always been fraught with challenges. Are we still going to make it? Yes,” he said, adding that regardless of the credit card companies that pull out of the industry, there will be others that replace them, and that banding together as an industry and appointing a specific association or body to represent online adult would be of great importance, although it might be a difficult task to undertake.

“Have you ever tried to herd cats?” Morgan joked, referring to the so far ineffective efforts of organizations like the Free Speech Coalition (FSC) and Larry Walters’ IFA to rally the adult entertainment industry under one roof.

“There are still a lot of untapped markets and niches,” said Jay Kopita of YNOT, adding that he is seeing more of a revolution within the industry as opposed to the ‘evolution’ of a few years back.

Kopita added that while he is not saying that the sky is falling, he has seen a lot of successful companies leave the industry lately and that webmasters need to take risk management more seriously.

“With 2004 being an election year, November will have a huge impact on this industry,” he said in reference to the possible re-election of President George Bush.

“If you’re going to do anything in the next year,” said Mallick, “You need to look at your billing solution. That is your risk management. Be able to accept any type of system possible. Police yourself. More is not better. Go for quality in every aspect of this business.”

Another unanimous point among panel members was the key importance of building relationships.

‘In this room right now, there is a lot of traffic,” said Craig Tant of Mansites. “This is a core group of people getting business done, building personal relationships, putting win-win ideas together.”

When the issue of 2257 compliance was brought up by an audience member, Tant was quick to say that his company has created a model of responsibility insofar as providing 24-hour live support and putting an entire compliance department in place to deal with the issue of 2257s, a system of providing proof that models are not underage.

“We have a responsibility to work with webmasters, hosting companies, and billing companies to make sure that content is solid,” Tant said. “If a webmaster can’t prove they own their own content, then down they go.”

Kopita added that Attorney General John Ashcroft recently added scores of Internet-savvy attorneys to his staff in order to vigorously go after adult webmasters.

“2257 is the tip of the iceberg,” said Kopita. “We’re all a target to some degree.”

Morgan added that while the majority of webmasters have never been called upon to prove that their 2257 papers are in order, it could still happen at any moment.

“You’ve got to do the right thing,” said Morgan. “You absolutely have to cover your ass. If that microscope comes on you, you come out clean that way.” He made reference to a colleague who recently had his offices raided by the federal government, but that he had all his papers in order and came out smelling like a rose.

The final point of the panel was for webmasters to get out and vote and make a difference in the upcoming presidential election.

Joan Irvine, executive director of Adult Sites Against Child Pornography (ASACP) was called upon in the audience by members of the panel as an example of the kind of successful lobbying force an organization can have in the online adult world.

Irvine stated that there is a renewed effort to unite the online adult industry by the FSC.

Irvine mentioned a campaign that is currently underway to encourage people to vote and that she and the FSC are planning a voter drive that would include sending out upwards of 15 million emails to encourage people to vote. According to Irvine, if as few as ½ percent of email recipients respond to the email, that would translate into 750,000 people that could conceivably take action against the current administration by casting their votes.

Members of the FSC, according to Irvine, are currently lobbying in Sacramento to have a limit put on how long private business records can be held in investigations.

Irvine also stressed a new effort undertaken by ASACP called ‘How Clean is You Traffic?’ a system that helps webmasters identify which affiliates are practicing non-compliance and improper billing purposes.

“Really know who your traffic is,” said Irvine. “Be sure you do your business right.”

“We are as strong as our weakest link,” said Kopita. “As long as some of us are doing shady business, it reflects on all of us.”

Tant added: “How many of you have your revenue contingent upon someone you don’t know?”

“Billing companies spend millions of dollars to know who your customers are,” said Cadwell. “Visa and MasterCard know who you are. Bad traffic could be the end of your business.”

Phoenix Forum is hosted by CCBill, Cavecreek Web Hosting, and DRM Networks. Premium sponsors include Traffic Cash Gold, Extreme Paychecks, SexKey, and Lightspeedcash. Platinum sponsors include Topbucks, National Net, ePassporte, and GhostHost.