Is Content Licensing Adult's Panacea? Experts Weigh In

Bob Johnson

LOS ANGELES — It sounds appealing in an industry always seeking new ways to boost its revenue streams. Create good adult content, mix it with a familiar brand and start licensing products to myriad companies around the world chomping at the bit to cash in.

But unlike the not-so-distant salad days of porn where a licensing deal could be made on the telephone in a matter of minutes, adult has grown up, and with that maturity comes a level of business sophistication that demands new skills and strategies that as veteran licensing broker Plaid Bag Media’s Peter Reynolds puts it, “separates the men from the boys.”

Of course that doesn’t mean there isn’t opportunity. Strong content and a recognizable adult brand remains a viable means to monetize what’s been built. Companies today have the opportunity to spread their wings in the traditional domestic web and cable TV markets as well as the burgeoning novelty and sexual wellness fields.

There are even growing opportunities in mainstream as adult products become more acceptable.

U.S. pay-cable TV channels for the first time ever are showing licensed adult studios with their logos on movies airing just after prime time with romance movies, according to Cable Entertainment Distribution Inc. (CED) president Marc Bruder. “Wicked, New Sensations and a few other studios that we represent are producing big budget high concept ‘romance’ full features and they are being licensed worldwide,” Bruder says. He adds that even hardcore versions are airing in every adult platform, channels, system and network that CED services.

Top brands have always opened the doors to licensing deals by virtue of their popularity. Unlike mainstream that could have thousands of players in a particular category, the best and the brightest in adult become household names despite their “outlaw” status by virtue of a relatively small industry.

And as always in adult, content is king. Once the content provides a foothold with consumers, the brand in most cases follows.

Naughty America recently advertised for a licensing executive to run with its premiere brand. CEO Andreas Hronopoulos said the company realizes that content is now more important and powerful than ever and that the brand name — that he says is widely accepted as a “a state of mind” — is ripe for licensing.

Bruder agrees and says he believes Naughty America up until now has not nearly seen its potential. “A few years ago CED was licensing Naughty America titles to our channels in Latin America and they did very well. Naughty America has a great team and leadership and if put in the correct distributors hands on a full exclusive relationship could transform this great studio in to a huge worldwide force. The potential revenue for Naughty America is much greater than their current bottom line annually is my guess.”

That kind of encouragement sparks companies like Naughty America to move forward and to look at the giants in the industry as benchmarks of success when it comes to licensing their goods.

Some of the most successful at the licensing game weighed in on the potential, sharing their experiences with XBIZ as to the benefits and the inherent pitfalls.

Larry Flynt’s Hustler empire for example, grew into a master at licensing, lending its unique content and name to lingerie, novelties, gentlemen’s clubs and more.

“Clearly if you have a strong brand, taking advantage of the ability to do licensing deals is a plus. But you have to have a brand that will resonate with the public and one that people will feel comfortable wearing (since we do know a number of companies in the industry that have well established brands that the majority of consumers are not going to wear say a shirt or sweatshirt with that company name on it out in public),” says Hustler President Michael Klein.

Aside from increased revenue, Klein points out that a strong brand resonates with consumers and can ultimately lead to higher traffic to websites, which means increased DVD sales.

Klein cautions however that companies considering the move need to get their brands on items that have some connection to the core business or that properly display the name without cheapening it.

And according to Exile Distribution owner Howard Levine — who licenses for broadcast worldwide — Hustler is the quintessential branding and licensing example.

“Larry [Flynt] is probably the best business man I've ever met. He has created a universal brand. He thinks several steps ahead of anyone else. People will attempt to duplicate his business model, but most if not all will fail. No one cares about Exile TV or Exile radio or Club Exile. We must stick to what we know. He has created a universal brand,” Levine says.

But there are others that have pulled off similar success with their own unique approaches. Vivid Entertainment, another branding giant, that's recently announced a licensing deal with California Exotic Novelties for its new Vivid Raw line of products, has also parlayed its distinct content and celebrity sex tape stance into a licensing machine that in addition to content, includes clubs, radio shows and more.

Having a recognizable international brand for 30 years makes licensing simpler, but as co-CEO Steven Hirsch says, there’s a distinct difference between brand and content licensing. “Content licensing is how our movies stay alive in the marketplace. Obviously studios should take advantage of all viable opportunities to license their content whether on TV, Internet, mobile, etc.”

But he believes brand licensing can work only for a select few well-established brands and primarily with adult-related products and services. 

Reynolds, who represents Adam & Eve and a number of other adult companies agrees that name brands have it easier, but maintains that there’s still a healthy market for mid-range companies with good content — especially in the genre-driven, niche areas.

The pro regularly cuts deals around the globe for broadcast, hotels and studios looking to bolster their portfolios with good content. He points to Germany as one market that continually seeks U.S. films, and pays top dollar in many cases. But he cautions that the market is now tougher than in previous years and that the combinations of the economic recession and dwindling DVD sales have made it a buyer’s market unless the content or brand is outstanding.

“I can’t imagine a company that doesn’t want to license their products. But they have to supply buyers with all of the necessary elements of a film including HD (niche) content (in most cases), catchy titles, artwork and a name porn star helps,” Reynolds notes.

Levine points to his client Forbidden Fruits as a perfect example of a new studio that is highly in demand. “The buyers are very selective and rarely give a new studio a chance. They prefer going with a proven winner. But that veil can be pierced. Forbidden Fruits is one studio that has done that. As for loaning your company's name to clubs or toilet paper or whatever, that is a short-lived business,” Levine says.

Reynolds advises companies with licensing on their minds to approach the deal very seriously. With more and more mainstream companies buying adult content, the contracts are more complicated and the fine print must be read.

Klein agrees and says that would-be licensors really have to stay on top of the companies that they do licensing deals with since they all come in with big promises of reaching a wide range of sales. Some do with no problems, he notes, but there are others who don’t really have the resources or connections that they claim, or the expertise on that type of branded product. “If you signed a long term deal [with a bad company], you are stuck with them for a while and you have wasted a good revenue stream with the wrong company,” Klein warns.

The executive notes that Hustler uses a seasoned licensing company that’s out there representing the brand at various licensing shows and through their connections. They are also working with the Hustler brain trust internally on some new deals that the company hopes to announce this year.

Reynolds is also a proponent of using a licensing pro. He believes that there’s a superior advantage of working with a broker who has grown up in the industry and knows how to talk the talk.  And with the contractual details becoming so much more involved, a company must also retain an attorney to safeguard intellectual rights and vet the details of the revenue split.

Regarding legal considerations, adult industry attorney Greg Piccionelli told XBIZ, “Content licensing is essentially a contractual matter. So almost always, the success and profitability of a content licensing deal will depend on how well the deal was negotiated and how skillfully the licensing agreement was drafted."

He adds that companies must prepare and know the deal they want to make. “Before you begin negotiating a content licensing deal, or just about any other kind of agreement for that matter, it is important to be prepared. You should always have clear objectives and know what you are willing to compromise. I have found that it often helps to make a list of key deal points and negotiation goals with my client before commencing discussions with the other party,” the lawyer says.

But even with new hoops to jump through, producers other than establsihed studios also have a shot at licensing.

Bruder says that webcam girls with their own in-home studios and decent HD content are also contenders for licensing their product.

“Some of the proprietary footage is very good. They are shooting solo, couple and group situations from hard XXX to soft versions then compiling a 60 or 90-minute show into a title we can license to broadcasters worldwide. These web studios owned by the girls are starting to shoot footage not only for the subscribers to their fan club who pay monthly subscription fees, but for our standard, traditional broadcast channels as well. Only a few of these ladies are able to pull this off at this time — but more are learning,” Bruder says.