In the Executive Seat: Richard Cohen

VOD giant was launched in December 2002 by National A-1 Internet, already a leading provider of adult audiotext services for 15 years.

The concept behind the new venture was simple, to make a site that would "...allow people to come and go as they please and offer them the chance to watch what they want, when they want," and was so successful that it has not changed in the intervening years. In June 2008, the company celebrated the site's 100,000th movie, and the pace continues unabated in 2009.

As the economy continues to deteriorate alarmingly, and the adult industry realizes that it is no longer recession proof, it seems the right time to get the perspective of one of the most successful online distributors of adult content ever.

Richard Cohen, the president of National A-1 Internet and a leader in the development of pay-per-minute billing and the digital delivery of adult content, graciously agreed to answer a few questions about the current environment and itself.

XBIZ: Did Hot Movies feel the impact of the economic meltdown at the end of 2008? How long do you think it will last and are you seeing people spending less money for adult content?

Cohen: We are seeing existing customers still making the same number of transactions but spending a little less.

Our site is inexpensive and offers a good value to the consumer (110,000 movies, about 10 cents a minute), so the economy is not really much of an issue. Tube sites offering free content and other factors are hurting us more so than the economy.

XBIZ: Hot Movies is famous for its highly visible ad campaigns. Have you changed or do you intend to change your marketing strategies at all? In a very tight economy, do you believe in lowering your ad budget, raising it or keeping it the same? What are the most effective methods to get the attention of your ideal customer?

Cohen: No, we intend to keep advertising to maintain awareness of our brand. We believe that in the long run this is effective.

You do not see Budweiser or Marlboro cutting their ads. We will be looking at Internet marking more so than print or radio this year. Our best promotion from the start is our free minute offers. Once people try our site they see the value in being able to "watch what you want then you want" and paying as they go, and return for years.

XBIZ: Is the number of video clips viewed each day still in the 38,000 to 60,000 range, as reported a year ago, or has it moved up, down or stayed the same? Do downloads still account for single digit consumption? In other words, is "get in, get off and get out" still the operative phrase?

Cohen: Yes, downloads and rentals account for less than 10 percent of our business. Most people prefer to watch scenes and not entire movies.

XBIZ: Are there any cool new technologies on the horizon that you see impacting your business significantly?

Cohen: Not really. I believe the integration of the computer and the television is getting closer. Once this happens, the viewing of Internet content should explode (and not just adult). Currently, the average person does not know how to connect the computer and the television, and in most cases the two are not located in the same room

XBIZ: Care to comment on Private Media's acquisition of Gamelink? Has anyone made an offer for Hot Movies? Would you sell the company if someone made the right offer? Do you see more investors eying adult?

Cohen: I have no first hand knowledge of that deal, but I do not believe it. I cannot see someone selling an established company for all stock and no cash. For the most part, the multiples offered for adult companies do not allow too many sales.

XBIZ: What do you think about the proliferation of Tube-style websites? Do you feel like piracy of adult content is increasing or decreasing? Do you think consumers being conditioned to expect free content? If so, what can be done to reverse it?

Cohen: Tube sites are a major problem in many ways. It looks like many if not most tube sites are now buying their content from studios that need the money who or can sell inexpensively. Piracy in many areas will always be an issue. The customers who use tube sites are not our customers. We offer 110,000 movies that cover all areas of adult. We are more like Tiffany and the Tubes are Wal-Mart. Our customers enjoy our product and service and are more than willing to spend $20-$50 a month for it.

XBIZ: Have you seen consumer appetites or expectations change in the last year? Generally speaking, have they altered the way they watch content on Hot Movies?

Cohen: No, viewing habits remain the same. The customers return over and over again when they want to watch adult content.

XBIZ: Are studios making fewer movies? If so, will it continue? And if it does, what is the future of prerecorded content and video-on-demand?

Cohen: Yes and no. Many studios are not making any movies but instead are taking part of the movies they own, making new movies out of them and creating new boxes and titles. Others are producing more new movies because they can no longer earn the same revenue they did in the past from a lesser amount of movies.

There are far too many movies and studios. The industry is going though consolidation and many studios will not longer be able to compete and therefore exist in the years to come.

XBIZ: Have you ever thought about expanding into the live content arena?

Cohen: No, we would never be interested in this.

XBIZ: What can we expect to see from Hot Movies in 2009? What will surprise us?

Cohen: Continual enhancements in our software, excellent customer service, 75-100 new movies every day, no surprises.