The State of the Industry

Stephen Yagielowicz
At the time of this writing, I had just returned from the recent XBIZ State of the Industry '09 Conference in Woodland Hills, Calif. — the world epicenter of the adult entertainment industry — and there are a few observations of this event and its impact on the industry that I'd like to share with you.

The first involves the makeup of the audience, which went beyond the typical "Internet" group to include many "new" faces amongst the familiar crowd. These were not people "new" to the industry but a selection of veteran operators from the "traditional" video side of the business and beyond — all of whom seemed to be delighted to attend an adult industry conference held in their own backyard.

The second observation is about the very nature of the event: "Conference" truly is the best word to describe this gathering, which has matured well beyond the raucous "show" atmosphere of years past to become a welcome source of professional business contacts and timely money-making information that easily could pass for a mainstream meeting.

But it was the overall tone of this environment that made it stand out from its competitors, and while I overheard one unknown observer comment that it was "boring" and that "there was no one there," these comments were put into perspective by an old friend who noted that the audience represented "today's adult entertainment industry."

I contemplated all of this while working the show, and while I miss the good old days, there's a lot to be said about having an intelligent conversation without the distraction of some drunken bimbo trying to dance on the bar and a bunch of 18-year-old "webmasters" finding out what it's like to have as many free drinks as they want.

Sure, there were enough parties to go around (including the hot XBIZ Awards show), but most of us seemed to be there to work — some perhaps more than others. It definitely was not "business as usual" but rather a more serious and in some cases almost desperate attempt to keep their business afloat that motivated many of the folks in attendance to noticeably step up their game.

Far from being the smallest (or dullest) adult industry gathering I've attended, in the end, rather than feeling like "no one was there," it was obvious that in a year in which all the facades are coming down, "everyone" was there.

"Everyone" included such folks as Larry Flynt and Phil Harvey, Ben Jelloun and Sharon Mitchell — and hundreds of others who covered every segment of the industry including a few who have yet to gain widespread penetration but reflected even more changes heading our way.

It's doubtless that many of the companies represented at the conference, despite being perennially profitable brand names, have fallen on difficult times (when you're a "real" company, publically traded and required to air your books, it's hard to lie about how your sales have risen "by triple digits" over the past six months). But many of the operators I've spoken with cautiously noted that the worst seemed to be behind them, with post-election / holiday sales beginning to increase, pointing the way to a brighter future.

But in the present, it seems that a lot of people are looking for a new job or for a buyer for their company, unless they work in the billing sector, which continues to grow. And that's where the rubber meets the road: when the guy telling you how he's still doing more than 1,000 joins a day then asks you for a job.

But enough about all that. What does it all mean? What IS the "state of the industry"?

Personally, I think that even the most die-hard video guys have accepted that the Internet is really not "a fad" and will be with us far longer than their antiquated business, production and distribution models — and is, in fact, a force to be reckoned with. And I'm not joking when I say that; up until the past year or so, I know some in that arena who still had hopes that the Internet would simply "go away." Damn Luddites.

Outwardly, this — as much as the economy — points to some of the motivation behind the lack of new production. It's one thing to invest in filming when you can profitably recoup your expenses on high-priced Blu-ray sales, but it's a whole different beast when you are trying to provide "fresh" content to an online audience that is reluctant to spend even one single dollar to obtain your content. Best to recut some old footage into highlight reels and compilations.

And recutting they are, bringing vast amounts of high-quality "new" material online in their attempts to broaden their brands and capitalize on previous investments until production once again makes economic sense — though for a few of these companies, that day never will come.

For the established Internet guys, the last thing they need is a huge increase in the amount of free porn already circulating around the web. It's as if a whole new generation of e-marketers is ignoring one of the major lessons of the past — that you can't sell what others are giving away for free. But they'll try.

So what's the bottom line? While this industry thrives on an "us vs. them" mentality — as evidenced by everything from the distance between the traditional adult sectors and the Internet upstarts to the separation (in the minds of many) between tube site owners and "legitimate" webmasters to the divide between adult and mainstream — it appears that "convergence" is now much more than the buzzword du jour.

The video guys all are online in one way or another; the online guys are expanding their distribution channels both offline and by launching tubes of their own; and quite a few adult-only operators are openly discussing their mainstream projects, which increasingly are accounting for a larger portion of their revenue stream.

As adult entertainment becomes a solid part of mainstream acceptability, the lines between the two become ever more blurry (there's even an R-rated version of "Pirates II" available at Blockbuster Video). Stir into this media mélange the evolving field of haptics, and I predict that our industry's best days might still be ahead of it — though the seats at the banquet table will be far fewer indeed.

The corporatization of porn isn't something that will happen or is happening, it is something that has happened — and if you're unaware of that fact then there truly is no longer a seat at the table for you. It's Las Vegas all over again: the independent owners, renegade mobsters and visionary entrepreneurs pushed aside by mega-corporations that saw a better way of doing things and brought the discipline needed to attain a whole new level of success to the remaining players.

It's no longer an issue of who has the cheapest rates on bulk traffic or best prices on disc duplication — it's about what our lobbyists in Washington are going to accomplish and what we can do about impending sin taxes. Sure, it takes much of the fun out of the process, but despite the occasional shootout, the Wild West has indeed been settled — and now rather than lawlessness and chaos, a more peaceful environment for merchants has arisen that will be good for business, if you're able to compete and play by the rules.

Now if we can just get past all this economic uncertainty...


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