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In the Executive Seat: Braincash Fred

Since 2003, Braincash has distinguished itself as an expert in helping such stars as Peter North and Lexington Steele and studios including Elegant Angel and Doghouse Digital develop their brand reach and customer base on the Internet. With a portfolio of more than 40 targeted websites, Montreal-based Braincash also has carved out a distinct identity in the solo-girl and niche marketplaces. Founder Braincash Fred agreed to field a few questions as we head deeper into 2009.

XBIZ: One of Braincash's strengths always has been to work with and develop big adult brands on the Internet. How is the Big Brand business faring thus far in 2009; how is it looking for the future; and how does it fare, generally speaking, in a global recession?

Braincash Fred: A brand is something people recognize and trust. For us, it has always been easier to work with brands since people are more inclined to purchase something they heard about than something new. In general, they are doing better than the market, and I would say they also hold better in the current recession.

XBIZ: You've also worked hard to develop and market specific niches like the Canadian single girl collection. How is the niche business going, with pretty much the same angle as above?

Braincash Fred: Niche content is working better in general, since it offers something that is more targeted to the customer's taste than general content. There's also less content from niches in the market, which makes people more inclined to pay for it. But there are also exceptions, and the solo-girl sites market is one of them. The niche is one of the easiest to enter, which makes it one of the most saturated. Five years ago, there were less than 100 solo-girl sites, and now there are thousands. The saturation makes the market a lot less attractive and much harder to market. We mostly refocused that part of our business onto female porn stars two years ago.

XBIZ: You've also partnered with some big-name DVD producers, giving you an interesting perspective on the health and interplay between physical and digital distribution. What are you seeing in that space, and what do you think the fallout will be? Have you seen less or more content being shot?

Braincash Fred: The DVD market is slowly moving to the Web. There's also a lot less content produced now than ever before since a lot of the DVD companies couldn't sustain the revenue lost from the DVD market. On our side, we make sure to work only with companies that are still actively shooting content and can provide us with fresh exclusive content. Quality products and new updates are the key to success for us in the future.

XBIZ: How big a problem do you think piracy is, and do you think anything can be done to better protect copyright holder's rights during the next year or so?

Braincash Fred: I think it's the main issue affecting our industry at the moment. The best strategy is proactive monitoring to get your content removed from illegal sites and legal action. Right now, it seems the majority of the producers are not doing anything, and as long as it will stay like that, some people will still abuse the situation to their advantage.

XBIZ: What is your near-term strategy — to hunker down, pull in costs and survive the downturn or be more aggressive, roll out new products and exploit possible acquisitions?

Braincash Fred: Things are going well for us. We plan to release a lot of new products this year and also to hire new resources. We are in an expansion phase, and we foresee 2009 as being better than 2008, even in the current economic conditions.

XBIZ: What do you think are the biggest issues facing your business right now and for the foreseeable future? What are you planning on doing to confront them? What about the biggest issues facing the industry as a whole?

Braincash Fred: Content piracy is the main issue that is affecting our business at the moment. We saw conversions increasing at the same time that tube sites appeared. The more free you get, the less people are interested in paying. I think the only way people will be able to compete with this free business model will be offering quality product that stands out.

XBIZ: Are there any new technologies that you have seen, or plan to work with, that really excite you? What do you think about the future of mobile?

Braincash Fred: Mobile and IPTV are the most interesting technologies for the adult industry at the moment. Even though each of them has been available for many years in various forms, I think this is the first year that they are finally gaining some real traction in the mainstream world. This will lead to more acceptation from customers and should make the transition to adult products easier.

XBIZ: Care to weigh in on prechecked cross-sales or any issues related to billing and transactions that you think might be hurting the industry's relationship with consumers?

Braincash Fred: There are still a lot of scams run using precheck cross-sales, but I think the new regulation from MasterCard is a sign of where the billing industry is moving. We can also expect Visa to follow in the same path. This should only be good for companies that offer quality products since it will clean the industry of the scammers. I don't think abusing customers is any way to create sustainable business.

XBIZ: How healthy is the adult affiliate network? What percentage of your traffic comes from affiliates? Do you see that ratio changing during the next year or so?

Braincash Fred: Even if the affiliate model is still our main source of traffic, I see that it's slowly declining. The way traffic is moving is in complete mutation. The affiliate model is evolving, and a lot of the traffic is now moving to the advertising model. Also, a lot of affiliates programs are generating their own internal traffic now. This is a trend in the market that I can only see as growing.

XBIZ: What will the adult entertainment industry look like in five years?

Braincash Fred: The industry will be larger in size but with fewer people in it. Profit margins are getting smaller, so a lot of small affiliate programs will disappear or be acquired by larger companies. The game also will be tighter and require more technical skills, so I expect fewer numbers of people to enter the business because of the higher threshold.

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