Corporate America Cashing In on Porn

With just $5,000 of her own money for start-up costs, she focused on subscription as her revenue stream: "I knew that I didn't have investors and that I needed to make money through membership in order to pay for the site and in order to pay the girls," she said.

Now, six months later, she claims to average 40,000 viewers a day, and to have grossed $80,000, with her revenue doubling every month.

The Producers

Vivid Entertainment is one of the biggest players in the San Fernando porn industry. The company produces 80 hard-core films a year, and has successfully expanded from the VHS and DVD market into satellite and cable TV.

In 1999, Vivid bought two hard-core pay-per-view channels from Playboy, which had acquired them when it bought the rival Spice Networks. Playboy was already making much more money from its soft-core pay-per-view channels than its magazine, but was reluctant to take the step into more explicit content.

Under Vivid's ownership, the hard-core channels grew rapidly, and last year the company turned around and sold the two channels back to Playboy, plus its own channel, for $70 million.

"That TV deal is what put them over the top," said Paul Fishbein, publisher of the industry publication Adult Video News. "The ability to run those channels, to get them for practically nothing and then to sell them back to Playboy for the amount of millions that they did was brilliant."

The deal also shows how the public's growing taste for explicit sexual content has nudged Playboy — once the biggest name in adult publishing — in a new direction. "I don't think there's any question that the public has forced them to become more explicit," said Dennis McAlpine, an independent Wall Street analyst.

Since buying the hard-core channels, Playboy's pay-per-view audience has nearly doubled and the company's stock has steadily risen.

The Hoteliers

Adult movies are now available in 1.5 million American hotel rooms, 40 percent of the total. Almost all of the upscale chains that cater to business travelers provide them, including Marriott International.

Although only one in 10 guests pays for a movie, most of those who do opt for adult fare, which is billed at a premium rate of $10 a title. Most of the revenue goes to the in-room movie companies that provide the content and the TV sets, but the hotels make 10 percent to 15 percent.

Adult movies account for around 80 percent of hotels' in-room entertainment profits — a small proportion of overall profits, but significant enough that the chains want to keep making them available. Marriott said in a statement that it saw the matter as a privacy issue and did not stand in the way of customers who want to view adult movies.

Only one of the upscale chains, Texas-based Omni, has barred adult movies, removing them from its 30 Omni-owned hotels and encouraging its franchisees to do the same. Omni took the step in 1999, citing its commitment to "family values." The chain received thousands of positive e-mails from grateful guests, but estimates the move cost $1 million in annual revenues and $3 million in additional costs to bring in a new provider.

The Blue-Chip Corporations

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