Porn in the Digital Age: Why Pay?

LAS VEGAS, Feb. 11, 2010— -- If you think the world of pornography is all about sex, you're only seeing half the picture. At the annual Adult Entertainment Expo trade show and the 2010 AVN Awards, the adult entertainment industry's version of the Oscars -- both held simultaneously in Las Vegas -- the business side of porn is in plain view.

The Adult Entertainment Expo is a business trade show and porn star-studded festival for fans showcasing the latest in high-tech sex toys and porn mainstays.

Fans are the multibillion-dollar industry's lifeblood, but in a strange twist, they're also part of its biggest problem.

"I don't know how they make money," said porn consumer Steve Curely. "I'm a cheap bastard. ... Why pay when you don't have to?"

Paul Fishbein, the publisher of Adult Video News, the industry's largest trade publication, said his business is in trouble.

"The very technology that helped bring the business into the 21st century is also killing it," he said. "It's hard to sell to certain consumers when they can get stuff for free."

It used to be that making money from new technology was the adult industry's biggest advantage. From VHS and DVDs to the early days of the Internet and even mobile devices, pornographers have led the way in creating capital from new forms of distribution.

But being at the forefront of Internet profit-making has made the industry vulnerable to losses from Internet piracy.

"It's a huge issue and it's something that the entire industry is looking at -- and not only the adult industry, but I think Hollywood is looking at it as well," said Steve Hirsch, a top porn producer and founder of Vivid Entertainment.

Hirsch, who has helped make porn mainstream, used to worry about protecting his right to make adult films. Now, he worries about protecting himself from piracy.

"We have two full-time people -- all they do is they're out there on the Internet looking for pirated content," he said. "When they find it, we send a notice, it comes down, then it goes back up and it's sort of a cat-and-mouse game."

Several people ABC News spoke to at the AVN Awards estimated their profits were down 25 percent as a result of piracy and a glut of free content.

"The adult business was the first to figure out how to make money on the Internet, before anybody else. What they didn't foresee was the availability of all this free content," Fishbein said. "You can only do so much policing and so much, you know, of the trying to prevent your material from being pirated and shared."

But as an industry, how do you compete against free content?

"It's very difficult," Hirsch said. "Maybe the best way to fight free is with free, but as of now, the economics don't make sense. You're not able to get enough advertisers to come in where it would really make sense to give your content away, so the key is high quality content, exclusive stars. If you have that, you can sort of carve out a niche for yourself and people would come to your site."

Hustler magazine's Larry Flint found his niche last year with a porn spoof of Republican vice presidential candidate Sarah Palin. At the AVN convention, the line to meet porn star Lisa Ann, who starred as "XXX Governor Sarah Palin," was one of the longest.

"It's worked out very well for me, to be honest with you," Lisa Ann said. "It definitely created a big surge in the business. A lot of these DVDs have been sold, which keeps a lot of people working."