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."

Triple-X Gov. Sarah Palin Impersonator Scores at Convention

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."

While she's grateful for what turned into a huge financial success, Lisa Ann has little tolerance for porn thieves.

"We can talk to people about having a little integrity and not stealing porn," she said, "I wouldn't steal music. I always download and buy music. ... Everybody deserves to get paid for what they do."

But many porn viewers don't care so much about seeing the top stars rather than what they can find for free.

"A certain percentage of people just don't care. They want it for free. And what we've done is we've educated an entire generation to think that adult material is free," Hirsch said. "Very difficult to change that mindset."

PornoTube Unleashes Pandora's Box of Piracy

The industry's trouble is of its own creation -- or more specifically, of Scott Coffman's. He's president and CEO of the Adult Entertainment Broadcast Network (AEBN).

In 2006, he launched the adult industry's version of YouTube, called PornoTube, which has become the leading provider of on-demand adult videos online. Users can upload video clips or photos for anyone to see at no cost.

"We launched PornoTube like everyone else, looking for traffic, and it skyrocketed," Coffman said.

But now Coffman has some regrets, admitting he thought the site would encourage users to purchase porn instead of pirate it.

"That was the worst thing I've done since I was in the adult business," he said. "What I didn't realize is the amount of people who would copy what I was doing and take it to a degree that was unheard of by ... hundreds of sites out there showing stolen content with lengths of clips of 30 to 45 min."

Coffman's creation made him a lot of enemies in the industry.

"They hated me when I first started it," he said. "About six months later, when all these other sites came out, then they really realized the impact of what we had brought forth.

"There's nothing you can do. It's almost impossible to battle piracy. The 'tube' sites in the porn world are here to stay. We've got to live with them," he said.

New Gadget Seeks to Simulate Sex

Coffman is looking to new technology again -- this time to turn things around. AEBN has created an interactive device for men, called the RealTouch, which is meant to simulate sex. The device syncs up with adult content video on a TV or computer screen to simulate the activities taking place in the movie.

Coffman believes the product, which he calls an adult take on the gaming system "Wii," is pirate-proof.

Hirsch also is looking to technology and hoping digital watermarks will make pirated content easier to find and police. In the meantime, his game plan for survival in the digital world is to be everywhere.

"What we need to do is look at our business and where are all the revenue streaks so that we're not dependent on just DVD sales," Hirsch said. "There's DVD, there's TV, there's Internet, there's wireless, there's international, there's licensing. We need to look at it globally and say, 'OK, we need to be sure we get our piece of the pie in every one of those businesses.'"