Porn Production Losing Ground on Technology

LAS VEGAS, Jan. 9, 2009— -- It's a dirty little secret, but some say the adult entertainment industry drives mainstream adoption of the latest technologies.

The VHS format, video chatting and the digital delivery of content, some industry analysts said, were given that extra little nudge by the purveyors of sex and all its accessories.

But for all the talk, however hushed, of this relationship, cold hard evidence is hard to come by.

Still, each January, when the two industries hold simultaneous conventions in Las Vegas, even sharing some of the same space, it's nearly impossible to not look at one in light of the other.

As the buttoned-up, data-driven, often-bespectacled techies get ready to leave the Consumer Electronics Show, the leggy, corseted porn stars and their endless lines of fans kick the Adult Entertainment Expo into high gear.

Those fans of fantasy may not care too much about the winner of the Last Gadget Standing competition at the Consumer Electronics Show when the finalists of the Best Booty contest are standing on the main stage.

But rest assured that many of the men and women who create the content that porn fans digest are paying close attention to the show down the hall.

And, as the pace of technological development and media convergence picks up, porn production companies find that although the "most reliable bull market in the world" is in some ways living up to its reputation, new media is challenging long-standing business models and time-tested rules of engagement.

"A lot of the companies have been pretty optimistic," said Stephen Yagielowicz, a senior editor at Xbiz.com, a porn industry news site. "The reality is that a lot of business is hurting. All these business models are crumbling."

He said that the industry was already rocking on its heels from convergence and problems related to new media, such as piracy, free content and popular social networks like Facebook and MySpace. The recession only added one more challenge to an already mounting heap.

Glut of Free Porn

While the Internet did enable a boom in the industry, it has also created a glut of free content that is now slowly eating away at it.

"It's hard to make a dollar from something people can get for free," he said.

But there are opportunities in the industry. And, in fact, he said, taking a Darwinian stance, the challenges will ultimately lead to a leaner but better industry.

Video chats, which he credits the adult industry with mainstreaming, he said, are always going to have value because they foster an emotional connection.

Artificial chat bots, with voices that very closely resemble those of real humans, also present opportunities for the same reason.

At the end of the day, the "Rolls Royces" of the industry, with high-quality and diversified products, will be the ones that endure.

Samantha Lewis, co-owner of Digital Playground, an adult entertainment company that specializes in high-quality, couples' films, said that her company is absolutely stable.

"We've never been so strong in this economy," she said. "There's a lot of companies that are struggling but our quality is so high-end and we do things that are not available with other companies."

One of the first to use interactive CD-ROMs in the 1990s, her company, Lewis said, tries its best to stay on the cutting edge of technology.

"DVD sales are going down without a doubt," she said. "But we strengthen on the Internet side. It's evened out."

A TV Box Carries Porn

Digital Playground was one of the first adult companies to move into the video-on-demand space when it signed an exclusive deal that allowed Vudu to sell its content through its set-top box straight to consumers' televisions.

The deal has lapsed and now Lewis and her partner, Ali Joone, are considering their options.

But as they review the distribution possibilities, the obstacles are becoming clear.

Across the way, at the Consumer Electronics Show, companies are increasingly marrying content and devices. LG electronics, for example, released a partnership earlier this week that allows consumers to stream movies directly from the Internet to the TV, bypassing a personal computer.

A Void in Adult Arena

For mainstream entertainment companies, this development makes it even easier for their audiences to consume their content.

But of the 6,000 titles in the Netflix Internet library, none have adult content. As this trend continues, adult content stands to be left out.

Considering this development and other new media successes, such as iTunes, Joone said there's a void in the adult arena right now.

Joone said he and other companies like his that focus on higher quality pictures have formed a loose consortium to address the technological barriers facing the industry.

Standardizing their Internet platforms and accounting methods and creating their own distribution mechanism are at the top of the list, he told ABCNews.com.

"You're talking about an industry that has adapted to other people's technologies, but it's never really created its own technologies," Joone said.

Porn Needs Own Technology

"I think we're at a point where we need to create our own tech to keep our market where it needs to be," he added.

One potential option for Digital Playground is FyreTV, a set-top box like Vudu that only features porn.

Developed by Estefano Isaias, who is with an Ecuadorean private equity group that has investments in the telecom industry, FyreTV announced its launch at the Expo last year but didn't go commercial until last week.

During its beta phase, 18,000 subscribers could search the company's 20,000 titles by star, genre, title and preferences. Since becoming commercial, the company approved the submissions from others who wanted in on the hot new product, and it now counts 30,000 among its customers.

"There was high demand for such a gadget," FyreTV director Rodrigo Franco told ABCNews.com. "Adult entertainment companies know that DVDs are going to be obsolete in the next four years."

Subscribers pay $9.95 a month for an allotment of credits that allow them to purchase content by scene. To make sure they receive only the scenes they want, the company lets users sort according to a comprehensive array of filters, including "blonde," "brunette," "big boobs" and more graphic specifications.

Marketing Porn Aggressively

But it's not just targeting the traditional adult entertainment market. Franco said the company will soon launch an aggressive marketing campaign with ads on Comedy Central and Spike TV.

Despite innovations like FyreTV, that the industry has embraced, many technology experts in the adult world say that more ingenuity and innovation needs to come from within.

"There is definitely a lot of sensitivity and growing awareness of the effects of the revenue stream, which has primarily come from DVDs, now shifting to other sources," Avi Bitton, chief technology officer for adult entertainment company Wicked, said. "It changes everything."

Wicked works with FyreTV, but Bitton said it tries to be compatible with as many systems as possible.

The adult industry is the one to really drive certain technologies, Rob Enderle, principal analyst with the Enderle Group, said. But he indicated that recent technological changes have thrown it a curve ball.

Convergence represents a massive change in many industries, including adult entertainment, Enderle said.

It opens up the market, which creates opportunities, but ultimately results in a smaller overall market.

"It's like musical chairs," he said. "When the music stops, you wonder who's going to be left standing."