Let’s Watch Some Porn

On the 24th of February, Bucknell hosted A Debate on Pornography between Craig Gross, a pastor who addresses the struggle with pornography with his website, and Ron Jeremy, a pornography film director and actor. Even though the production and consumption of porn in today’s society is rampant, it remains a taboo issue in most sections of society, even in a developed and modern society like the United States. In a world where profit-making is the sole goal for a growing population, the porn business has emerged as one of the most profitable. However, little is known about how this industry is organized and able to generate the sky-high revenues and profits that it generates.

Although I have known for a while that the porn industry on-line is bigger than most on-line business, if not the biggest, my current interest in the organization of this industry was sparked by the request made by two leading porn producers for the federal government to bail out the industry. According to the article linked, the porn industry generated $12 billion in revenues in the year 2007. That is more than many of us would have imagined this industry to have produced. Another aspect of the industry is its immunity to most (not all) other economic factors – this is largely because of a very high and stable demand.

The day of 9/11 was a (lousy) sales day; 9/12 was mediocre; but by 9/13 it was back to normal. Restaurants may have been empty, but everybody else stayed home and consumed porn, but this time around there’s more of a long-term trend going on that has to do with the economy.

– Peter Acworth, Founder kink.com

With a demand as stable as this, and profitability as high as mentioned above, it is not surprise that this is the industry that has led to the spread (and even advancement) of many of today’s everyday technologies, television and the Internet are two of the most prominent examples.

The organization of this industry is subject of very little discussion in everyday conversations, but I believe that it is a business model that we need to analyze – after all, understanding it can only help organize other businesses better, and certainly cannot hurt.

Such is the demand for porn in the US that many household business names have major porn deals in effect that help them make millions of dollars in revenues. In a Frontline documentary called American Porn, PBS revealed the names of many businesses that have direct links to the porn industry. These included hotel chains, cable and satellite companies, and the Internet giant Yahoo!

At hotels the profits from on-demand porn services exceeded the money made from the operation of mini-bars. The extent to which porn is popular among hotel guests can be judged from the following example:

In late 1999, Omni Hotels announced that it would no longer offer adult pay-per-view movies in its rooms. The company’s statement noted that it made the decision “in response to what it perceives as a growing need for corporate America to support pro-family issues.”

Based near Dallas,Texas, Omni has hotels and resorts throughout North America and ranks 45th in the list of the top 50 U.S. hotel chains.

In an October 2000 New York Times article, Omni’s president, Jim Caldwell, said that his company’s decision to remove the sex-videos would cost it an estimated $1.8 million per year. The company stated that “[t]he anticipated loss in revenue demonstrates the company’s commitment to the issue. Omni Hotels has already removed adult magazines from the gift shops at its owned and managed properties.”

At Yahoo! the fee charged for listing a regular website with the search engine cost $200 in the year 2001, but listing an adult pornography website cost an astonishing $600!

The industry even has its job search engines, AdultStaffing lists hundreds of jobs and thousands of candidates that employers can search through when trying to fill these jobs. For an industry that is so well hidden, that is a lot of jobs to be offered on a public website, in the current economic crisis.

So what is that is different about this industry? What makes its business model noble?

There are no particular answers available to this question, but there are a few observations that can be made which indicate an organization structure vastly different from those that we are familiar with.

Porn producers are well aware that there exists some demand in all parts of society, but given the rampant digital piracy it would be impossible to make any money if they relied on existing demand only. Instead most companies operate dozens of smaller ‘product lines’ (translated websites or types of pornography) – some of these lines may not be very popular, and others may be very profitable. It is an idustry that is not shy of experimenting with new ideas, and has found plenty along to the way to keep its customers satisfied.

A great deal of pornographic content is flooded onto free websites and other sources, however, higher quality and ‘premium’ services are kept restricted, the companies rely on the demand they build through the free media to feed the demand for premium products and services.

Another special aspect of this industry is its love for a low-profile life. No major porn producers want to be famous, and certainly don’t to be famous for being rich! They lead relatively humble public lives and try to stay out of the spotlight, this avoids any unwanted coverage which could lead to denunciations by the religious right or fuel already existing legal campaigns to curb the industry.

While the industry will continue to be an enigma, perhaps with more openness and acceptance in the society we will find out some of its business secrets. After all, vivid.com did seriously consider going public. General Motors is also directly involved in the business now, bringing porn to 9 million of its stable viewers across America.

Related Links and Sources:

WARNING! Some links may lead to explicit content!

Adult Staffing

SFGate – Porn Industry in Trouble

PBS – Frontline – American Porn

Porn 500

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2 Responses

  1. Nadir, I also attended the porn debate and found the business aspect of the industry extremely interesting. Before the debate, I thought the adult industry was thriving because of the internet. Instead, I found out that in fact, much like the music industry and the problems it faced with Napster and other P2P clients, the adult industry is suffering because of free websites loaded with pirated material. Do you think the government will step in like they did with the Napster case, or do you think the taboo surrounding the adult industry in America will slow down any legal action?

  2. I feel like the porn industry is something that law makers will not try to help for fear of backlash, especially from the socially conservative. I also bet that porn industry will start hurting from the recession as I feel that people will choose bread and electricity over porn.

    Here is a link that talks about how the industry is hurting.

    http://open.salon.com/blog/amytuteurmd/2009/01/26/porn_star_laments_were_going_down

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