PORN INDUSTRY HIT HARD FINANCIALLY

In good times and in bad, sin sells; booze, tobacco and sex have all weathered countless economic storms over the centuries.

This recession is a little different, though. It's been extremely challenging for adult filmmakers, who are not only wrestling with anemic consumer spending, they're also competing with a nearly infinite supply of free, amateur videos from countless user-generated sites, not to mention a glut of traditional inventory.

"From my experience, as long as I've been in this business, this is the first time I can say that we're absolutely feeling the effects of the economy," says Steve Orenstein, president and founder of Wicked Pictures, and a 29-year veteran of the adult-entertainment industry. "There was a line we used to use about this business being recession proof. When people talked about the economy, we'd say our business is fine. But look, now you'd have to be blind and deaf not to see that there are problems."

Orenstein hasn't cut any pictures out of the production pipeline -- he still plans on making 48 films this year because, he says, cutting back on pictures would only cut back on his profits. He is, however, looking at ways to reduce expenses, especially since he's facing increased oil-related costs for transportation, distribution and for DVD cases, which are an oil-based product. And raising prices to cover the added costs is out of the question, given the economic environment.

"We haven't laid anyone off or cut any salaries, but we're trying to be smarter -- cut the things we probably should have cut ten years ago," says Orenstein.

Even if Wicked Pictures has felt the pinch, Orenstein suspects he's better off than most, since Wicked caters to women and couples -- who are more likely to buy DVDs than single men.


Many others aren't quite as fortunate.

"At the retail level, all the store owners I've talked to say their rental sales are off 10 percent to 15 percent," says Paul Fishbein, founder of Adult Video News, an industry trade group. "Producers say sales are down at least that much. We've identified the reasons we think sales are down. First and foremost, there's a glut of product. The laws of supply and demand have been turned upside down. We're on par to put out 15,000 new releases this year, which is just insane. Secondly, there's a battle with pirated or free material on the internet -- much like the music industry, adult [movie] producers are trying to figure out how to stem free or pirated content."

It's not so dissimilar from technological disruptions in previous decades -- such as when porn transitioned from film to video. This time, though, it's a quadruple whammy. DVD sales apparently topped last year -- overall, DVD sales in the first quarter hit $5.6 billion, down 0.3 percent from the same period a year ago, according to Video Business.com.

"DVD sales are flat to slightly negative, while rentals are going down at about 5 percent per year," says Gerry Kaufhold, an analyst with market research firm InStat. "One thing that's probably smacking the rental business is gas prices -- you have to pick up a movie up on Friday and drive it back to drop it off on Sunday. And the rental business has probably been hurt as much by other factors -- prices for Lexan, the raw material used to make plastic discs, is going up since it's an oil-based product. The plastic jewel cases are more expensive. And adult filmmakers aren't just competing with the internet -- they're competing with subscription services and pay-per-view."

But even if in-store rentals are taking a hit, online rental service SugarDVD says business is growing, month over month.

"We're finding consumers don't want to pay $30 or $40 apiece for DVDs when they can subscribe and get DVDs in the mail. Prices are often higher for adult DVDs, and sometimes people don't want an extensive library of adult titles -- there are some movies that are great to see once or twice, but you don't want to own it. It's really changed the dynamics of the industry. Studios must innovate or start distributing digitally," says Tony Medrano, vice president of business development at SugarDVD.

SugarDVD has also stayed ahead of the curve -- the site launched a streaming service two years ago -- roughly a year before Netflix. It also offers a pay-per-minute service, which, depending on the movie, starts at 7 cents per minute.

"We constantly have to innovate," says Medrano. "We need to get out in front of consumer demand."

Source: blog.wired.com

I wonder how are the finances for the gay porn industry?