Going Deep Inside the Adult Entertainment Industry

How Big is it?

Flickr by Svenstorm

Now that we’ve demonstrated how horny American’s are, let’s move on to the next question: exactly how big is the adult entertainment industry?

In a nut-shell: pretty darn big.

Conservative estimates value the worldwide porn industry at approximately $4.9 billion dollars, with $2.8 billion attributable to America alone. These are annual figures, meaning that’s how much they earn per year.

With so much dough surrounding porn, one can always count on the well-oiled cogs of the free market economy to fully exploit people’s hormones. And exploit they did.

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Nowadays, anyone with a camcorder can become an aspiring porn producer. A large number of porn sites on the internet are actually operated by sole proprietors, many of whom star in their own films. Consequently, the adult entertainment industry is largely scattered and very competitive. There are however, several widely renowned trademarks in the industry: Vivid Entertainment and Bang Bros from the U.S., Marc Dorcel from France, and Brazzers, which is headquartered in Montreal, Canada. All the companies listed above are multi-million dollar operations, but since none of them are public corporations, the exact figures are unknown.

Like all industries, porn studios are also taking advantage of the technological marvel known as the internet. In fact, porn is one of the first things people used the internet for, starting from the late 80s – even before the conception of the world-wide-web. So, in a way, the porn industry is the forefather of what is known today as e-commerce.

The reason the internet is so popular within the industry is that websites are cheap to operate; the marginal cost per sale is exceptionally low, since the web-hosting cost is largely fixed. Moreover, internet also provides a sense of (perceived) anonymity; people tend to be deterred by the thought of going to a store and purchasing a naughty film in person.

Because the internet is practically made for the distribution of porn, there are a total of 24,644,172 pornographic websites worldwide. That’s 12% of all websites on the internet. It is no surprise that the internet is now the leading channel of distribution for porn.

Although the internet has been instrumental in the success of the porn industry, it is a double-edged sword. The industry that was long thought to be recession proof has faltered in the recent economic crisis, and the internet is mostly to blame.

“Porn Tubes”

Flickr by x-ray delta one

Since the conception of YouTube, many cunning businessmen realized two things about it: 1) It is indeed a brilliant business model and 2) there is no porn on it. And so, websites dubbed “porn tubes” are born.

Sites such as YouPorn, RedTube, PornHub, XVideo, and Megaporn Video sprang up one after the other. All of them offer a video sharing platform which allows people to upload and stream good-quality porn for free, provided you have a good internet connection. (A high-speed internet connection is absolutely essential, because watching laggy porn simply won’t do.)

This was all fine and dandy when the economy was doing well. Porn studios embraced these video sharing platforms, and even uploaded their own samples to advertise themselves; the porn tubes received much more traffic than their own company websites. The relationship was mutually beneficial.

After the economy collapsed and people started losing their jobs, porn, however, became the first thing people cut from their budget. This is because the porn tubes provide a decent alternative at no charge what-so-ever. Although the video quality on the free porn tubes might not be HD 1080p, people are willing to settle for it during times of economic hardship. One can’t very well pay for porn when there are mouths to feed and rent to pay.

To put this in economic terms, the free porn tubes rendered the adult entertainment industry more income-elastic; the sales in the industry are more sensitive to changes in people’s income and therefore, the condition of the economy.

The Porno Industry Going Limp?

The porn industry is no longer recession proof, but rather follows the cyclical changes of the economy.
How hard did the recession hit the porn industry?

In a nut-shell: pretty darn hard.

All porn studios experienced substantial declines in revenue between 30-50% since 2008, with some dropping as much as 80%.

[pullquote]Nowadays, anyone with a camcorder can become an aspiring porn producer. … There are a total of 24,644,172 pornographic websites worldwide. That’s 12% of all websites on the internet.[/pullquote]

The effects of the recession aren’t just felt in the film sector, but also within other erotic services, such as live sex chats. One girl with the alias WetGirlCuming from LiveJasmin.com disclosed that, “[more] people are browsing around on free chat, and nobody’s paying to go private.”

Gone are the good ol’ days where people are willing to shell out $30 to $40 for a DVD. The intrusion of the free porn tubes has shrunk the industry, perhaps even permanently.

Will it bounce back up? Or will it stay flaccid? It is anyone’s guess as to where pornography is headed in the future.

ARB Team
Arbitrage Magazine
Business News with BITE.

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