Porn Valley- [ftd.de]- For months, Hollywood executives have been fretting about the slowdown - and possible decline - in DVD sales, the financial engine that has powered the film industry for the past decade. Yet as they try to understand the repercussions, they might want to take a trip to the nearby San Fernando Valley that is home to the "other Hollywood". There, the pornographic film industry is already suffering through a home entertainment meltdown.
In 2006, after a decade of steady, double-digit growth, spending on top-shelf DVDs and home video fell by more than 15 per cent to $3.6bn, according to Adult Video News, the industry's best-known trade publication. Most of the companies involved are private, so no one knows the exact figure. Some executives believe that it may be 30 per cent or more at some companies. "A lot of people have gone out of business. People are doing whatever they can to survive," says Ali Joone, founder of Digital Playground. "There's been a real shake-out.''
The results have been far-reaching, including a wave of cost cuts, and a change in the way that pornography companies do everything from making films to marketing and distributing them to consumers. In addition to losing staff, studios have been compressing their shoots from three days to two on many films and using less editing, according to executives.
Strangely, the slump has spurred more - not less - production in the past few years as pornography companies have tried to make up for lost profits. Last year there were a record 7,000 new releases on DVD, according to AVN. "There's a glut of product," says Paul Fishbein, AVN's editor.
But that situation now seems to be reversing. One big company, Hustler Video, has already lowered its production from as many as 30 films per month to 10. At the same time there has been a drive to cut costs.
"There's no question that there's anxiety, and you could see it in Las Vegas at the show," says Steven Hirsch, founder of Vivid Video, referring to a recent trade show. "The industry's really in flux right now."
The DVD market is another reminder of the pornography industry's reputation as the vanguard of the film industry. In the 1980s, its customers led the adoption of the videotape. Home video, in turn, revolutionised pornography by moving it from dingy theatres to the privacy of suburban living rooms. With the introduction of the DVD, in the late 1990s, the industry may have entered its golden era. Ardent fans not only bought new releases on DVD but also updated their VHS libraries to the new format.
To some extent the decline is to be expected as those catalogue sales tail off. But piracy and the internet are two other factors challenging the mainstream film studios. The internet in particular has proved to be a double-edged sword. A new generation of internet porn companies have put ever more free pictures and video on their sites in the hope that the massive traffic they garner will yield a few paying subscribers. As a result, there is now so much free material on the web that there is less need for the casual fan to spend money on DVDs.
At the same time, companies such as Mr Hirsch's Vivid Video have been trying to build new media businesses to make up for the offline shortfall. Last year, the porn industry generated $2.8bn in online revenue, according to AVN, accounting for more than a fifth of its total.
Like their Hollywood counterparts, Vivid and other porn companies are selling their content for download on mobile phones (although not in the US) and are preparing to release films in high-definition DVD. But the distribution platform that has the most potential, many believe, is video-on-demand. Indeed, while DVDs slumped last year, on-demand sales - many in hotel rooms and through mainstream cable television systems - grew by 34 per cent to $1.7bn. "Video-on-demand will be the main revenue driver - whether it's internet VOD or cable television VOD," Mr Hirsch says.
Mr Joone, who is also bullish about VOD, likens the industry's technological shifts to Hollywood's experience in the 1950s at the dawn of the television era. With new competition, the film studios were forced to increase the quality of their productions in order to retain their audience. "For years, if it just had sex in it, people would buy it," he says. "But with the internet, people have choices now."
Although Hollywood executives may not admit it, Mr Fishbein believes that they are paying attention. "I know people in the mainstream industry and they always look to porn to see what's coming next," he says. "But it's always wink-wink."
