Porn Hedge Fund Sics Half-Naked Models On Apple
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Like it or not, I've often thought that porn is a leading indicator of internet trends, and the overall trend in porn seems to be towards low-budget, low-quality disposable stuff designed for a quick buck with no long tail (yeah, that sounds so wrong in this context...). It's also interesting that the industry has gone from being sleazy and underground to professionalized, corporate and semi-respectable - they hold conferences, award shows and so on. But the market is fragmenting so fast that I wonder whether it can properly sustain itself as a distinct industry much longer.
The porn biz never embraced DRM, but that decision has also meant giving up long-term revenue as porn is avidly pirated. Also, the trend towards reality TV, widespread availability of webcams, and IDIY (Internet amateurs) are moving inexorably towards the death of the porn star and porn studio, to be replaced by camsluts; there are a lot of exhibitionists out there and distribution is no longer an issue, especially since porn does not particularly depend on long-form productions like movies do. a 'hot' video lasting 5 minutes is way more desirable to consumers than a 'lukewarm' one lasting an hour.
I don't keep up with the adult web very much but my impression is that while established pay sites are holding their own for the time being, there's a rough 3 way split: 1. mini-studios that do their own video for members, 2. mini distributors that buy in most of their content from model/photographers and resell it, and 3. those who give it away but use the porn as a draw to affiliate programs for sex toys, underwear etc., or sex-dating services. Conversely, I think there are sex-dating services that are free and use the traffic to market porn and/or sex toys.
There's a lesson her for HN readers. What if, instead of consumers finding web apps they like and paying for them (or generating enough traffic to monetize ads), app development tools become so flexible and streamlined that they become consumer-facing, and the majority of people are happy to create their own mashups? That vision is years away now, but ten years ago it wasn't obvious how much havoc cheap digital cameras and streaming video were going to wreak on the porn business as they are doing now.
Rule 34, among other things, disputes the "no long tail" notion. There's a wide variety of fetish porn that doesn't appeal to most, and often the only market left is to fulfill some niche people didn't think they had.
Porn is also uniquely disposable due to, among other things, the Coolidge effect. Porn is the least reusable of all content (books, movies, and TV shows are in the middle while music is probably the most reusable).
Porn was a leading indicator for awhile--early limitations on internet bandwidth meant a movie or TV episode was too long for most people to want to transfer it, while a porn scene was about the right length--but it's grown into its own distinct industry where the peculiarities of porn in particular dominate the early-adopter status of the porn industry.
Your point about the collapse of the cost of production for porn is a good one though. That's really hurting the industry's profits.
No, the argument was that like other media, porn is avidly pirated. However, it doesn't embrace DRM like other media. It is a compare/contrast.
I see porn as a bit different from other content in 3 ways: 1) it's smutty, so it's not worth much of the industry's time/money to serve DMCA takedowns or RIAA-type lawsuits, since they're unlikely to gain much public or legislative sympathy; 2) distribution is very fragmented - 80 distributors serving approx. 8000 adult stores in the US; and 3) branding is relatively weak, due to the factors above. These differences put a lot of pressure on content providers and limit their growth potential (quiet there at the back).
The reason I think this matters, in the context of the OP, is that with such a fragmented market it's difficult to identify serious long-term investment opportunities. I think the most successful adult product in the last year or two was some 'male enhancement' pill marketed on cable TV, which isn't content-related at all. For porn media, the market is like thousands of independent or small-chain bookstores that sell fanfiction-quality-dreck right alongside premium offerings, creating an inexorable trend towards lowest-common-denominator content. since advertising opportunites are limited (porn mags and websites) providers have to produce a constant amount of relatively low-profit material, rather than being able to follow a more traditional launch & cash-in cycle like movies or pre-internet porn where the barriers to market participation were higher.
tl;dr the unique distribution challenges in the porn industry significantly limit profit margins compare dot other media. All IMHO.
Good thought.
Anyways, I am just curious as to why it is taboo for a normal VC to be investing in adult entertainment? Porn is a big/booming industry and I think a lot innovation can be made in it too.
Not really; porn is having all kinds of problems as a money-making enterprise: http://www.portfolio.com/culture-lifestyle/culture-inc/arts/... (link is dated but those trends have not changed).
I think we've heard this story before...
[1] http://venturebeat.com/2009/02/03/sleazy-measures-for-sad-ti... [2] http://consumerist.com/5147418/florida-ag-examining-cash4gol...
"'There is almost no money left in the fund,' an investor said. 'Koenig has an American Express black card through the company that he uses on partying, girls and high living. Most money is missing and iPorn.com is not worth what he says it is.'"