Industry News

The Economics Of Porn

Vanessa posts on XPT:

I don’t think that the market for porn is fundamentally different from any other industry. You have competing production entities offering product on one side and you have consumers demanding product on the other side. Correct me if I am wrong, but I would estimate that consumer demand has not changed for the worse in recent times. Overall demand for porn should be steady, if not steadily growing.

What has changed is the supply side. There is more supply then ever before, and that traditionally affects a market in the following ways:

– the prices for your product drop
– profits get less, some companies start writing red numbers

What happens from there is different for each company and depends on what adaptive strategy a company chooses. I’ll just theorize on what a company could do:

You could try to lower production costs. Some cost cutting can be legitimate and is a good thing. Get rid of waste, cut non-essential expenses, increase efficiency, etc. If you have already done all that, and you are operating at maximum efficiency but you are still not making profits then you are in trouble.

At that point some companies will use brute force to cut even more costs. That’s when you start compromising on quality, pay talent less, get uglier girls, default on payments, don’t spend money on props, take out of the budget wardrobe, makeup and hair, use the same ugly couch in the same lame apartment again and again, etc… Some people think they can pull it off and still deliver a product that is as good as it used to be. Or that is just good enough. Maybe they think nobody else will notice. Maybe they are the kind of people who really can’t see much of a difference, or they think it doesn’t matter for porn. But consumers know the difference. Your product will be downgraded. Either people are not going to buy it, or they won’t buy it next time, or they will never buy anything from you ever again. It happens gradually, of course. You will start selling fewer units or you will sell them at a lower price, no matter what, your cuts won’t be enough to move back into the profit zone. At that point you are at the mercy of forces beyond your control… you can try to hang in there, start building up debt, and hoping for the best, but probably you are just delaying the inevitable. You will go out of business.

Other companies will develop hopefully more successful adaptive strategies. Maybe you start off-shoring. But chances are that because you are a very small business and not General Motors that this sort of strategy is going to be hit or miss on a project by project basis. It may turn out great one time, only to be your worst nightmare next time. Also, maybe you don’t like to travel much, or you don’t want to make phone calls at 5 in the morning or at midnight to keep up with different time-zones. Maybe you love your own country and want to work with local talent and your friends in the valley…

So what else can a company do? Assuming you are not a major player and you have no way to form alliances with companies that control distribution outlets – what can you do?

You can start putting more though into competitive differentiation. What can you do to make your product more different from the competition? What is your niche? What is your market segment? What is it that only you can deliver? What is it that you are best at?

If there is nothing at all you can come up with to answer this question and the only thing you can produce is stuff that is not much different from what consumers can shoot at home, then maybe it’s time to look for something different to do, or else get ready for crunchtime.

What is it that the consumer cannot shoot at home? Most guys (outside the valley that is) who watch porn don’t have a girlfriend who wants to be filmed while performing double anal with some strangers from craigslist. Also, the girlfriend is unlikely to invite her girlfriends over so that you can arrange a lesbian orgy, ATM, watersports, gagging or who knows what… I’m not saying it doesn’t happen in private, but isn’t it more convenient to pick up a video from the store after work, or download something rather then arranging for an entire porn shoot? Consumers love convenience. Lastly, how many of the average men out there have girlfriends that look as good or are as hot (and willing) as A-list talent?

Herein lies the answer. The companies that have the hottest looking girls are the ones that are best positioned to survive in the long run. It’s the law of nature. Everybody wants the best looking girl. How do you get better looking girls? Pay more money. Only the biggest companies will be able to afford paying for that kind of talent.

Second in line are those companies that have gifted producers and directors, people with a passion for porn who can create great production value even when they are working with b-talent and smaller budgets. But those companies will be competing against each other and therefore will need to be catering to different niches in the market. Every company will have to be really good at something unique to them.

Last in line are the companies that are trying to do a little bit of everything, and the do-it-yourself outfits. There isn’t much of a future for those. Because you are right, anyone with a camcorder can do it, and will do it just for fun, and it will be impossible for a professional to make a living from that kind of product. It will probably end up for free viewing on www.youtube.com/adult

In the next decades many porn companies will disappear. That doesn’t mean the end of porn, but it would indicate a bit of a restructuring coming up. It means that the most vulnerable of the smaller companies will disappear, some will go bankrupt, others will be bought up, and still others will merge. In the end, a few majors will be left to dominate the industry. Those are going to be corporations – suits making the decisions, clean working conditions, health plans, secure SDT screening for all performers, and it’s all going to be connected with other conglomerates and big money. Maybe one day you will have top models doing porn because Gucci is marketing a high-end vibrator in your film. Who knows?

There is a great future for porn. This is just the beginning – unlimited opportunities for growth, combined with an insatiable demand that will never be met. But home-made movies and ugly performers aren’t going to be it! I don’t want to see any more of that ugly shit that is now filling 80% of the shelves.

You Might Also Like