Is A Porn Bailout Necessary In Hard Times?

An adult video store in New York. Chris Hondros/Getty Images i

An adult video store in New York. Chris Hondros/Getty Images hide caption

itoggle caption Chris Hondros/Getty Images
An adult video store in New York. Chris Hondros/Getty Images

An adult video store in New York.

Chris Hondros/Getty Images

The adult entertainment industry doesn't make cars or loans, but porn mogul Larry Flynt thinks Congress should help it weather the economic crisis.

"The porn industry needs a bailout, people, with the economy as sad as it is, trying to make their mortage payments, they're just bewildered at what confronts them, so they don't even think about sex," the founder of Hustler magazine says. "So I think it's time for the government to step in and rejuvenate the libido and enjoy the one thing that's left that's still free."

Sales of adult DVDs have been positively flaccid for the past two years — down about 22 percent and falling, according to industry figures. Blame the impact of the Internet, and now the recession. So earlier this week, Flynt and Girls Gone Wild creator Joe Francis sent a formal request to Congress for a $5 billion bailout.

Most people in the adult entertainment industry dismiss the request as a publicity stunt, but they do agree that the recession is hurting business.

"The economic downturn has affected everybody," says Steven Hirsch, the CEO of Vivid Video. "People simply don't have as much money as they used to. The guy who used to spend $100 on adult content is now only spending $50."

Hirsch is a second-generation adult entertainment producer. He started working for his father when he was 19. In its 25 years, Vivid has become an industry giant, bringing adult stars such as Jenna Jameson to the screen, and distributing sex tapes of celebrities such as Pam Anderson and Kim Kardashian.

But even those names don't sell like they used to. To keep his business competitive, Hirsch is joining standard elements to new technology, like an interactive video that allows the viewers — typically men — to control the leading lady.

"You can change the storyline, and you can basically tell her what to wear, what to say and what to do," Hirsch explains.

This may or may not be every man's fantasy, but Hirsch believes video on demand will be the future of adult entertainment. The Internet, he says, has changed everything. Free sites like YouPorn.com are stripping clients away from DVD sales. Hirsch is working to stay profitable.

Several miles away from Hirsch's sleek offices, Jax Smith, the CEO of SugarDVD, is on his third Internet venture. SugarDVD was his first. In seven years, the business has grown into the adult-entertainment version of Netflix. He's made money every year. For Smith, the passion comes not in the product itself, but in marketing it.

"We might as well be selling peanut butter here," he jokes, "as long as there was something there was a niche for, and we could do well at it."

Maybe, but peanut butter jars don't have these kinds of titles on their labels: Who's Your Daddy 7, Slutwoman, Chicka Boom 32 X.

Smith initially hoped he would find veteran partners for joint ventures, but says the old guys are slow to adopt the new technology and turned him down. Trust is hard to come by in the porn industry.

Smith has moved ahead, regardless, using technology to enhance distribution, and has diversified his offerings to include sex toys and high-quality video-on-demand to make up for DVD losses. He predicts that the recession that is squeezing his colleagues will boost his own business. That's one of the few times this year you'll hear anyone express gratitude for an economic downturn.

And what about those "old guys" who turned down the chance for collaboration? Four of their businesses went belly-up, and Smith is planning to buy them later this year.

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