Monthly Archives: December 2008

Lessons from the Adult Entertainment Industry

Fiona Patten and I were both born in 1964. At around 26 I made a major change in my life and moved from Western Australia to Victoria. I had actually planned to move to NSW, but never quite made it there as my intermediate move to Melbourne kept on getting extended. 18 years later with wife, kids, house, and businesses, I realise I never actually planned to move to Melbourne, but I’m really glad I did.

Fiona also made a major change at around 26. She was a fashion designer who started putting on fashion parades at 3 in the morning. Her target audience was sex workers and her mission was to raise funds for people suffering with HIV. And that was the start of her relationship with what’s preferably known as the Adult Entertainment Industry. 18 years later she is now the spokesperson for the industry as CEO of the Eros Association. Fiona didn’t plan to be there either but she’s glad she did.

I figured that Fiona and her industry had learnt vast amounts about doing business on the internet as everyone is always telling me that the porn industry is making money hand over fist. So I decided to have a crack at getting Fiona to spill what she knew about technology trends and business models. I thought it would be great content for a Churchill Club event . So we did it and actually managed to have an enjoyable, educational, judgement free, snigger free evening. I decided to share what I learnt.

The Environment

Her industry is one of the most regulated in Australia. Distributing adult DVD’s is illegal in most states, but a blind eye is normally turned to it by authorities. This causes a massive headache as piracy is rife in their industry (maybe 80% of content purchased). But on a piracy complaint, Police are much more likely to simply arrest the person for selling illegal adult content than pirated content. Since AICO , Adult Industry Copyright Organisation, doesn’t want to damage distribution channels they have to take slow, expensive civil action against each pirate.

The adult entertainment industry never planned to be online, they were pushed there by market forces and problems with distribution channels. But once there, they found they a new level of scalability. They could have websites with 100,000 members paying $30 per month. Unfortunately this is no longer the case and those days (just a couple of years ago) are fondly known as the “good old days of the internet”.

Banks were also loathe to give the industry access to their payment gateways lest they be seen to be supporting porn. Necessity’s being the mother of invention this meant that the Industry ended up developing this own third party payment gateway solutions so that they could take money online. Interestingly third party payment gateways (eg Paypal, Authorize.net etc) now dominates transactions on the internet.

So What’s happening today?

Not all online innovations happened first in the adult entertainment industry though. The rise of Youtube has led to “tube sites” becoming vastly more popular. Delivery of video inside a flash player means that content can be delivered with clever controls, advertising funded sites can be built incredibly quickly and content is harder to pirate. In the last two years or so, 2.5 Million adult tube sites have apparently appeared on the internet.

And like Youtube, user generated content has also become very popular. Unlike Youtube users were much more militant and a 50/50 revenue share model was quickly settled on.

One of the changes that’s happened through delivering content on the internet is that the industry has realised customers are happy to purchase short short clips, 7 minutes is apparently just right for most men :)  .   So the economics of making full length adult movies (around $100K to produce) is becoming more shaky. Interestingly the adult entertainment industry is now looking to music industry models to see what they can learn about unbundling content and collecting royalties.

There is also a fair bit of experimentation with revenue models going on. Content is sold by monthly access, by the clip and by the minute. There are also plenty of successful sites that offer low quality free content with advertising wrapped around it. Delivering content inside a flash player in a web page means there is plenty of real estate for advertising, without having to insert ads into the video.

Many of the stars of the industry (again like the music industry) have Myspace sites. Not only are these stars approachable they are generating significant traffic to the content sales sites.

So what’s on the horizon?

Fiona regularly travels to the US to look at trends in the industry and a number of things caught her eye that she thought she’d pass on.

The pressures of content piracy combined with a market need for only 7 minute clips means that full blown movies may become a thing of the past. The short movie format is much more desirable to customers and much more profitable for the industry

It was quite clear that the increased availability of broadband was leading to content that’s filmed from multiple camera angles that the user can select from on the fly. Fiona commented that the accelerometers in an IPhone could quite easily be used to track how you are viewing content. This means that you could turn your phone to change the camera angle you were viewing. Apparently this is being experimented with already.

Like every mature market, global players are appearing that are buying up content producers. The small guy strategy is to get better at market segmentation. More and more niche interest sites are starting to appear. Its no longer porn. Its becoming short porn, tall porn, green porn for left handers etch.

The gay market is also being recognised as punching above its weight in terms of revenue generation. Apparently the average catalogue has 10% gay items in it, but this generates 30% of the revenue.

The social networking platform Ning has just announced that it will no longer allow adult content groups to run on it. The industry apparently considers this quite exciting as it means video piracy will be reduced (apparently lots of content was shared inside Ning communities) and it will drive these nascent communities that generate their own content, back into the fold where revenues can be derived by the industry.

The downside of all this user generated content, online communities and community acceptance is that more information about what people like in the space is now online and potentially compromising your right to privacy. However it was Scott McNealy (Ex CEO of Sun Microsystems) who said in 2001 “ Privacy is dead, get over it”

Magazines, DVD’s, TV, Film, Computer Games all have different regulations in regards to adult content. There is expected to be some alignment between the regulations in the future. This means that some adult content will start build brands by taking advantage of lots of channels to market. Think Pirates of the Caribbean with its movies, games, dolls and colouring in books. This isn’t possible for the industry today, but clearly will be in the future. (Actually, maybe not the colouring in books).

The final thing that Fiona expected to see in the future was more complex offerings in her industry such as the multi viewpoint clips, and two way broadcasting. She also expected see offerings that combined online and off-line components. The driver for this innovation will be the fight against online piracy.

And on top of all this, it turns out the Adult Entertainment Industry is pretty much recession proof. Makes you think what kinds of innovations are going to flow down to us in the near future.

iPhone apps make sense

This afternoon I popped into a corner coffee shop in the city to have coffee with a friend of mine. She was, in her own words, “super excited” as she had just launched (yesterday) her first iPhone application.

She of course hassled me to download it, but apparently it wanted to download via the internet, not via a GSM network, so I thought I couldn’t get it.

Surprise, surprise though, the café we were in had a free WiFi connection, so I had no excuse. I suspect that I was fixed up, but I was pleased with the outcome anyway.

Her iPhone application is called Drink and was simply fascinating. It wasn’t just some silly game, but a useful tool that took advantage of the natural attributes of the iPhone.

Not too many applications do this; normally they are just an idea dumbly ported to as many platforms as the developers can find.

Anyway my friend Michelle publishes decks of cards with titles such as Bar Secrets Melbourne/Sydney/Brisbane. Her company Shopping Secrets now has heaps of titles, for cities all over the world. It’s likely that you’ve seen them on a book store counter or own a deck yourself.

Her format is basically 52 cards, each on a different interesting bar she has picked out. But that’s not what’s important here; what’s important is her innovation.

She could have just provided an iPhone version of her cards, but instead she integrated it with other applications on the phone.

  1. With a press of a button, you can add a bar to your contacts, then give them a call.
  2. With a flick of a finger, you can enable the GPS function which will tell you which bars are closest to you and their distance (useful at 1am in the morning).
  3. With a wipe of an unsteady finger, her application will use Google Maps to give you graphical directions from your current location to the bar in question (we all know why that’s going to be handy at 3am!).

This completely changes her business. She is now in a position where via the Apples iTunes store she can sell to millions of people in every country in the world, and regularly give them updates. She is no longer constrained by existing distribution channels.

The platform of course is easily reusable so all her other titles (24) can easily be uploaded.

The more I think a about it, the more I like the iPhone model. All that information easily available in a simple, interactive mobile device.

Makes you wonder why Australian organisations aren’t jumping all over it to push out their brand. For instance:

  • Australian Universities could be building apps that have clever models for calculating statistics or trigonometry.
  • Engineering firms could push out “ready reckoners”.
  • Accounting firms could be publishing out financial calculators.
  • Parking firms could offer GPS linked parking guides (that let you know how many places are currently available, and how to get there).

Anyway, Michelle’s Drink application really impressed as it took advantage of the attributes of the platform. Two words, “useful” and “smart”. And since I bought the application, she felt obliged to pay for the coffee. Not sure if everyone can access that deal though :)

If you have iTunes installed, click here to get the ap.

Open Source & Free CRM

I’m connected to Jodie Benveniste of Parent Wellbeing via LinkedIn . I’m not exactly sure how we met (She’s in Adelaide, I’m in Melbourne) , but I think it was because she read some of my articles and liked them. And because I have kids, I read some of hers. Anyway, she sent me an email, the other day about CRM systems. CRM stands for Customer Relationship Management.  Basically contact systems on steroids. Although I’m not an expert, I have deployed 6 or 7 different systems, so decided to share my (slightly fleshed out) answer on free systems to a slightly wider audience.

Brendan
You’ve been blogging about freeware, webbased software on smartcompany – which is great! Just wondering whether you’ve found any decent CRM solutions?   Look forward to hearing your thoughts!

Cheers, Jodie.

Hi Jodie,

I have been using Maximiser on the desktop for the last couple of years in the past, to keep a record of contacts, event attendance and newsletter mailouts. But as part of my new cloud computing push, I am evaluating new CRM solutions. And being me, I wanted to look at the free versions first.

In the Open Source space I am currently having a look at vTiger CRM . Previously I had a look at Sugar CRM (the other main player), which didn’t necessarily impress me (as it was a bit pseudo Open Source, with the yummy bits unavailable).

The Web 2.0 interface of vTiger appears to be nice as it speeds things up. It runs on my standard software configuration (LAMP Stack ) and seems to have all the bells and whistles
– Sales force automation
– Customer support & service
– Marketing automation
– Inventory management
– Activity management
– Security management
– Calendaring
– E-mail integration

It also plugs into Outlook, Microsoft Office and Thunderbird (my email client).

I have also tried FreeCRM , which is a hosted solution with the lite (bannered) version being free. Banners irritate me though.

Its hard to make recommendations on CRM though, as my experience is that every business runs in a unique manner (other than franchises), and that CRM systems tend to be configured uniquely to each business. Therefore everyone will have a different opinion on what is best and a different solution will be best for them.

For instance, I am separating the Churchill Club CRM solution out from my general Brendan Lewis solution.  I have completely different needs from the Churchill Club.

The Churchill Club’s new ( Joomla based) website will use a CRM solution integrated into it, combining a couple of free modules. On the Joomla platform I have added the Community Builder module to store information, the JEvents Module for running events, and the AcaJoom module for sending out newsletters. I have also integrated some eCommerce into the mix so the whole thing will be one, stand alone system.

Personally, I have different needs. I have a couple of thousand contacts that need to be:
– Categorised

– Available to me in all three offices
– Integrate with other bits of technology I use
– Can export all records easily if I get bored with it.

Hope this helps.

Brendan