IS THE PORN BIZ KILLING ITSELF? GREG ZEBORAY OFFERS HIS ANALYSIS :: Simply Jimmy D :: Breakin' News or Breakin' Balls: It's all the same to me!

jimmyd _writes "In a simplyjimmyd exclusive, veteran insurance and production services guy to the jiz biz, Greg Zeboray, takes a stab at answering the question that's on everyone's mind: Is the porn business killing itself? (Please note: Only simplyjimmyd.com carries this sort of serious, incisive, thoughtful analysis of our business. Accept no substitutes for simplyjimmyd.com: A place where a completely absurd business is always treated with intelligence and respect.)

Greg writes: In regards to “Is this business killing itself?” the answer is no. People – particularly the new people coming in – need to recognize that the exponential growth period is over, and that adult has now settled into a normal business cycle – growth in new clients (buyers) only slightly outweigh the loss of past clients. Much like the dot-com and tech booms, there was a time when the adult industry was (correctly) viewed as a cash cow. But, the cash cow was on its deathbed at the end of the 90’s, and has now passed away. What you’ll be left with are a few well-positioned and well-capitalized companies dominating the marketplace, with the rest struggling for survival.

‘Big Joe’ identifies many of the adult industry as perverts and idiots, and that may be true – but I can assure you every industry has its fair share of perverts and idiots. Name one industry that doesn’t have a large percentage of its members “stumbling over their feet to screw each other for small amounts of money”, and “sales people undercut prices … because they don’t know how to sell in any other way”. Big Joe, as much as I hate to say this, people don’t need to “wake up” – they’re not asleep! Adult is no different then any industry: good business people and bad business people exist within. While I feel bad anytime someone fails, failures are an integral part of the free enterprise system. One rule that has always applied (and always will) is that 20% of the people make 80% of the money, and now that adult has settled into a normal business cycle, it too will fall under that rule. In the business world, the middle class is almost nonexistent.

Many people disagree with me, but I predict VHS and DVD sales could be down as much as 50% two years from now, as VOD takes hold. The technology to purchase a movie off the Internet and watch it on your television is already developed, and will be available soon. I don’t know about you Jimmy, but I’d be willing to pay more money for the convenience of renting a movie off the Internet as opposed to driving to the local Blockbuster (twice at that - once to rent, once to return). I’m only aware of one adult company (Vivid) that appears to be positioning itself for this eventuality, and to the others I say plan for it now, or face a bleak and difficult future. Jimmy, those who become a ‘have’ do it by devoting more time to positioning themselves for the future then worrying about the present. The present – like the past – can’t be changed, but the future can!

The reality is, VOD combined with cable sales, is the only real hope for making an acceptable return on your investment. With these outlets, there is no need to wholesale your product to distributors or retailers, no box cover printing costs, no duplication costs, no DVD authoring, no sales staff, smaller to no accounting staff, and etc. Shoot it, edit it, and out it goes.

One thing that has amazed me in today’s tough climate is the non-existence of exclusive and co-op relationships between production company’s and distributors. If I was going to enter the arena (I’m not), I would list my priorities on first finding a distributor as a partner – one who has exclusive rights to my product, and in return pays half my advertising costs, and then concentrate fulltime on developing VOD and cable relationships. By having an exclusive distributor, I would avoid the need for a sales staff and bloated accounting department, my advertising costs would be halved, and my time would be freed up to concentrate on developing the future – VOD and cable. In any other business, exclusivities and co-op advertising is a way of life – why shouldn’t it be in adult? Pencil it out, and you’ll see that even if you did half your normal volume, you’d be more profitable.

Jimmy, business as usual has run its course. Of all the new company’s to come in over the past year or two, the one I see with the best chance of succeeding is Simon Wolf, and that’s because they not only control their own destiny (by operating a huge cable and hotel market), but because Robert and John are very forward thinking individuals. Quite possibly, second only to Steve Hirsch and his partners at Vivid.

Oh, and one last thing to those who want to enter the business: Do a thorough due diligence, and ignore all this talk of it being a 10 to 14 billion dollar-a-year business. That figure might be true, but the percentage of that amount that trickles down to the production side is really small – perhaps on the low side of single digits, and a proper due diligence will confirm this.

-Greg Z.

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