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Adult Set-Top Box Bows as Industry Tackles Declining DVD

16 Jan, 2008 By: Erik Gruenwedel

Forget the no-show of Club Jenna (Jameson) at last week's AVN confab in Las Vegas. Scuttlebutt among adult producers and distributors concerned plummeting DVD sales, piracy, the format war, free content and the industry's first set-top box, among other issues.

Faced with a seemingly unlimited supply of adult content, electronic distribution and an indifferent consumer, sales of adult DVDs in 2007 saw a precipitous drop, following several years of tepid decline.

Although official industry figures haven't been released, consensus among exhibitors indicated a 20% to 30% drop in disc sales compared to 2006.

Steven Hirsch, co-founder and CEO of Vivid Entertainment Group, one of the industry's top brands and largest DVD producers, said DVD sales dropped as much as 40%.

“Vivid [in 2008] will continue to focus on video-on-demand [VOD], mobile and in building Web-based subscriptions,” Hirsch said.

Digital Playground's co-founder and CEO, who goes by the name of “Joone,” said advances in technology have mandated distribution across multiple formats instead of one.

“We need to give the consumer the choice and let them decide how they want to view it,” he said. “Some people want the DVD, others have big screens and want it in HD and others don't want the finished good and prefer streaming.”

Then there is FyreTV.com, billed as having the adult industry's first set-top box exclusively offering hardcore fare. The Miami-based broadband service, which is in beta testing, will charge users only for content viewed. Cost of the box, which debuted at AVN, was not disclosed.

Much of the industry has pledged content to the service, including Pink Visual, a Van Nuys, Calif.-based DVD distributor.

“I think IPTV is the future and where we're headed,” said Kim Kysar, distribution operations manager for Pink Visual. “I also think it will be at least five years before people stop buying standard-definition DVDs. Not everyone is interested in the next big delivery method.”

Former investment banker turned pornographer Clifton Britt (“Lexington Steele”) said FyreTV and electronic distribution represented evolution in the market place and should not be viewed as underscoring the demise of DVD.

“You have to see it as your glass is half full instead of half empty,” Britt said. “You have to find a way to stay on top of the game.”

Free Stuff

As with studio concerns over copyrighted material appearing with user-generated content on YouTube and MySpace, increasingly free adult content has flooded the Web, often times pirated.

Last year, Vivid sued Adult Entertainment Broadcast Network (AEBN), alleging its user-generated site, PornoTube.com, displayed copyrighted material. The case is ongoing.

While most producers said they lacked Vivid's resources to fight piracy, others said doing so against foreign-based properties was futile.

“What do you do when it is coming out of Russia?” said one exhibitor.

Pink Visual's Kysar countered that pirated material should be considered a cost of doing business.

She said the company found offering free content online, including creating a free link to the Apple iPhone, drove DVD sales and subscriptions.

By partnering with online communities housing free content, Pink Visual was able to better understand its customers and what they wanted from its product, according to Kysar.

“If you cling too tightly to your content and prevent potential consumers from viewing free clips and teases, it's going to be that much harder to build a strong customer base,” she said.

Format Agnostic

The apparent end of the format war between Blu-ray and HD DVD registered largely indifference within an adult industry that has firmly embraced HD DVD.

Currently there are more than 50 adult HD DVD titles in release, compared to less than 20 in Blu-ray.

Digital Playground, which leads the industry with more than 30 HD DVD titles, recently announced it would street 8 titles in Blu-ray.

During the first hour of the AVN show, the company sold 10 copies of the acclaimed title Pirates in Blu-ray, according to a spokesperson.

Digital Playground's Joone said the company would not abandon HD DVD in the short term, citing consumer demand. He welcomed a unified format (preferably Blu-ray), which he said would give producers the ability to utilize Blu-ray's acclaimed special features.

The sequel to Pirates, Stagnetti's Revenge, will be released in all formats simultaneously this spring, according to Joone.

Vivid's Hirsch said HD replication costs still favored HD DVD over Blu-ray.

“We will be judicious in selecting which movies go into [Blu-ray,] he said.

DVD's Staying Power

Bob Brandt with U Rent DVDs, an upstart Calabasas, Calif.-based online adult DVD service, said disc consumption will continue to be driven by consumer needs for physical product.

Brandt also operates X-Rated Bucks, an affiliate marketing site — common in the adult industry — in which a business pays cash to affiliate sites for each visitor or customer brought in by their marketing efforts.

“DVD sales are just a percentage of my business,” he said.

Digital Playground's Joone said the current state of technology doesn't favor an exclusive distribution channel. He said adult consumers vary in their viewing habits and technological sophistication.

“[DVD sales] can't go away because there are consumers in their late 40s and 50s who are not downloaders,” echoed Marc Stuart with Maverick Entertainment in North Hollywood, Calif.

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