You would be amazed at the amount of money in the porn industry. No suprise that so much net traffic is pornographic.
and on that note- and remember this is 6 years old.
From an older edition of the economist-
Giving the customer what he wants
Feb 12th 1998
From The Economist print edition
http://www.economist.com/PrinterFriendly.cfm?Story_ID=113208
To its buyers and sellers, the sex trade is just another business
AT THE Vegas striptease joint in Kiel, in northern Germany, business is flat. So is the champagne. Dancers sit listlessly at the bar, waiting for a customer to buy them an overpriced “cocktail” in exchange for a few minutes of sympathetic conversation. “Too much sex on television,” explains the manager grumpily. “Why should people pay here when they can get it for free just sitting at home?” Ten years ago, he says, business was so much better.
Next door, in Kiel’s Eros Centre (one of Germany’s big licensed brothels), scores of prostitutes stand waiting at the doors of their rooms, ogled by a trickle of men traipsing along the red-lit corridors. Business is bad here too. The standard price, DM50 (about $30), is unchanged since 1992—in other words, it has dropped by nearly a third in real terms.
Welcome to the international sex industry, turnover at least $20 billion a year and probably many times that, of which Kiel’s struggling little red-light district is a corner. It is the black sheep of the entertainment industry, in parts hugely lucrative, in parts pitifully poorly paid. Riddled with malpractice and sleaze, it unites one of the world’s oldest businesses, prostitution, and one of its newest, Internet sex. Just possibly, respectability beckons.
To start with, some categories. There are what may be called services: prostitution, striptease and telephone sex. And there are products: pornography and sex aids. In both parts of the industry, a handful of well-run and imaginative businesses are making money as never before—through upmarket escort agencies, for instance, or over the Internet, or by intelligently exploiting market niches. Traditional businesses, especially the many small and amateurish ones, are threatened with extinction.
What is going on? The biggest change, as in so many industries, is globalisation. In many poor countries, international tourism and business travel have made prostitution spectacularly rewarding. In Riga’s luxury Hotel de Rome, a designer-dressed Latvian woman working the night bar, at $200 a time, confides that she nets an average $5,000 a month, in a country where the average wage is one-twentieth of that. “I meet some useful people too,” she says; she is planning to set up a marketing agency soon. In the Hotel Gellert, in Budapest, a Hungarian woman proudly shows off one of the world’s most coveted passports: her earnings have financed a marriage of convenience with a Swiss. Naturalisation is imminent—enabling her to work, she says, “anywhere I want in the world.”
Hundreds of thousands of women from poor countries dream of something similar. For most, a tourist visa suffices. At the bottom of the market, few language or other skills are required. Increasingly, western providers of sexual services are finding it difficult to compete with foreigners. As in other industries, these new competitors work longer hours, for less money, and with less concern for safety and comfort than their western counterparts.
Much the same is happening on the product side of the business. Sex aids these days are produced almost exclusively in China. Most West European producers of sex videos use East European actors wherever possible. “They cost less and do more,” an executive at Germany’s Silwa production company explains, bluntly. In only eight years, Budapest has become probably the biggest centre for pornography production in Europe, eclipsing rivals such as Amsterdam and Copenhagen. Stars’ fees have dropped sharply. Even excruciating or humiliating acts usually cost the producer only two or three hundred dollars, roughly a third of the fees paid ten years ago.
Hand in hand with globalisation goes another business trend—commoditisation. The downmarket end of the industry, be it run-of-the-mill pornography or street prostitution, is a buyers’ market, where prices are ratcheted downwards and only the cheapest supplier survives. A lorry driver going from Prague to Berlin sees hundreds if not thousands of prostitutes lining the E55 highway offering their services. The cheapest, typically Gypsies or Ukrainians, charge a pitiful $10, or less.
Where does this leave the entrepreneur? For the ruthless ones, the road to riches is clear and brutal: cut costs by treating your workers abominably. Women and girls can be enticed (or kidnapped) from poor countries, smuggled into rich ones and worked as sex slaves. If they complain, they are warned, not only they but their families back home will suffer. Russian pimps in Western Europe have a reputation for astonishing violence and cruelty. There is still plenty of money to be made in this line of business. But in the longer term the future of cut-price prostitution looks bleak. Bruised, terrorised prostitutes in ugly surroundings attract only the least choosy, and worst-paying, customers.
Even for the non-criminal parts of the industry, the main response to the last ten years has been to keep churning out cheap material. “A lot of people in the sex industry don’t know very much about sex—they’re just ignorant chauvinist men,” says Tuppy Owens, Britain’s best-known campaigner for freer sex laws, and a fierce critic of the standards in the commercial sex industry. But, she says, customers get what they deserve: “The people doing the good things aren’t the ones making the money. People actually want the bad stuff.” Many customers of the sex industry, it seems, find that a sordid rip-off chimes nicely with their need for a touch of degradation.
A more intelligent response to price pressure and global competition, in the sex industry as in any other, is to go upmarket. Prostitutes in hotel bars and nightclubs charge five or six times as much as their sisters on the streets. One well-known call girl in London specialises in investment bankers and charges £1,000 a night. Upscale prostitution is safer: customers may be nicer; hotels offer more protection than a pimp (they have a reputation to protect, after all) and take a smaller cut.
Perhaps the best example of specialisation comes among prostitutes working in the Gulf states, where aristocratic Arabs are the best-paying customers. Tastes are clear: local women are prized most highly (at up to $2,000, according to an insider); other Arab women come second. Europeans and then Thai and Filipino women cost the least. The result? Moroccan prostitutes have been learning colloquial Gulf Arabic, so that they can pass as locals and collect a higher fee; Russians lucky enough to have Middle Eastern complexions and features have been studying Arabic to increase their earning power. For their part, classy London call-girls have been learning Russian: globalisation, after all, creates lots of new customers, as well as new competition.
Pornucopia
The same applies to pornography. The bottom of the market is hopelessly oversupplied. Watching every one of the many tens of thousands of pornographic videos made in the past 20 years would take most of an adult life-time. Staying awake would be a big problem: most are barely distinguishable, with feeble plots and dialogue. Demand for basic porn is all but saturated. This has yet to sink in. “There are still people who think that putting any old sex scene on screen will make them a fortune. All it really does is drive down prices,” sniffs the Silwa executive.
As in any business threatened with commoditisation, what really makes money is building a brand or finding a niche. Consumers will pay a premium for a familiar face—such as Teresa Orlowski, the Hanover-based porn star who now runs one of Germany’s biggest sex-video businesses. Offering customers something new or different works too. Videos on subjects which would have been considered odd, or even kinky, a few years ago, such as tickling, or foot fetishes, can now be found occupying a shelf or two in the “adult” section of any well-stocked video store. American porn barons such as Steven Hirsch of Vivid Video have made a fortune by producing (slightly) more upmarket fare, featuring such innovations as connected dialogue and intimations of a plot.
Vivid is the most powerful studio in America’s porn-film industry. Nationally, adult videos bring in $2 1/2 billion a year, according to Adult Video News, and account for more than a quarter of all sales and rentals at the typical video store. Most of the industry resides in the San Fernando Valley, on the north side of LA’s Santa Monica mountains, and especially in two centres of activity. Van Nuys, once a middle-class suburb (“the town that started right”, says its motto), is home to both Vivid and Doc Johnson’s, a maker of sex toys. Chatsworth, an area of industrial warehouses on the Valley’s northern rim, has so many porn studios that it is known locally as Silicone Valley. One of its biggest studios, Trac Tech, is a gigantic affair, with permanent sets made up to look like a hospital, a bar and a restaurant—also bedrooms, obviously.
As in many another industrial cluster, the Valley’s porn business has drawn other firms towards it. There are talent agencies, such as Pretty Girls International; strip clubs such as Bob’s Classy Lady, which allow women to show their talents and earn money between films; and sex-aid factories, one of which does a nice line in casts of porn stars’ genitalia. Great Western Litho, which prints the covers of hard-core videos, is one of the Valley’s leading employers, along with Hewlett-Packard and Anheuser-Busch.
Perhaps with a view to improving its reputation, or to developing distinctive brands, or maybe just because its principals have a sense of humour, the adult-film business loves to imitate the the pretensions of mainstream Hollywood. The industry has its own Oscars, complete with stretch limousines and gushing acceptance speeches, as well as its own fan clubs and film critics. Vivid Video has revived the Hollywood studio system, signing actors on exclusive contracts and promoting its actresses as “Vivid girls”, a cut above the regular porno crowd. Mr Hirsch spends most of his time on the phone talking about distribution and licensing.
Just now mainstream Hollywood is returning the compliment. Apart from “Boogie Nights”, an affectionate study of the rise and fall of a young porn star, four other new mainstream films take porn as their subject—including “Merchants of Venus”, by Len Richmond (the son of a sex-toy entrepreneur), and “Some Nudity Required”, a hit at the recent Sundance Film Festival. Hollywood could learn some valuable business lessons from its embarrassing sibling in the Valley. Unlike the regular studios, plagued by rising costs (particularly for stars’ salaries) and dismal profits, the porn business has been excellent at controlling costs. Only a handful of leading actresses earn up to $100,000 a year; most are paid say $300 for a girl-girl scene and $400 for a boy-girl scene.
One fast-growing part of the American porn business has even lower costs: the “home-video” industry. Home-made videos, typically shot with cheap handheld camcorders, and with actors working for love (or something) more than money, now account for between a fifth and a third of all adult videos made in America. As part of the industry moves upmarket, seeking higher prices to cover its higher costs, the rest may be heading even further down-market, with costs as close to zero as may be, with prices and quality to match.
The advent of the home-video camera is by no means the only change in technology affecting the industry. But the porn business is a keen innovator—again unlike mainstream Hollywood. Most leading porno stars have their own web sites, some of them interactive. New tapes allow you to watch up to eight films simultaneously, while some CD-ROMs allow you a measure of control over what happens on the screen.
The Internet is the most important of all the changes, technological or otherwise, affecting the global sex industry. Among other things, it has removed the biggest obstacles to selling pornography and sexual services: shame and ignorance. The “World Sex Guide”, for instance, is an Internet site that gives detailed (anonymous) reviews of brothels, escort agencies and nightclubs in hundreds of cities around the world. In the past, a dissatisfied customer of the sex industry had almost no recourse. Furtive buyers are seldom hard bargainers, or loud complainers. The Internet is changing this. If a $50 “private show” in a striptease bar proves to be nothing more than a bored wiggle behind a curtain, a dissatisfied customer has the chance to warn future ones to take their money elsewhere.
For escort agencies, for example, the Internet cuts out the trouble and expense of sending colour catalogues, or videos, to prospective clients. Previously restricted to marketing their services through small advertisements in newspapers and telephone directories, prostitutes can tempt their customers much more effectively in cyberspace. Well-run pornographic websites are the most profitable places on the Internet (which, for the moment, admittedly, is not saying much).
At the same time, however, the Internet removes a large chunk of the sex industry’s potential market by creating a vast new source of free or nearly free material. Online communication means that the exhibitionist and the voyeur, the person who likes writing smutty stories and the person who likes reading them, can get together for the price of a local telephone call. One well-known meeting place on the Internet is
www.bianca.com; it says it has more than a million visits a day.
Another technological development—cheap colour printing, and the consequent increase in magazine titles—has created a further problem for the industry. Readership for most mainstream soft-porn magazines, such as Penthouse, has plummeted over the past 20 years. New magazines, such as Britain’s GQ or Loaded, offer much of the titillation with almost none of the embarrassment. Barriers between pornography and entertainment are also being blurred by the liberalisation of broadcasting. Documentary programmes on such challenging themes as the problems ménages à trois face when trying to book hotel rooms are standard fare on late-night private television stations in much of continental Europe.
What about standards?
Evidently the sex industry is exposed to many of the forces that normal businesses must contend with. But will it ever become quite normal—an entirely respectable part of the entertainment industry? History suggests it might: a Victorian visiting any modern Western city, or picking up a newspaper or glancing up at many a billboard, might conclude that it already had. Public reserve is not set in stone. Tolerance of pornography has changed a good deal even in the past two decades. The subject matter of famous obscenity trials from the 1960s and 1970s seems almost comical in comparison with the material now shown in the late evening on, for example, Britain’s Channel 4 or Germany’s Pro 7.
But the industry has some way to go, judging by the alacrity with which many sex-industry tycoons still seek to establish themselves in other businesses once they have made some serious money. One of the Arab world’s best-known pimps founded a bank. The current top Russian pimp in the Middle East is building a hotel. How long will it be before sex-entrepreneurs can marry their children to royalty, or even to legitimate tradespeople, without the bother of diversifying?
Presumably, it will happen faster if the industry’s practitioners find a political voice, so that they can lobby legislators to remove or streamline the remaining legal restrictions on the industry. Surprisingly, this seems to be happening, particularly in America. California’s pornography industry already wields considerable political clout—as well it might, given its scale. There is also a vocal lobby in Australia (it recently sent research to legislators showing an inverse correlation between numbers of legal brothels and the incidence of sex crimes). In Germany, by contrast, industry groups still concentrate on enforcing the law rather than changing it. The pornographic filmakers’ association, the GüFA, upholds its members’ copyright interests. Another body polices the country’s draconian retailing laws—taking petrol stations to court, for example, if they dare to sell pornography.
The commercial interest in cleaning up the industry coincides with an important objective of social policy: ending trafficking in women. Campaigners on this issue, sponsored by the European Union and other international bodies, are increasingly sure that only legalisation gives a basis for tackling criminality. There are even flickers of organisation from the people who bear the brunt of the current hypocritical legal climate, the workers. Erotic dancers in America have formed a union, and even staged a strike last year. In Germany workers in the same occupation are already organised by the IG Medien trade union.
Prohibition of gambling and alcohol have both been tried in varying degrees in dozens of countries around the world, always with the result of stimulating illegality and sleaze. The sex industry appears to be no different. All developed economies have conceded that the business is impossible to stamp out. Tolerating prostitution while leaving it technically illegal or semi-legal encourages corruption: policemen are paid to turn a blind eye. It also renders the workers helpless against their employers. Until recently, sex slaves who escaped from brothels in most European countries were usually deported as illegal aliens, which hardly helped the authorities nail their oppressors. The inexorable trend, in both law and public morals, is towards legalisation of what is already tolerated.
That would free law-enforcers to concentrate on what is not tolerated, such as the sexual exploitation of children. And it would put the greater part of the sex business where it ultimately belongs—as just another branch of the global entertainment industry.
Producers of pornography would compete for real Oscars. Street prostitution might be treated like any other outdoor entertainment, such as busking, regulated according to local taste and circumstance. Brothels and strip clubs would arouse no more comment than casinos and nightclubs. Some customers might find it all rather dull and clinical: a niche would remain for the authentic experience, complete with gorilla on the door, over-priced drinks and grubby red velvet sofas. Others might like the new professionalism. Frequent flyer miles? You read it here first.
This is what they get for there devilish acts of Fornication! 
