Snapshot Look At Current Adult Entertainment Biz

For a few days recently, I 'researched' the adult-entertainment industry for this article. I became curious as to just how big the industry was, what kind of money was being made and what companies owned, operated, managed and provided adult entertainment. In fact, there are multiple segments and sectors within the industry, with companies involved in movies, books and magazines, Web sites and software, nightclubs, adult-cable networks, pay-per-view services, telephone and online services, retail stores and catalogs.

I discovered that the industry is difficult to accurately measure. It's even more difficult to track how many publicly traded, mainstream companies are involved and what percentage of their earnings originates from the adult industry. Search-engine firms such as Google, or video-streaming providers such as RealNetworks Inc., don't really specify how much money they earn from the adult trade. While stock
analysts will admit that the revenue contributions can sometimes be significant, the companies themselves rarely mention it.

More Revenue Than Hollywood

According to statistics compiled by industry guide AVN, it is estimated that the adult-entertainment industry worldwide generates an estimated $57 billion a year, with sales of $12.6 billion in 2005 credited to the U.S. alone. Industry-wise, those numbers are significant: Americans spend more on adult entertainment than they do going to the movies. According to figures from box-office tracking firm Exhibitor Relations, U.S. revenues from mainstream Hollywood films were $8.9 billion.

Other statistics I came across were equally surprising. Forty million Americans admit to visiting adult Web sites. And according to a recent survey, 70% of men ages 18 to 34 say they look at adult Internet sites at least once a month. Twenty percent of men and 13% of women say they look at these sites while on the job.

The Internet has been a big contributor to the growth of the industry. Still, no one knows for sure how many adult-oriented sites exist because many of these 'unique' sites fall under the umbrella of a handful of companies. The Web site Internet Filter Review stated it calculates that there are 4.2 million adult-entertainment sites online. The online segment of the industry represents $2.5 billion of the total and is growing rapidly, pioneering such now-commonplace practices as streaming video, trading files and making online purchases. By comparison, sales of music downloads totaled $1.1 billion last year.

Leading the Way in Technology

But the success of many emerging technologies has long been helped by a linked use in the adult-entertainment industry. A big attraction for digital cameras, some believe, was the ability to take private photos without having to have the film developed at the corner photo shop. And a force behind the rapid spread of VCR, and later DVD sales, was the ability to view adult movies without having to go out to a theater. While Hollywood is still struggling with how best to put its movies online, some adult entertainment empires have been built by production companies selling streaming-video programs on the Internet.

Adult content can now even been downloaded on cell phones, or on an iPod. Experts predict that mobile adult content is expected to bring in an additional $1 billion in worldwide revenues this year alone. That number is expected to double in just the next 4 years. As unlikely as that popularity may seem today, one online Web site that features amateur pinup girls in 3- to 5-minute video clips recently reportedly logging 500,000 downloads in their first 24 hours of targeting iPod users.

Like Hollywood, the U.S. adult-entertainment industry is dominated by a handful of privately held studios. Unlike Hollywood, they do not disclose revenue or production costs, making it difficult to gauge the size and profitability of the industry. The industry releases about 11,000 titles on DVD each year, giving it tremendous power to influence the battle between studios and technology companies competing to set standards for the next generation.

It was recently reported that Web address Sex.com ' long coveted as potentially one of the most lucrative site names on the Web ' was sold for about $12 million in cash and stock. The CEO and founder of Match.com was the original owner and beneficiary of that transaction. The sale ranked as one of the most expensive Web domain-name transfers ever.

Adult-entertainment businesses expect to see their market capitalizations increase significantly over the next few years. But for investors, this sector has its shortcomings. The industry is mostly made up of private companies, both small and large, and one way for these companies to limit public scrutiny is to stay private. Playboy Enterprises, Boulder, CO-based New Frontier and Barcelona, Spain-based Private Media Group are some of the few publicly traded firms.

Many mutual funds avoid investing directly into adult-oriented companies because the industry is under constant pressure from a variety of groups and politicians. However, there are a number of brand-name cable and technology companies that have not ignored the explosive growth.

For a few days recently, I 'researched' the adult-entertainment industry for this article. I became curious as to just how big the industry was, what kind of money was being made and what companies owned, operated, managed and provided adult entertainment. In fact, there are multiple segments and sectors within the industry, with companies involved in movies, books and magazines, Web sites and software, nightclubs, adult-cable networks, pay-per-view services, telephone and online services, retail stores and catalogs.

I discovered that the industry is difficult to accurately measure. It's even more difficult to track how many publicly traded, mainstream companies are involved and what percentage of their earnings originates from the adult industry. Search-engine firms such as Google, or video-streaming providers such as RealNetworks Inc., don't really specify how much money they earn from the adult trade. While stock
analysts will admit that the revenue contributions can sometimes be significant, the companies themselves rarely mention it.

More Revenue Than Hollywood

According to statistics compiled by industry guide AVN, it is estimated that the adult-entertainment industry worldwide generates an estimated $57 billion a year, with sales of $12.6 billion in 2005 credited to the U.S. alone. Industry-wise, those numbers are significant: Americans spend more on adult entertainment than they do going to the movies. According to figures from box-office tracking firm Exhibitor Relations, U.S. revenues from mainstream Hollywood films were $8.9 billion.

Other statistics I came across were equally surprising. Forty million Americans admit to visiting adult Web sites. And according to a recent survey, 70% of men ages 18 to 34 say they look at adult Internet sites at least once a month. Twenty percent of men and 13% of women say they look at these sites while on the job.

The Internet has been a big contributor to the growth of the industry. Still, no one knows for sure how many adult-oriented sites exist because many of these 'unique' sites fall under the umbrella of a handful of companies. The Web site Internet Filter Review stated it calculates that there are 4.2 million adult-entertainment sites online. The online segment of the industry represents $2.5 billion of the total and is growing rapidly, pioneering such now-commonplace practices as streaming video, trading files and making online purchases. By comparison, sales of music downloads totaled $1.1 billion last year.

Leading the Way in Technology

But the success of many emerging technologies has long been helped by a linked use in the adult-entertainment industry. A big attraction for digital cameras, some believe, was the ability to take private photos without having to have the film developed at the corner photo shop. And a force behind the rapid spread of VCR, and later DVD sales, was the ability to view adult movies without having to go out to a theater. While Hollywood is still struggling with how best to put its movies online, some adult entertainment empires have been built by production companies selling streaming-video programs on the Internet.

Adult content can now even been downloaded on cell phones, or on an iPod. Experts predict that mobile adult content is expected to bring in an additional $1 billion in worldwide revenues this year alone. That number is expected to double in just the next 4 years. As unlikely as that popularity may seem today, one online Web site that features amateur pinup girls in 3- to 5-minute video clips recently reportedly logging 500,000 downloads in their first 24 hours of targeting iPod users.

Like Hollywood, the U.S. adult-entertainment industry is dominated by a handful of privately held studios. Unlike Hollywood, they do not disclose revenue or production costs, making it difficult to gauge the size and profitability of the industry. The industry releases about 11,000 titles on DVD each year, giving it tremendous power to influence the battle between studios and technology companies competing to set standards for the next generation.

It was recently reported that Web address Sex.com ' long coveted as potentially one of the most lucrative site names on the Web ' was sold for about $12 million in cash and stock. The CEO and founder of Match.com was the original owner and beneficiary of that transaction. The sale ranked as one of the most expensive Web domain-name transfers ever.

Adult-entertainment businesses expect to see their market capitalizations increase significantly over the next few years. But for investors, this sector has its shortcomings. The industry is mostly made up of private companies, both small and large, and one way for these companies to limit public scrutiny is to stay private. Playboy Enterprises, Boulder, CO-based New Frontier and Barcelona, Spain-based Private Media Group are some of the few publicly traded firms.

Many mutual funds avoid investing directly into adult-oriented companies because the industry is under constant pressure from a variety of groups and politicians. However, there are a number of brand-name cable and technology companies that have not ignored the explosive growth.