The Business of Pornography
Most of the outsize profits being generated by pornography today are being earned by businesses not traditionally associated with the sex industry
The distribution of sexually explicit material has become intensely competitive. Hundreds of companies now produce and distribute hard-core films, selling them to wholesalers and retailers and directly to consumers. Videotape has lowered production costs so much, according to one industry executive, that the only barriers to entry today are "a sense of embarrassment and the lack of a good lawyer." The availability of hard-core films on home video has forced adult theaters out of business in cities nationwide. Los Angeles once had more than 30 adult theaters; today it has perhaps six. The number of adult bookstores has also declined, though not so precipitously. The bookstores are supported mainly by their peep booths, which at some locations now allow a customer to watch five hard-core videos simultaneously on dual TV screens, demanding a new quarter every 20 seconds.
Although the sex industry in Southern California is booming, most of the revenues generated by hard-core videos are going to mainstream video stores. The consolidation of the retail video business, marked by the growth of national chains like Blockbuster, has put enormous pressure on mom and pop video stores. Faced with competition from superstores, independent retailers have turned to renting and selling hard-core porn as a means of attracting customers. This marketing strategy has been made possible by Blockbuster's refusal to carry X-rated material and by the higher profit margins of hard-core videos. A popular Hollywood movie on videotape, such as Pulp Fiction, may cost the retailer $60 or more per tape and rent for $3 a night. A new hard-core release, by comparison, may cost $20 per tape and rent for $4 a night. Some mom and pop video stores now derive a third of their income from porn. According to Paul Fishbein, editor of Adult Video News, there are approximately 25,000 video stores that rent and sell hard-core films--almost 20 times the number of adult bookstores.
Economies of scale. The spread of hard-core videos into mainstream channels of distribution has fueled a tremendous rise in the production of porn. Since 1991, the number of new hard-core titles released each year has increased by 500 percent. The falling cost of video equipment has attracted more and more filmmakers to the business. In 1978, perhaps 100 hard-core feature films were produced, at a typical cost in today's dollars of about $350,000. Last year, nearly 8,000 new hard-core videos were released, some costing just a few thousand dollars to produce. Wholesale prices have been driven down by this flood of product. A market once characterized by a relatively undifferentiated product has segmented into various niches, with material often aimed at narrowly defined audiences.
Hard-core videos now cater to almost every conceivable predilection--and to some that are difficult to imagine. There are gay videos and straight videos; bondage videos and spanking videos; tickling videos, interracial videos, and videos like Count Footula for people whose fetish is feet. There are "she-male" videos featuring transsexuals and "cat fighting" videos in which naked women wrestle one another or join forces to beat up naked men. There are hard-core videos for senior citizens, for sadomasochists, for people fond of verbal abuse. The sexual fantasies being sold in this country are far too numerous to list. America's sex industry today offers a textbook example of how a free market can efficiently gear production to meet consumer demand.