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The conventional wisdom about the adult entertainment business is that it is recession-proof. This time in the adult industry, though, it may be different, partly because of the current conditions and partly because of the drift by consumers toward new options.
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msnbc.com contributor
updated 1/25/2009 12:03:20 PM ET 2009-01-25T17:03:20

The Los Angeles County Economic Development Corporation estimates that in an average year the adult entertainment industry — which is headquartered primarily in Southern California — registers total sales of $12.6 billion.

Recently Larry Flynt, head of the Hustler empire, and Joe Francis, the man behind the “Girls Gone Wild” series, requested a $5 billion bailout from Congress.

Is it that bad out there?

The rest of the nation is reeling from a severe economic downturn. Yet the conventional wisdom about the adult entertainment business is that it is recession-proof.

And that thinking is consistent with the behavior of mainstream Hollywood. In times of economic difficulty throughout history — even during the Great Depression — people still found the relatively small sums of money to pay for movies and keep their spirits up.

This time in the adult industry, though, it may be different, partly because of the current conditions and partly because of the drift by consumers toward new options.

“They are definitely struggling,” said Jack Kyser, an economist with the LACEDC. “They are subject to piracy like the mainstream industry is, and that siphons revenue away. Then there are a lot of amateurs in the online industry, which is growing rapidly, and they don’t charge for it.

“The industry is really seeing a change in their business model.”

AVN Media Network, the most prominent overseer of the business, publishes trade publications for the adult entertainment industry and puts on trade shows. Paul Fishbein, chairman of AVN, is entering his 27th year in the business, “and this is the first time I can honestly say the adult business is not recession-proof.”

“Everybody I’m talking to says the business is down anywhere from 20 to 30 percent,” he explained. “That’s in line with the rest of the economy. People in the retail sector are down anywhere from 10 to 40 percent.”

Why buy the cow ...
While the recession has something to do with it, Fishbein said, the availability of cheaply made adult fare online is cutting into the cash flow for traditional outlets and establishments.

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“There’s enough free porn on the Internet that, if you don’t care about quality, you can get what you want,” Fishbein said. “Plus the DVD business put out 13,000 new releases last year. That’s just too much.

Slideshow: Celebrity Sightings “There’s too much stuff out there. The economy is bad. And there is a lot of free porn. So it’s a perfect storm that is affecting everybody’s business.”

Yet two of the more notable names in adult entertainment seem to be weathering that tempest at least adequately, for the time being.

Even though Francis joined with Flynt in asking Congress for a handout — whether jokingly, half-jokingly, seriously, or all of the above — he is comforted by the fact that “Girls Gone Wild” is a recognized brand with an ardent following.

“We offer reality product. We don’t do hardcore,” he said. “We’re heavily advertised. There’s a comfort zone in choosing ‘Girls Gone Wild.’ We’re No. 1 in all categories.”

Francis’ operation benefits from the fact that it doesn’t have to pay actresses, or only on rare occasions. Low overhead, more profit. Also, “Girls Gone Wild” can be sold in retail outlets that won’t sell hardcore pornography, another advantage.

What Francis is more upset about than the current economy is the frequent pirating that occurs with his product. “We’re facing what the music business faced a few years ago,” he said. “These sites are stealing our content. We want copyright laws enforced.”

Vivid Entertainment Group deals mostly in adult films and has had stars like Tera Patrick, Jenna Jameson, Briana Banks and Savanna Samson on its marquee. Its president, Steven Hirsch, said his company also depends on loyal customers who want high-quality material.

“We’re fortunate. We have a brand,” he said. “People know who we are. Our girls work exclusively for us. For the past 25 years we’ve had the reputation of producing quality movies.”

But his business has also been affected by both the current economy and developments in the marketplace, he said. “The DVD business is down about 30 percent from year to year,” he said. “When it comes to adult movies now, people go online. So we’re focusing on the vivid.com subscription Web site. We’re also looking to new technologies, adult entertainment on cell phones, all of the emerging businesses that will help make up for the loss on the DVD side.”

Both Francis and Hirsch said they didn’t expect any layoffs in their businesses, nor have they cut back on production. But they’re still feeling the pinch.

“I never thought the adult industry was recession-proof,” Hirsch said, “but it seemed in the past we could hang in there. This time, though, we’re dealing with a downturn in DVD sales at the same time there is an economic downturn.”

Of course, in the adult business, like any business, there is the small businessman, the little guy. Rob Rotten is an adult actor, director and producer and head of Punx Productions. When he makes a film, he said, “I have my fingers in everything, including post production and box covers.”

“We’re in a transition stage,” said Rotten, who has been in the business for nine years. “I don’t necessarily think it’s a bad thing, recession or not. It was bound to happen. And I wouldn’t blame it totally on amateur sites.”

The Northern California-based Rotten believes the adult entertainment business has been hurt by opportunists who try to produce low-quality films and charge exorbitant sums in order to make a quick buck. “It’s a lot of low-budget gonzo stuff released into an oversaturated market,” he said. “I think the general public just got sick of paying $49.95 for a poorly edited, poorly shot, poorly made video.”

As opposed to many who were hit unexpectedly by the severity of the downturn, Rotten said he was ready. “I knew there would be a backlash and I prepared for it,” he said. “I’ve downsized and I limit the number of movies I make a year.”

Rotten offered a tip that could probably apply to just about any struggling business with a product in today’s economy. “The movies I put out and are affiliated with, we actually care about them,” he said. “Even though it’s an adult movie, I try to make the best movie I can within my allotted budget.

“There are some companies that are doing better now than they were three years ago, because they never let go of the quality aspect. They’re not just shipping wood.”

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