Sex, Bombs and Burgers

by Peter Nowak

  Photographs would only do for so long, though, and soon porn entrepreneurs turned to developing online video. A full decade before YouTube, Pythonvideo.com was streaming live video from a number of sex theatres in Amsterdam’s red-light district. Launched in 1995, the endeavour was limited by the early video compression standards and slow internet speeds of the time, but the small, choppy streams proved immensely successful. Originally intended as a promotional vehicle to encourage tourists to visit the theatres, by 2001 Python was streaming live video content to three thousand websites.

  Other players, such as Virtual Dreams, took Python’s idea a step further and introduced two-way video-conferencing strip shows. Visitors to the site typed in their requests to the man or woman at the other end, who then acted them out. Presciently, Virtual Dreams’ owners predicted the technology would benefit “medical, educational and a whole host of commercial and industrial transactions.”18 Of course, video chat is now a standard tool offered by the likes of Apple, Google, Skype, Microsoft and Yahoo. Burger King even copied the idea years later with its hilarious “subservient chicken” website, where a man dressed in a chicken suit took requests from visitors.

  Into the new millennium, several porn producers, including Los Angeles–based heavyweight Wicked Pictures, pushed the adoption of better compression standards, particularly the H.264 codec (also known as MPEG-4)—now widely used in online video—to take advantage of the higher internet speeds being made available to consumers. “We don’t sell millions of copies of a title on hard goods like a mainstream studio does, so we choose to support new avenues to deliver our products,” Wicked founder Steve Orenstein says. “We embraced H.264 early on as our primary codec for online delivery for both archived and live high-definition streaming.”19

  The porn industry’s video innovations did not go unnoticed by mainstream businesses, which quietly adopted them for their own purposes. One senior executive who would prefer to remain anonymous told me of how the multinational bank he worked for co-opted porn technology to help advise clients on their investments.20 In 2003 the bank was looking for a way to distribute a video multicast of each morning’s investment tips, but no one was offering such a service commercially and the bank’s own IT research team was stuck. “Then we said, ‘Hold on, having a talking image distributed by the internet is something the porn people have been doing for a long time,’” the executive says.

  The IT team came up with the idea of having an employee sign up to various porn sites to snoop around, but the bank’s human resources department was, not surprisingly, “dead against it.” A junior member was sent home armed with a credit card, instructions to expense all his research as meals and a mandate to figure out how the porn companies were broadcasting their videos. He came back a few weeks later with a fully functional video system. “It was a direct analogue. It was completely the same approach and the same technology,” the executive says. “The higher-ups didn’t care, they were completely in on the game and used to just laugh. They were completely conflicted.”

  Mainstream businesses also latched onto the security methods developed by porn companies, which by the nature of their business had huge targets painted on them. “The mixture of how ‘adult’ is seen as less accepted in society and the idea that money flows like water through this industry makes it an ideal target for hackers,” says Paul Benoit, chief operating officer of the company that runs Twistys.com, a popular video download site. “Adult companies are less likely to work with the FBI or RCMP in dealing with hacker attempts since the nature of their business isn’t as accepted as banking or book selling.”21

  Aside from having to deal with the same issues as mainstream websites, such as denial-of-service attacks, worms and viruses, adult sites also have to prevent hackers from stealing their content, which is usually hidden behind a paid membership wall. “This includes making sure our members area is locked down to authorized and paying customers only, but we also have to have defences in place to prevent password sharing, password brute forcing, proxy server abuse and such,” says Jack Dowland, systems administration director for a number of adult sites, including Pink Visual. “Everyone wants something for free. And not just free stuff for free. They want stuff that you would normally have to pay for for free. Add in the technical challenge, and you have a playground ripe for would-be crackers.”22

  Porn sites have thus been a target for every horny fifteenyear-old computer geek with too much time on his hands. As with Playboy and its watermark software, porn sites have had to make big investments early to protect their content and customers’ private information. For many, security has become almost as important as producing the sexual content. As such, while having “porn star” on your résumé may not get you acting gigs opposite Clint Eastwood or Meryl Streep, having “porn webmaster” can result in a warm welcome from mainstream companies looking for innovative IT employees. That’s not to say that many porn webmasters want to jump the fence—they tend to get paid well and enjoy more freedom at what are almost always smaller, more flexible companies. Working in the porn industry, Twistys’s Benoit says, means doing “whatever our imaginations can generate.”

  While many web developments came from companies that simply made erotic films, the darker and creepier side of human sexual desire has also, unfortunately, inspired big advances. The arrival of Java, a programming language that made possible many multimedia applications, is one such example. Patrick Naughton was part of the team at Sun Microsystems that designed Java in the mid-nineties. In 1999 Naughton was nabbed by an FBI sting at the Santa Monica pier in Los Angeles, where he arrived for what he believed would be a sexual rendezvous with a thirteenyear-old girl he had met online. Naughton, who at the time was overseeing Disney’s internet content, was convicted of travelling across state lines to have sex with a minor, but avoided jail time by brokering a deal to help the FBI capture pedophiles online.23

  Java, meanwhile, proved to be a great tool for web designers to create all sorts of in-browser applications, from games to interactive weather maps to real-time chat functions. It also allowed designers to create new functionality without having to worry about how to get past the firewalls used by many corporations, which tend to block employees from downloading add-on software for their computers. This proved to be a huge boon to the porn industry, which sees about 70 percent of its traffic happen during the nine-to-five work day.24 Observers within the IT industry, meanwhile, have for years speculated about why Naughton was so interested in creating communications tools that could bypass corporate firewalls.

  Show Me the Honey

  The porn business is a business, after all, and none of these innovations would have happened if there wasn’t a whole pile of money to be made. To cash in, adult companies were quick to develop a variety of payment systems, some good, others bad. Aside from adapting the automated credit card payment systems they had developed for phone sex, porn producers also invested in things like e-gold and OmniPay, digital currency transfer systems that allowed people to pay for goods online without a credit card. These systems have fallen into disrepute in recent years because they’ve become the primary payment vehicles of online casinos, which in North America are largely banned from accepting traditional financial transactions. (They did, however, inspire well-regarded systems such as eBay-owned PayPal.) One of the shadiest systems required customers to download and install special software. In one of the most insidious scams the Federal Trade Commission has ever seen, the software then made its own connection to an internet provider in Moldova where, unbeknownst to the customer, it racked up huge longdistance phone charges. Customers only found out when their phone bill arrived.25

  On the plus side, porn companies also pioneered cooperative affiliate systems where one website advertised on another. If a visitor followed a link on Site X to Site Y and ended up joining Site Y, Site Y then gave Site X a payment for the referral. Not only did mainstream businesses such as Amazon and eBay co-opt this innovation, it al
so formed the basis for Google’s entire context-based advertising system. When you enter a query on Google, a number of text ads pop up on the right hand of your search; if you click on one of those ads, the company behind it sends Google a payment for the referral. In ten short years, Google has used this ad system to become the massively profitable behemoth it is today.

  Regardless of the payment systems used, putting porn on the internet was—and is—akin to printing money. The traffic and revenue numbers have been simply huge, even if they have been hard to accurately measure, since most producers are not large, publicly traded companies required to report earnings. Still, analyst estimates have painted an astounding picture. In the early days of the web, sexually oriented products accounted for an estimated 10 to 30 percent of the entire online retail market.26 By the turn of the millennium, while mainstream content providers such as The Wall Street Journal charged online subscribers $59 a year, adult sites such as Danni’s Hard Drive were able to charge $25 per month, which explained how porn accounted for more than half of the estimated $2 billion spent on online content in 1999.27 The most profitable non-sex category of websites, online gambling, took in only $150 million in 2000, a paltry amount compared to the $1.7 billion raked in by adult sites.28 Mainstream businesses also quietly benefited from the heavy traffic being generated by porn. Of the eighty-one million people who accessed popular search sites Yahoo and MSN in March 2001, more than thirty million made their way to an adult site.29 At the same time, about 40 percent of Germany’s and Italy’s entire web traffic was aimed at porn sites, with similar numbers found across Europe.30 That traffic helped the portals sell advertising space on their sites.

  Internet service providers also reaped the benefits as customers converted their slow dial-up connections to more expensive high-speed broadband. In the United States, about 20 percent of AT&T’s high-speed customers paid to watch porn online. In Europe, where high-speed subscriptions grew 136 percent in 2002, music file-sharing services and adult content were identified as the two leading reasons for why people switched to broadband.31 “Adult content is the obvious subscriber service to go for because there is already a proven business model,” one analyst said at the time.32 The revenue growth in online porn continued through the mid-2000s, particularly in the United States, where producers raked in close to $3 billion of the total $5 billion global porn pie in 2006.33 In 2009 an estimated 25 percent of all search requests were for adult content while a third of all websites were pornographic, garnering as many as 68 million hits a day, or 28,000 surfers a second watching porn of some kind.34 Today, $89 is spent on porn every second.35 Even taken with a grain of salt, the numbers are astounding.

  Too Much of a Good Thing

  But this money-printing business is now under attack. A recent estimate by E-commerce Journal pegged the online porn market at $2 billion, or about the level it was at in the early part of the 2000s.36 DVD sales and rentals, meanwhile, are down by about 15 percent. For the first time in its history, the supposedly recession-proof adult entertainment business is contracting in terms of revenue. Adult Video News, the Wall Street Journal of the industry, attributes the decline to the same two factors that have Tera Patrick worried: too much product and too much piracy. “The laws of supply and demand have been turned upside down. We’re on par to put out fifteen thousand new releases this year, which is just insane,” said AVN founder Paul Fishbein in 2008. “Secondly, there’s a battle with pirated or free material on the internet. Much like the music industry, adult producers are trying to figure out how to stem free or pirated content.”37

  Ironically, the product glut is the result of internet innovation. With the ability to create and distribute videos more cheaply and easily than ever before, everyone with an internet connection can now be considered a competitor to the likes of Vivid and Hustler. Piracy, meanwhile, is coming in two forms: file-sharing and free websites. The mainstream music and movie industries have felt the damage of websites such as Pirate Bay and Mininova, which contain directories of “torrents” that allow users to swap files for free. The potential hurt could be much worse for the porn business since, as Wicked’s Orenstein said, it has no other revenue stream—such as live shows or box-office earnings—to fall back on. Even worse are a rash of porn-flavoured YouTube clones, including YouPorn, RedTube and Tube8, which allow users to upload sex videos. The sites are drawing considerably more traffic than the big porn companies’ own online operations, and they’re rife with copyrighted material. That has the producers hopping mad. “This needs to be treated like a bank, like someone is going in and robbing a vault. As far as I’m concerned, for the music business, for Hollywood and for our industry it has to be treated the exact same way,” says Digital Playground president Samantha Lewis. “We’ll all be out of business at this rate.”38

  The producers’ retaliation has come in several forms, some more successful than others. They have done remarkably well in keeping their content off torrent sites, for example. While Warner Bros. declared victory in 2008 by announcing it had kept its blockbuster Batman movie The Dark Knight off torrent sites for two whole days after its theatrical release, whereupon it became easily available, the big porn companies are taking comfort in the fact that many of their films are file-sharing rarities. Lewis claims that this is the result of a persistence not practised by Hollywood. Digital Playground, for one, has two full-time employees monitoring torrent sites who take immediate action against any and all infringements. “All we do is shoot off an email and it’s down in thirty seconds. They really don’t want a lawsuit,” Lewis says. “We’ll get something down and then they’ll mix it around, maybe change the spelling of the name and put it right back up in fifteen minutes. We’ll be on them again. If it happens again, then they get the letter [from lawyers]. You just have to be persistent and they know we’re serious.”

  Some feel the ultimate solution to stopping piracy lies with what brought the industry to the dance: innovation. Stoya, winner of several “new starlet” awards in 2009 and porn’s current “it” girl, says lawsuits and technological restrictions like copy protection haven’t worked for the music and movie businesses, and they won’t work for adult entertainment. Maybe, then, it’s time to get creative. “It’s not so much that they’re fighting a losing battle, but they’re fighting a different battle. The solution is to think outside the box,” she says.

  There is also the matter of too much product. The solutions there will follow the same economics as in any other industry: consolidation or expansion. If revenues continue to decline,some producers will fall by the wayside or get swallowed up by competitors. As for expansion, there are plenty of countries that still actively ban porn. Getting a foothold in some of those now may reap huge rewards down the road. “The Chinese wall keeping pornography out is going to fall some day,” says Kim Kysar of Pink Visual, which is trying to build its brand in neighbouring Asian countries in anticipation of that eventuality. “As soon as it does, it’s obviously going to be the biggest market there is.”39

  Nevertheless, many are still worried. Hustler president Michael Klein agrees with Tera Patrick. If the big porn producers can’t figure out how to deal with piracy and the glut of product, they’re going to have to figure out an entirely new way of doing business. “It’s going to be harder to find the next Jenna Jameson or Tera Patrick, someone who’s going to be a standout star,” he says.40

  The Final Frontier

  The irony of the entire situation is that the destructive power of the internet lies in the very seeds of its formation—the decision by Vint Cerf and DARPA in the seventies to freely distribute the rules that govern connections between computers. That seminal move was duplicated by Berners-Lee in the early nineties when he released his web browser code for free. Both actions, fundamental to the formation of the commercial internet and web, created the “culture of free” that has turned media business models—porn or otherwise—upside down over the past decade. The longer people use the internet
for free, the greater this sense of entitlement grows. Perhaps that is the way of the future and businesses will have to figure out a way of working within the new system, or perhaps old models will somehow reaffirm themselves, possibly through a continuation of lawsuits and enforcement of copyright laws. I suspect it’ll be a mixture of the two: content creators will eventually figure out how to do business and make money in the new paradigm, while users will accept that not everything on the internet is automatically free.

  There is, of course, one other possibility. Cerf is working with NASA’s Jet Propulsion Laboratory in Los Angeles on developing the “intergalactic internet,” a new communications network that will connect all the satellites and spacecraft up in orbit with facilities here on Earth. The network got early DARPA funding in 2000, followed by a second round in 2007, then moved into production in 2009 after successful testing. Under the current system, if scientists on Earth want to retrieve data from, say, the Hubble Telescope, they need to schedule a download connection for when the sensor array passes over a node on Earth.

  The new system follows the “hot potato” routing idea of the original ARPAnet, where data is stored at nodes and forwarded as soon as possible. Satellites and other craft will be able to automatically transmit their data to other nodes whenever they pass by them, eliminating the need for complicated logistical scheduling. This “delay-tolerant” feature, which sends information even if there are connection disruptions, also has applications here on the ground. The U.S. Marine Corps has tried it and loves it, as have Sami reindeer herders in northern Sweden, who tested it for DARPA in 2005. Commercially, the system could theoretically be rolled out by Google on its Android cellphones for significant bandwidth savings. One Android user could, for example, download a map over the cellular network and then radiate it out to other Android users, thereby saving the other users from having to download it as well.