Pervasive, Popular, Profitable,
The Economics of Internet Pornography
The business of pornography, adult and child pornography alike,
underpins and arguably sustains the Internet. It has often been
said that pornography is the only profitable entity on the Internet.
Some distinguishing characteristics of Internet pornography are
its profitability, accessibility, and popularity. In 2000, it was
estimated that pornography was a $10 billion industry in the United
States. In 2001, The New York Times Magazine reported that
the $10 billion estimate is on "the low-end." Frank Rich
write an article for The New York Times Magazine entitled
"Naked Capitalists: There's No Business Like Porn Business"
The $4 billion that Americans spend on video pornography
is larger than the annual revenue accrued by either the N.F.L.,
the N.B.A. or Major League Baseball. But that's literally not the
half of it: the porn business is estimated to total between $10
billion and $14 billion annually in the United States when you toss
in porn networks and pay-per-view movies on cable and satellite,
Internet Web sites, in-room hotel movies, phone sex, sex toys and
that archaic medium of my own occasionally misspent youth, magazines.
Take even the low-end $10 billion estimate (from a 1998 study by
Forrester Research in Cambridge, Mass.), and pornography is a bigger
business than professional football, basketball and baseball put
together. People pay more money for pornography in America in a
year than they do on movie tickets, more than they do on all the
performing arts combined. As one of the porn people I met in the
industry's epicenter, the San Fernando Valley, put it, "We
realized that when there are 700 million porn rentals a year, it
can't just be a million perverts renting 700 videos each."
For the full article, see http://www.nytimes.com/2001/05/20/magazine/20PORN.html
In the following excerpt from The New York Times, Timothy
Egan analyzes pornography as an industry.
Wall Street Meets Pornography
By Timothy Egan
Spurred by changes in technology that make pornography easier
to order into the home than pizza, and court decisions that offer
broad legal protection, the business of selling sexual desire through
images has become a $10 billion annual industry in the United States,
according to Forrester Research of Cambridge, Mass., and the industry's
own Securities and Exchange Commission filings.
Whatever the phenomenon may say about the nature of American society,
the financial rewards are so great that some of the biggest distributors
of explicit sex on film and online include the country's most recognizable
The General Motors Corporation, the world's largest company, now
sells more graphic sex films every year than does Larry Flynt, owner
of the Hustler empire. The 8.7 million Americans who subscribe to
DirecTV, a General Motors subsidiary, buy nearly $200 million a
year in pay-per-view sex films from satellite, according to estimates
provided by distributors of the films, estimates the company did
EchoStar Communications Corporation, the No. 2 satellite provider,
whose chief financial backers include Mr. Murdoch, makes more money
selling graphic adult films through its satellite subsidiary than
Playboy, the oldest and best-known company in the sex business,
does with its magazine, cable and Internet businesses combined,
according to public and private revenue accounts by the companies.
AT&T Corporation, the nation's biggest communications company,
offers a hard-core sex channel called the Hot Network to subscribers
to its broadband cable service. It also owns a company that sells
sex videos to nearly a million hotel rooms. Nearly one in five of
AT&T's broadband cable customers pays an average of $10 a film
to see what the distributor calls "real, live all-American
sex - not simulated by actors."
For all the money being made on sex - legally - by mainstream corporations,
the topic remains taboo outside the boardroom. The major satellite
and cable companies do very little marketing of their X-rated products,
and they are not mentioned in annual reports except in the vaguest
On the Internet, sex is one of the few things that prompts large
numbers of people to disclose their credit card numbers. According
to two Web ratings services, about one in four regular Internet
users, or 21 million Americans, visits one of the more than 60,000
sex sites on the Web at least once a month - more people than go
to sports or government sites.
Though estimates have been greatly inflated by some e-commerce sex
merchants, analysts from Forrester Research say that sex sites on
the Web generate at least $1 billion a year in revenue, providing
a windfall for credit card companies, Internet search engines and
people who build Web sites, among others in the commercial food
Some of the most popular Web properties - which feature quick links
to sites labeled "Virgin Sluts" and "See Teens Have
Sex" - are owned by a publicly held company in Boulder, Colo.
That company, New Frontier Media, has stock traded like any other,
and it expects its video network to be in 25 million homes within
a few years. It does business with several major companies, including
EchoStar and In Demand, the nation's leading pay-per-view distributor,
which is owned in part by AT&T, Time Warner, Advance-Newhouse,
Cox Communications and Comcast
Thirty years ago, a federal study put the total retail value of
hard-core pornography in the United States between $5 million and
$10 million - or about the same amount that a single successful
sex-related Web site brings in today. It seemed likely that the
industry would remain where it had always been - largely out of
sight, but profitable, and faced with consistent legal problems.
What kept the market relatively small, in the view of people in
the industry, were the barriers between consumer and product. Typically,
a person would have to go to a run- down part of town, among people
considered less than savory, to find hard-core adult films or bookstores.
These retail outlets frequently were raided by law enforcement authorities,
further adding to the risk for a consumer - a risk of shame, or
But even with most Americans owning VCR's, people still had to take
a trip to the video store, risking some embarrassment. Pay-per-view
television and the Internet removed the final barriers.
What investors and bigger corporations soon discovered was the vast
audience for pornography - once the privacy barrier was eliminated.
Twenty percent of all American households with a VCR or cable access
will pay to watch an explicit adult video - and 10 percent will
pay frequently, according to the distributors New Frontier and Vivid.
That interest explains, in part, why the production of pornographic
films has grown tenfold in the last decade. There are now nearly
10,000 adult movies made every year, according to an annual survey
of the films produced in the Los Angeles area.
But video rentals have reached a plateau over the last two years.
The future is pay- per-view at home - driven by the easy access
and good technical quality of digital television - and pay-per-view
from the Internet, driven by the technological innovations of new
cable and phone lines that carry far more images, more quickly,
to a computer screen.
The number of people visiting sex sites on the Web doubled over
the last year, outpacing the number of new Internet users. Some
of the more popular sex Web sites attract in excess of 50 million
hits, or visits, a month, according to the ratings services Nielsen/
Net and Media Metrix. About one in a thousand people who visit a
site will subscribe, for fees averaging $20 a month, according to
some of the leading Web pornography providers and Flying Crocodile
Inc., a company based in Seattle that tracks and services the sexual-content
"Wall Street Meets Pornography," New York Times,
October 23, 2000. For the full article, see http://www.nytimes.com/2000/10/23/technology/23PORN.html.
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