Sex, Bombs and Burgers (3 page)

Having been at the forefront of the industry since its first issue in 1974,
Hustler
has seen more technological change than just about anyone in porn. Michael Klein, president of Larry Flynt Publications (which publishes
Hustler
), agrees with Casemore’s assessment. Porn companies have to be on top of the latest technology because they are in an extremely competitive industry. If they’re too slow in getting their content to people, somebody else will beat them to it. “You need to be out there and get the product out as quickly as you can to consumers,” he says.
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Porn companies are able to adopt new technologies quickly because they are usually small and, like the actors they hire, quite flexible. Tera Patrick, one of the industry’s biggest stars, started her own company, Teravision, in 2003, with then-husband Evan Seinfeld, bassist and singer with the heavy metal–hardcore band Biohazard. The couple says porn companies can experiment with technology because they don’t have to go through layers of management. “The mainstream is slow on the go. They need
a hundred people to make a decision. In a corporate structure, people are afraid to go out on a limb because if something goes wrong, they could lose their jobs,” Seinfeld says. “In adult entertainment, if you came to Tera and myself and said, ‘Hey, I’ve got this new technology to deliver your content to people via an iPhone,’ we could run a check on your company in a matter of days, have a contract and be up and running within a week.” Patrick agrees: “If somebody pitches me something, we can move at light speed. In some cases the early bird does get the worm.”
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Even the bigger porn companies like LFP and Playboy Enterprises don’t feel hemmed in by their corporate responsibilities and behave like entrepreneurs. If a mainstream movie studio wants to try something new, Klein says, “they have to go back and get Tom Cruise’s permission or Tom Hanks’s permission, the director’s permission, the writer’s permission. We secure all those rights and we control the movies we have when we do the deal so it’s easier for us to try all these things.” The result is that there are thousands of privately owned entrepreneurial porn companies with lots of money to burn. As porn star Stoya points out, they can afford to say, “Yeah, let’s give it a shot—if it doesn’t turn out, it’s no big deal.”
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This flexibility attracts non-traditional entrepreneurs who have trouble fitting into the mainstream. Scott Coffman, a serial entrepreneur who had tried to create, among other things, board games and herbal supplements, saw potential in video-ondemand because of the way people were pumping quarters into peep-show booths in adult video stores. He started the Adult Entertainment Broadcasting Network, a website where visitors can pay to watch porn on a per-minute basis, to try out the
peep-show concept online. AEBN, Coffman says, now pulls in a hundred million dollars in revenue a year, making it the largest video-on-demand provider in the world, in or out of porn. “I thought that’s the way we should be selling adult entertainment online, because guys only want to come and watch for a short amount of time. We saw the potential when most companies didn’t really care about it,” Coffman says. “We showed that you could make money on the internet with video. We didn’t just show the way in technology, but also in economics.”
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After graduating from the University of Southern California’s prestigious film school, Ali Joone started Digital Playground in 1993. In 1997 he bet the company on an emerging home-video technology, DVD, a move that mainstream producers were reluctant to make in light of such previous flops as laser disc and CD-ROM. “Everybody in the industry thought DVD was a fad, mainly because CD-ROM came and went. I never looked at CD-ROM as the final product because the image was small. But when you looked at DVD, the image quality was great and it was a big leap from VHS,” he says. “The mainstream waits until there’s a number of players out there.”
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Porn is also a medium that allows for unparalleled freedom and creativity, Joone says. “Adult is the last place where you can do independent filmmaking. You can make any movie you want as long as it has sex in it. As a creative person, your boundaries are huge.”

During the course of researching this book, I was surprised to learn that Paul Benoit, a former high-school mate of mine, was the chief operating officer for the company that produces the popular porn site Twistys. I never pictured him as a porn executive, but as he explains, he was attracted by the marketing opportunities and creative freedom. “What’s always fascinated
me about the industry isn’t the breasts or the sex, but how willing it is to push the envelope,” he says. “Being in the industry means doing whatever our imaginations can generate.”
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Porn companies are forced to innovate, Benoit says, because they are one of the most stigmatized, marginalized and even hated industries there is. As such, they face limitations, regulations and prosecution at every step. Credit card firms, for example, charge them larger transaction fees because they run a higher risk of customers wanting their money back (people don’t tend to think transactions through when they’re sexually aroused, which often results in buyer’s regret). A growing number of countries are also looking into ways of outright blocking pornography online—and not just the violent and disturbing stuff, but simple nudity as well. One filter tested by the Chinese government even blocked pictures of pigs, which were mistaken for naked human flesh. And this isn’t happening only in developing or devoutly religious countries like China and India, but in countries with supposedly strong free-speech laws such as Australia and the United Kingdom.

For porn companies, necessity really is the mother of invention. They have to get to new technologies quickly and exploit them for as long as they can, until regulators catch up. Then it’s on to the next technology. “To deliver, you have to invent in order to circumvent other issues that may come up,” Benoit says.

Decades of technological innovation and virtually unlimited demand have given the industry a veritable licence to print money. Many producers have resisted going public because of the red tape, including responsibilities to management and shareholders, that inevitably follows. As with traditional businesses, many
believe that once shareholders enter the equation, the ability to push boundaries lessens. Non-transparent private companies are also better at hiding information, such as how much money they’re generating, which helps them fly beneath the radar of authorities and tax collectors.

All of this explains why there are only a handful of publicly traded companies that deal in sexual content, including Chicagobased Playboy, Colorado-based New Frontier Media, Barcelonabased Private Media and Germany’s Beate Uhse. Playboy and Beate Uhse are the biggest, each bringing in around $300 million in revenue a year. There are many big independently owned companies that reportedly pull in hundreds of millions in revenue each, including a pair of Japanese firms, Soft on Demand and Hotuku, London-based Dennis Publishing and a host of American companies, including Digital Playground, AEBN, Vivid and Wicked Pictures.
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Aside from the big boys, there are thousands of smaller companies such as Twistys and Teravision. Accurate numbers are difficult to come by because of the industry’s lack of transparency, and because, as technology historian Jonathan Coopersmith puts it, “everyone lies.”
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The estimates that do exist are jaw-dropping. The worldwide porn market has been pegged at a whopping $97 billion, or more than the combined revenue of some of the biggest internet companies, including Google, Apple, Amazon, eBay and Yahoo. China, South Korea and Japan are the top three porn revenue generators, although in the case of China the numbers are likely skewed toward the manufacture of goods like DVDs and sex toys rather than consumption, given the country’s strict antipornography rules. The United States rates fourth with an estimated $13 billion spent, followed by Australia and the United
Kingdom with about $2 billion each. That worldwide revenue amounts to $3,075 being spent on porn
every second
, $89 of which is on the internet.

While the United States only places a technical fourth in estimated revenue (though its $13 billion still exceeds the combined revenue of the three biggest television networks, ABC, CBS and NBC, and is close to the total intake of the NFL, NBA and MLB), porn innovation, like military innovation, is still very much an American story. American producers have led every medium shift, from film to videotape to DVD to the internet, where 89 percent of adult websites originate in the United States. The rest of the world doesn’t even come close; Germany is second with 4 percent of porn sites, followed by the United Kingdom with 3 percent. Asian countries make up a mere sliver of the total porn-site pie.
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While pornography is a global market, the worldwide industry looks to American producers to find out what’s next.

Keeping Up with the McDonald’ses

The motivation behind innovation in food technology is simple: as the world’s biggest industry, the stakes in food are huge and the competition is fierce. Producers must cater to customers’ tastes, even if they are unreasonable, which is more the case in the food industry than in perhaps any other. We want burgers and fries, but we also want them to be healthy. We want fresh produce year-round, even in the dead of winter. We want food immediately because time is our most precious commodity. We also want our food cheap so that we can spend our money on “more important” things, like new cars and flat-screen TVs. All of this requires technological innovation. For producers, catering
to these needs is not easy, but the smallest changes can provide big rewards. Huge differences in profit can often be measured in seconds. If a fast-food restaurant can shave a few seconds off serving a burger and then sell millions of burgers, the technology that will help it do that is well worth the investment.

Historically, stabilizing a population’s food supply has meant improving agricultural methods, harvesting tools, equipment, transportation and infrastructure, all of which inevitably involve technology. The Green Revolution, which swept the world in the fifties and sixties, applied agricultural innovations such as hybrid seeds, chemical fertilizers, pesticides and irrigation methods. Norman Borlaug, the American scientist known as the father of the Green Revolution, was fond of pointing out how integral those technologies were to prosperity. “Civilization as it is known today could not have evolved, nor can it survive, without an adequate food supply,” he said during his Nobel Peace Prize acceptance speech in 1970.

After stability, the impetus for innovation becomes portability and export, and it’s here that the military ties have typically come in. During the Second World War, the American government spurred massive investment in new preservation techniques such as spray-drying and dehydration. These new technologies were needed to make foods last longer and withstand the rigours of travelling thousands of kilometres across the ocean, to be consumed by soldiers. The investments paid off, resulting in what food historians have called the bestfed troops in history. While the average American male civilian ate 125 pounds of meat in 1942, a typical soldier was allotted 360 pounds. Some troops were getting as much as eleven pounds of food per day while civilians made do with four.
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When the war ended, the United States emerged as a food power with a huge advantage over the rest of the world. By 1946 the country was established as a major exporter, producing 10 percent of the world’s food.
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Its position as the first country to achieve political, economic and agricultural stability was strengthened by the fact that Europe had just seen much of its infrastructure destroyed, and by coincidental large-scale crop failures in Asia. In 1946, while Americans wallowed in the luxury of too much food, more than 600,000 Chinese died of starvation and 125 million Europeans faced malnutrition.
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Today, the United States is the largest exporter of food and livestock, with nearly double the output of the next country on the list, France, followed by Germany, the Netherlands, China, Spain, Belgium and Canada (it’s no coincidence that the top three food exporters in the world are G8 countries).
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The American food system has, in fact, created so much abundance that it wastes more food than many nations produce. Americans spend half a trillion dollars every year at supermarkets and another half a trillion at restaurants, half of that at fast-food outlets. They also end up throwing away half of the food that is ready for harvest.
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Once stability and exports were established, profit became the main motivator for continued innovation in the food industry. This led to consolidation into fewer and fewer major powerhouses over the second half of the twentieth century. These huge, publicly owned companies must earn profits for shareholders or risk being consolidated themselves. Many of them are based in the United States and several, including Pepsi, Kraft, Coca-Cola, Tyson Foods (the world’s biggest chicken processor) and McDonald’s, are Fortune 500 companies. Together, they comprise the largest industry in the world, dwarfing even the
military, with annual revenue of about $4.8 trillion, or 10 percent of global economic output.
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With that much money at stake, the industry is incredibly competitive—companies must continually come up with new ways to generate profits. There are two ways to do this: squeeze new operating efficiencies into the business or think up new products.

When it comes to improving efficiencies, the same rules apply as in boosting economic productivity. In economics, a worker’s productivity is measured in units produced per hour worked. Economists agree that there are basically two ways to boost this output—either a business hires more employees to spread the workload or it invests in technology that allows each individual worker to do more. This rule also applies to agriculture, more specifically to farmland. The only way to boost agricultural output is to increase the amount of land being used or invest in more efficient technology. Since populations and cities are growing and arable land is decreasing proportionately, well ... there’s really only one option. During the Green Revolution, this meant hybrid plants that made more efficient use of the land. But it hasn’t been enough, so biotechnology companies such as Monsanto have turned to genetically modified plants and animals to boost efficiency once again. If you can grow a stalk of corn that produces more useful kernels and fewer useless leaves and stalks on the same amount of land, why not do so? Or so goes the rationale.