from THE HOLLYWOOD REPORTER:
Vivid: A new business model for porn
How adult-entertainment firm stole a page from Hollywood
By Georg Szalai
Sept 3, 2010, 12:00 AM ET
NEW YORK -- If the new "Date Night" DVD had sold only 25,000 copies, there would have been hell to pay for studio executives. But for Steven Hirsch -- or anyone else in the adult entertainment business, for that matter -- that figure represents a blockbuster.
The founder of Vivid Entertainment, the leading purveyor of pornographic videos, has built a business estimated to pull in as much as a $100 million slice of an industry estimated to bring in as much as $13 billion a year (compared to mainstream box office of $10.6 billion). The key to thriving even as free online porn services eat away at the DVD market is being nimble enough to adapt principles familiar to the rest of the showbiz world: celebrity scandal and superhero tentpoles. Laurence Fishburne's daughter Montana's sex tape and "Batman: a XXX Porn Parody" -- both from Vivid -- are vying with each other for top-selling adult DVD of the year.
"We have done celebrities for many years but have more recently acquired more than ever before as public appetite has increased," Hirsch told The Hollywood Reporter. "The days of generic adult films are gone because there are many, many websites for stuff like that."
Vivid was founded in 1984 and got a big kick from the Pam Anderson and Tommy Lee honeymoon tape "Pam & Tommy Lee: Hardcore & Uncensored," which was first released in 1998 and became not just an icon of celebrity exposure but also is believed to have sold more copies than any other celebrity sex release with the possible exception of Paris Hilton's. It also made Vivid the one to beat.
"It's the one adult brand -- besides Hustler maybe -- that is most entrenched in people's minds," said Paul Fishbein, president of Adult Video News Media Network, which publishes industry trade AVN.
Since then, Vivid has aggressively positioned itself to acquire celebrity fare -- and the reputation has made it a magnet for celebrities shopping tapes themselves.
While industry sales and financials don't get tracked like box office or DVD sales in Hollywood do, Vivid gets more adult video shelf space than any of its peers and routinely sweeps the annual AVN Awards, the Oscars of the adult industry. Hirsch has been a leader in the mainstreaming of porn, emphasizing quality by shooting on film rather than video; introducing more tasteful packaging; and expanding the brand by stamping Vivid on makeup, intimate accessories, nightclubs and other products.
Hirsch's business instincts continue to pay off. The man Forbes once dubbed "The Porn King" in May acquired and released "Kendra Exposed" a sex tape featuring Kendra Wilkinson of "The Girls Next Door" and "Kendra" reality TV fame that wasn't originally shot for public consumption but is on track to become one of the best-selling adult DVDs of the year. And in August, Vivid topped things off by making a TMZ-fueled splash -- the celebrity site is one of Hirsch's favorite digital buzz engines -- with its release of the "Montana Fishburne" DVD. It has reached the top of the AVN sales chart, sold out of its first pressing of 25,000 DVDs at about $45 a pop -- requiring a second pressing of the same number -- and also could become the year's best-seller, according to industry watchers.
"With Montana, we felt she had a famous last name and is a beautiful girl," Hirsch said. "And it could launch her career."
Not every celebrity tape is of interest. When you listen to Hirsch, he uses words like "quality," "tasteful" and "looking good" in describing what he looks for. As Vivid "greenlights" acquisitions or productions of celebrity content, key filters in mind include good looks, a recognizable name and production values.
That is why Hirsch has in recent days publicly emphasized, again via TMZ, that he wants to see footage of "The Hills" star Spencer Pratt's tape with Heidi Montag to vet how interesting it would be for Vivid.
"Only companies with deep pockets get to play this celebrity game," said Alec Helmy, president and publisher of XBiz Premiere, an information provider and research firm focused on the adult industry. "Vivid is the top name in this space now, and they have positioned themselves aggressively to [get a look at most content and] also get future releases."
Getting desirable content is key as the adult business -- which films or produces nearly 90% of its product in the San Fernando Valley and has suffered because of free Web content, sluggish DVD sales and the recession just like Hollywood. Fishbein said coming up with estimates is nearly impossible. After all, industry players typically are privately held and famously secretive, some parts of the business are illegal and therefore hidden, and there is no tracking service a la Nielsen in mainstream media. But the Los Angeles County Economic Development Corp. issued an estimate five years ago that put adult industry revenue at $12.6 billion a year. Miller said he has seen estimates from about $8 billion-$13 billion in recent years.
The fast decline in porn DVD sales, which Fishbein compares to the Napsterization of the music industry, has made revenue estimates an extra-fast-moving target. Miller estimated that adult DVD sales might have fallen as much as 25% since 2005.
"We have seen DVD sales decline much as Hollywood has," said Kym Kysar, brand and product manager at Pink Visual, which distributes adult content in digital and traditional form. "Adult video stores are closing just as the Blockbusters, Hollywood Videos and Movie Gallerys of the world are closing."
Joe Francis, creator of the "Girls Gone Wild" series, and Hustler founder Larry Flynt even came up with the idea to ask Congress for a $5 billion porn bailout last year. (Request ignored.)
One key reason why celebrity releases might save the industry is that celebs -- whether A-list or B -- can broaden the potential appeal of what typically is a very niche business.
"A consumer who may not have a regular interest in adult films may have interest in a celebrity based on curiosity and intrigue," said publicist Brian Gross, president of BSG PR.
And Hirsch said more women and casual fans tend to buy celebrity tapes, which generally helps them outsell other fare.
"In this day and age with TV and Internet ... you feel like you know these celebrities, so it's more exciting to see them nude," said Jim McBride, who as CEO of MrSkin.com -- which aggregates female nude pictures and clips from the worlds of film and TV -- has made a business out of celebrities.
The average adult industry tape sells only several hundred to a few thousand copies but is very cheap to produce with multiples of $100,000 being considered a really high budget.
Industry observers said no one in the adult space likes talking about what they spend on celebrity content, but they tend to be more expensive than regular productions. One source said videos featuring particularly popular stars can be worth in the hundreds of thousands or even low millions in the cases of major names. For example, Vivid offered former Miss California Carrie Prejean $1 million to star in one of its movies. (She declined.)
But sales of celebrity releases also can be in the tens of thousands -- multiples of more standard fare.
Miller estimates that the most popular celebrity-fueled adult videos such as "Pam & Tommy Lee," Paris Hilton's uncensored 2004 tape (from Red Light District) and the 2007 leaked tape of Kim Kardashian and R&B singer Ray J -- for which Vivid paid Kardashian $5 million in a settlement -- have sold hundreds of thousands of units, the first two possibly more than 1 million.
While there are no fixed retail prices, Hirsch said the Fishburne tape generally is available for $39-$49. Using the $45 midway price tag, its first DVD run raised more than $1 million in revenue.
Vivid.com also can benefit from exciting big-name content that creates buzz as the site might attract or retain people who pay $29.95 per month for subscriptions.
For reality TV stars, younger celebs and aspiring actors, Hirsch has opened new doors.
"It's gone from moneymaking and being a taboo to a type of branding," said one industry source. "The media and consumers love this stuff. Paris didn't lose anything, and Kim Kardashian escalated her fame."
Some say the blurring lines of fame also has helped such porn stars as Riley Steele ("Piranha 3D") and Sasha Grey ("Entourage") follow Jenna Jameson in crossing over into the mainstream.
Hirsch not only likes to buy films featuring celebrities but also gives star treatment to full-time adult performers by signing women to one-year deals with multiyear extension options to make them so-called Vivid Girls. The approach is mindful of the old Hollywood studio system of the 1930s and '40s that tried to lock in longer-term relationships.
"We always felt if we invest in a girl and do the marketing and promotion, and people like her, we want people to come back to us to see more of her," Hirsch said. "People know that when they get one of our movies they are going to get a certain level of quality -- and quality, beautiful girls."
But Hirsch warns that comparing the sales for a Vivid Girl tape with a celebrity tape can be like comparing apples and oranges. "People have more access to them more regularly, so (many) of their DVDs tend to sell fewer copies than the one tape of a celebrity," he said.
Hirsch also is continuously looking to innovate and diversify his business.
"We have Vivid Alt featuring girls [often with more piercings, tattoos and other things that deserve the label 'alternative'] who are not Vivid Girls, and we do educational releases with our Vivid Ed line," he said.
A few months ago, Hirsch added what he expects to be a major new specialty labels: a superheroes parody business.
"That will be a big opportunity and opens up new opportunities" with casual audiences, he said. "We released 'Batman XXX: A Porn Parody' [spoofing the 1960s TV show] in May from director Axel Braun, who is one of the best. It's done great and is one of the best-selling titles of the year."
Vivid instilled a sense of a production quality by, for example, hiring the original TV show's costume designers, which observers argue helped it stand out against cheaper parody productions. The (clean) YouTube trailer for the "Batman" adult spoof has recorded more than 915,000 views.
Next up is "Superman XXX: A Porn Parody," which features Ryan Driller as Superman along such performers as Lexi Belle, Kristina Rose, Randy Spears, Evan Stone and Dale DaBone.
"As usual, I'm trying to re-create the look and feel of the source material and have some fun with it without offending the fans," "Superman XXX" director Braun said last week. "But while the 'Batman' TV show was shot in studio with a relatively low budget, Richard Donner's [1978 'Superman'] movie was a huge production with plenty of exteriors and groundbreaking special effects, so it will be a lot more challenging, and definitely more interesting,".
There will be more spoofs to come, including such TV shows as "Law & Order" and "The Addams Family" and movies including "Grease," "A Clockwork Orange" and even "The Godfather."