(snip)"But lately, success hasn’t come easily for Vivid and its upmarket rivals. Three years ago, 80 percent of Vivid’s income came from DVD sales. Today, Hirsch puts that number at about 30 percent, with the rest coming from a fragmented range of sources: subscriptions to Vivid.com, pay-per-view TV, internet video-on-demand, merchandising, and mobile-phone deals. Domestic DVD sales are down 35 percent this year alone. His revenue is flat, he says, but that’s mainly because he’s been cutting costs. Within five years, he claims, DVD sales will be close to zero.
Vivid’s situation is grim but not unusual. DVD woes plague the entire Valley, from multimillion-dollar corporate operations to backroom bottom-feeders: Total sales fell 11 percent in 2006, to an estimated $3.8 billion, according to Adult Video News, the industry’s leading trade publication. Hirsch’s company shares the high end of the market with about 20 other studios that each claim more than $20 million in annual revenues. Outside of those are at least 100 small producers who bring in $500,000 to $5 million a year, estimates Paul Fishbein, president of Adult Video News. These companies shoot on shoestring budgets of $10,000 or less (sometimes much less) per film. “Those rinky-dink companies are struggling to get 1,000 to 1,200 DVDs out at $8 to $10 wholesale,” says Fishbein. “That barely pays for the cost of a cheap production.”
And the decline of DVDs will only accelerate. “You’re going to see a precipitous drop now,” Fishbein says. “Hopefully for producers here in the Valley, that will be offset by internet sales. Hopefully.”
As the portion of Americans with broadband connections (47 percent and growing) continues to rise, consumers are becoming increasingly addicted to the immediate gratification of Web video. But suddenly, there’s a chasm between porn consumption and porn sales. While sales of internet-based adult entertainment grew 14 percent last year, to $2.8 billion, that figure would be substantially higher if there wasn’t so much free competition, especially from the user-generated adult sites."(snip)



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