Internet Piracy Is Killing Porn's Profits

Internet Piracy Is Killing Porn's Profits

Web sites like RedTube and PornHub allow users to view pirated porn videos for free.

Porn mogul Jay Quinlan really hates when people on the Internet steal his intellectual property. 

 At a panel this week at the “XBIZ State of the Industry Conference,” Quinlan, tattoo-covered vice president of a company that owns three adult entertainment pay Web sites, struggled to contain his anger over seeing videos from his pages being illegally posted on YouTube-esque porn hubs.

“The people stealing this stuff should be brought out to the back room and shot,” he said. “I mean, who wouldn’t want to watch free porn? I don’t think people are that picky about their masturbation habits. So every year that goes by now, there are new people – especially younger people – watching adult content who think that porn is free. And it’s not good.”

YouTube has an answer in the porn industry, and it’s called "Tube." Web sites like RedTube and PornHub allow users to upload and view an unlimited selection of mostly illegal porn videos for free, and it has devastated the porn industry.

The adult business, already struggling from free, user-generated porn on the Internet,  saw a 22 percent steep decline in DVD sales and rentals last year, more than twice that of Hollywood, according to a Hustler press release at the conference.

The issue hit mainstream media in December of 2007, when leading porn producer Vivid Entertainment Group filed a lawsuit against Porno Tube, alleging the site profited from its copyrighted material. Like with Napster, it made little difference.

The free sites are still wildly popular today. Alexa, a web information company that ranks the top global sites on the web by traffic, on Thursday had ranked YouPorn at #35 and RedTube at #49, both above CNN’s Web site, which was #50 and #72 Apple.com. (LINK)

The adult entertainment business was once grudgingly acknowledged as a pioneering industry that led the way for innovations later emulated by Hollywood – first to adopt video, and first to embrace the Internet, among other things. Now the adult industry is being hit hard by piracy, and what happens could be a harbinger for Hollywood.

YouTube is littered with clips from film and television, but the clips posted on adult Tube sites are far more detrimental to for-profit porn producers. That’s because viewers of adult fare are more easily satisfied by a three-minute clip than perhaps a fan of “The Dark Knight” would be by a three-minute clip from that film.

Reports on the state of the industry prompted Larry Flynt and Girls Gone Wild CEO Joe Francis to state last month that the porn business deserved a $5 billion bailout.

But while speaking at the conference at the Warner Center Marriott on Tuesday, Flynt admitted the request was ludicrous, adding that he is “anti-stimulus and anti-bailout.”“I’ve got a solution for all these companies [that are asking for bailout money]; it’s called bankruptcy,” he said.

About a year ago, it became evident that the rise of Tube sites could harm the industry in a big way. Illegal tube sites siphon content from various locations, putting it up to create traffic. Owners of these sites can make quick money by featuring advertising from dating websites or live-cam websites.

According to the Digital Millennium Copyright Act, internet service providers who host the video content but don’t create or modify it have some immunity from the federal law. A safe harbor clause included in the DMCA largely protects webmasters from being charged with copyright violations, making it difficult for adult content producers to police pirated videos.

Though those content producers could file a free copyright infringement notice with the service provider which would require their video to be taken off the third-party site, many opt not to do this or simply do not have the time and money required to track down where their pirated content is being posted. To make matters more complicated, many individuals who run Tube sites are often living in other countries, and thereby not subject to U.S. law.

Lawrence G. Walters, a lawyer who deals with first amendment issues and is a partner with the largest firm focusing on adult entertainment clients, believes it would be effective to slap some of those downloading illegal content with lawsuits, much like the Recording Industry Association of America did up until recently to try and curb illegal music downloads.

“If someone got a letter from a law firm saying ‘we know you’re downloading free porn illegally from a website,’ I bet you’d have a lot more people paying money for porn and stopping illegal usage because most people don’t want to be sued publicly for something like porn,” Walters said. “Sure, there’s sympathy for the kid who downloads a few songs in his dorm room and gets sued by some big music company, but there’s not the same kind of sympathy for a guy downloading porn in his basement.”

But others like Stephen Yagielowicz, the managing editor of XBiz, say the hype over Tubes is overblown, noting that those who visit the sites aren’t the type of consumers who would pay for content anyway.

“The porn industry likes to have its boogeymen. Right now, that’s the Tube sites. People start to buzz, ‘Tubes are killing us – where can I get a good script?’” he said.

Yagielowicz believes that a majority of the Tube sites will soon shut down because the cost of running them and paying for their large bandwidths can be up to hundreds of thousands of dollars – money that isn’t being recouped by a couple of ads.

“If people really want to make money off of porn on the Internet, they need to realize that porn is a non-essential product,” he said. “So what else can I offer you on my page? You have to monetize the eyeballs. I think a lot of the larger Tubes will start aggregating social networks and niche user communities, developing into pay sites by adding membership and adding value at an upsell.”