A Haven (??) called “San Fernando Valley”…

Who would have ever imagined that this small place in Southern California bounded by Santa Susana Mountains, Simi Hills, Verdugo and San Gabriel mountains on all sides will go on to become the home of global adult entertainment industry… an industry that was estimated to be USD 39.4 billion in 2001… yes 39.4 Billion with a ‘B’ !!

Term 8 at ISB + Access to lots of articles is a potent combination. In my quest for more knowledge (a.k.a 1 page write-ups ) I read few reports through links available in LRC. One abstract that caught my attention was Business Insight’s report on ‘Adult Entertainment’ – the oldest profession in the world. There were few statistics that startled me… 

• US market generates 30% of total adult entertainment market revenue
• 59.2% of US adult online content revenue was generated through advertising and merchandising in the US in 2001; the rest was via subscriptions 

That means… all markets other than US contribute to 70% of revenue and 40% of online revenue comes from subscription. I’m not able to piece the puzzle here. US is the largest market with UK & continental Europe coming next… that means more than 40% of the revenue should come from RoW. Ignoring Thailand, do we have a regulated market in this part of the world?

I have never seen a soul here who has spent money on buying content from primary stores or online… it is always the secondary market which ticks here… a world where everything is ‘Napsterized’.

• ‘Dude does this road lead to Pallika Bazaar?’
• ‘Hey, do you have some CDs? C’mon… You know what I’m asking for’
• ‘Boss, hmm… can you share your files? What is your share name? Is it PG99?’  

We do have well-oiled machinery for Escort Services & Magazines… but will Indians get to see TV-Ads which reads ‘1-800-Patli-Kamar’ or ‘1-800-Bali-Umar’? I doubt… but with the coverage Mika & Rakhi got when they ‘gasped for breadth’… you never know. 

For a moment… let me wear my B-School hat and act more responsibly. We were told to read parallels between industries and apply learnings & best practices… so here goes one – ‘What should Hugh Hefner’s marketing head do when he starts an adult book store in a new location?’… Answer is simple – Do what Sam Walton did best… hang a banner in the front which reads “Backdoor Bonanza” JJ 

Alright Monk… time to analyze the cost structure of these online adult entertainment companies. Adult content products are graphics intensive and therefore procurement of bandwidth should be a major element in the cost structure of any adult content site. With high traffic inflow and low ‘visitor-subscriber’ conversion rate, the initial & free ‘teaser’ pages should use much of the bandwidth.

Is there anyway to reduce this unprofitable expense?

• Derived Content – Larger firms can sell their content to smaller businesses. Smaller businesses won’t have the wherewithal to produce content.
• Increase Subscriber Inflow – Have a mechanism to share subscriber traffic across websites. This way, companies can reduce ‘visitor to subscriber’ ratio and also have more moolah for every click. If one were to get more sauve with jargons … you can call it ‘Eyeball to Action’ ratio

One way is to cut cost and do more for what you spend. Other way is to bring more revenue through advertisements. There is nothing wrong in taking 59.2% to a higher number especially in a world where there are more Eyeballs and no Action. How easy is it to retain subscribers without a constant supply of fresh content and that too when they have to be licensed from movie makers?

So the next time you hear someone ‘Yes…Yes…Yes…Yes’ on TV/ Computer please remember there are thousands of unsung heroes (read Analysts ) behind the stage who work around the clock.