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II)C)1: Why Betamax vs VHS was the wrong question, and is still giving us wrong answers.

[Image removed at Mr. Edelman's Request]
Harvard Economics Professor Benjamin Edelman

Last winter, Harvard economics professor Benjamin Edelman published a paper entitled “Red Light States: Who Buys Online Adult Entertainment?” in the Journal of Economic Perspectives. Prof. Edleman hoped to point out the sexual hypocrisy of the “red states” by showing that credit card records suggest states like Utah are more enthusiastic consumers of online pornography than residents of bluer states.

To me, Professor Edelman’s paper read like the typical sort of “adult-entertainment” piece I’ve come to expect at the New York Times, or Time Magazine, or the AP—a recitation of unsourced “facts,” flights of fancy, and bizarre conclusions. But because Prof. Edelman made the mistake of publishing under the rubric of research rather than journalism, his paper came under far more scrutiny than the average New York Times piece. Edelman’s paper was widely criticized for the sloppiness of his methodology, including by me.

To my mind, the most damning defect in Prof. Edelman’s paper was that he was apparently completely unaware of things like the fact that in Utah, law enforcement routinely intimidates retailers who might otherwise chose to carry sexually explicit DVDs, or that the entire state of Utah is on almost every DO NOT SHIP list that mail-order vendors maintain; and Edelman’s conclusions about the cultural meaning of the credit card records he used in his research (Red Staters love their online porn!) were made in utter ignorance of the fact that for many Utah residents, online access is the only easy access they have to sexually explicit material. 

But it was this passage from the introductory section, Why Study Online Entertainment? that jumped out at me:

For economists, the adult entertainment industry offers several aspects of interest. On the production side, for example, the adult entertainment industry has repeatedly proven to be among the first to adopt new imaging technologies. For example, Johnson (1996) concludes that adult videos spurred early purchases of home video cassette recorders. More recently, as studios evaluated competing high-definition DVD formats HD-DVD and Blu-ray, at least some studios chose Blu-ray upon observing that adult studios favored that format (Mearian, 2006). Looking back, adult entertainment was an early adopter of a wide variety of image-related technologies—including ancient sculpture (Diver, 2005), the book (Moulton, 2000), and the photograph (Loth, 1961). (Emphasis mine, link to citation mine)

Of course now we have the benefit of hindsight. We know that Blu-Ray won out over HD-DVD, even though the licensing restrictions and production costs are much higher than they are (were) for HD-DVD. We also know that back in 2006, the “adult industry was was overwhelmingly choosing HD-DVD precisely because the licensing and set-up costs are prohibitively high for  producing Blu-ray discs for titles that sell (on average) only a couple thousand copies.

So how did this assertion that “studios” (Dreamworks? Warner? Disney?) were holding back, waiting for pornography to decide the format war find it’s way into Edelman’s paper? Well first lets look at the passage that actually quotes a human being in the Mearian article:

Ron Wagner, director of IT operations at E! Entertainment Television Inc. in Los Angeles, said his company has already chosen the Blu-ray Disc format, in large part because of talk in the porn industry favoring it over rival HD-DVD.

Wagner said that while attending last year’s National Association of Broadcasters (NAB) annual conference in Las Vegas, more than one panel discussed “several major players in the porn industry going the Blu-ray route.” He said the rivalry between Blu-ray and HD-DVD was also the buzz around NAB 2006 last month.

“If you look at the VHS vs. Beta standards, you see the much higher-quality standard dying because of [the porn industry’s support of VHS],” he said. “The mass volume of tapes in the porn market at the time went out on VHS.”

That’s right, it’s Ron Wagner, of that Hollywood heavy-hitter,  E! Entertainment Television. He was at NAB and there was a panel and they talked about porn. There’s our lede.

I don’t know what it says about us, this ease with which these sorts of “facts” find their way into our culture – into our flagship newspapers and magazines, into the research papers of Harvard B-school professors. My wife calls it the “Lex Luthor Effect,” our collective need to imagine vast shadow economies, with luxurious underground palaces filled with stolen antiquities and artworks; or to imagine widespread satanic cabals, operating daycare centers to cover their ritual sexual abuse and murder of children; or jizzilionaire porn magnates, tipping the scales this way and that, as suits their diabolical plans.

It’s a funny idea, but it does explain this bit on PBS.org where they’ve published (with a straight face), “[The porn jizzilianaires] don’t want the notoriety of how much money they’ve made. That’s why you don’t see most of them running around in the Rolls they keep that in the garage and take out on weekends.”

It would also help to explain why we hear over and over again, in mainstream media outlets that porn is bigger than major league sports, bigger than television, bigger than the aerospace industry, one of the biggest industries in America, one of the biggest industries in the world! Of course Steve Jobs and Bill Gates and Michael Eisner are sitting back, waiting for Larry Flynt and Steve Hirsch to decide the Blu-ray vs HD-DVD question!

Naturally, all of these assertions are made with provisos and prevaracations. In 2005, when I asked Time Magazine’s Richard Corliss where he got his $52B/year figure, he said he got it from CBS. In 2007, when I asked the New York Times’ David Cay Johnson where he got his $13B/year figure, he said was just reporting what AVN published, and figures are hard to come by.

But not impossible. From my 2005 post, The Porn Monster:

  •  Deep Throat was produced in 1972 on a budget of about $25,000. Adjusted for inflation that’s about $125,000. You can probably count the number of porn videos that will be produced this year with similar budgets on one hand.
  • 99% of porn is shot on video cameras that cost about $3,500 on cassettes that cost about $3.
  • Nearly all other forms of shot-on-video entertainment use cameras costing $35,000-$100,000. Film cameras cost as much or more, and film costs about $1/second. There’s a reason that mainstream entertainment can afford this expense and porn cannot, and it’s not because they’re putting the difference up their noses.
  • Jenna Jameson is regarded as the most mainstream and successful porn actress ever; the pinnacle of success in her business. How does her financial success and respectability compare with someone at the pinnacle of success in any other area of the entertainment industry? In other words, how many porn stars have mansions in The Hamptons? (Answer? Zero.)

Some more facts:

  • The Screen Actors Guild (SAG) represents 110,000 actors
  • IATSE represents 120,000 people working in the film, television, and theatrical trades.
  • The Directors Guild of America represents 14,000 people.
  • There are over 700 players on the rosters of Major League Baseball: minimum salary, ~$700,000; average salary ~$3,000,000; top salary, over $15,000,000 annually.
  • For the last several seasons of the NBC television show Friends, the cast members were paid $1,000,000/per episode, each.
  • Based on the Adult Industry Medical Foundation’s (AIM) testing data, there are somewhere between 1,200-2,000 performers working in the mainstream straight adult industry (producers and performers who avail themselves of AIM’s HIV testing.) The average time in the industry for these performers is estimated at about six months, with per scene rates running between $300 and $1,500 depending on the acts depicted and the demand for the performer.

I do think the shift from Elk’s lodge smokers to theatrical distribution was hugely important in the evolution of the art and business of the erotic image; The Opening of Misty Beethoven couldn’t have happened without it.

And the shift from theatrical to home video was no less significant. But I think the only significance of the VHS vs. Betamax question is that it gave (and continues to give) the impression that the “adult entertainment industry” is some huge, highly lucrative enterprise; a great behind the scenes puppet master. As I said after my conversation with David Cay Johnston:

Looking from the outside, the existence of titles like DIRTPIPE MILKSHAKES (volumes 1 and 2) lends credence to this idea. After all, if a $13B/year industry is making dozens, perhaps even hundreds titles a year devoted to such exotic sexual interests as women eating semen out of other women’s anuses, then certainly there must be something out there for people with more pedestrian tastes – things like convincing, well-crafted depictions of mutually pleasurable sex.

But while there’s no shortage of anal creampie themed videos, gaping anus themed videos, and other things too unsavory to mention on this blog, finding well-crafted sexually explicit films that convincingly depict mutual pleasure is all but impossible. As I said to Stacy Grenrock Woods in Esquire a couple of years ago, it’s easier to find a well-made fishing show than a well-made sex film.

Porn’s supposed to be this multi-billion dollar a year business, so big and dangerous there’s an entire department at the DOJ devoted to it; and it churns out thousands and thousands of titles each year, seeming to serve every niche fetish—but it can’t seem to serve the widespread and basic desire that many people have to see a well-crafted depiction of two people who really seem to be enjoying having sex with each other.

People know in their gut something’s not right. People know there’s a disconnect. People know that what they want to see isn’t some specialized niche, it’s a basic human desire. Yet it goes unserved.

The restrictions on the distribution of erotic images (as in, you won’t be able to find MATT AND KHYM at Walmart, Blockbuster, etc.) has restricted the business to making money in a very few, and not especially lucrative ways. Porn margins are razor thin, and the result is that “the industry” vastly overserves niche sexual interest markets, where issues of production quality, or even simple honesty in packaging will be overlooked, while it vastly underserves sexual interests with broader appeal, but much higher expectations.

The combination of the digital video revolution and the internet has removed virtually all barriers to entering the market. These days, any idiot with a BestBuy credit card can make and market porn, and that’s just what’s happened. And anyone who’s taken a high school economics class knows what happens when too much supply chases too little demand.

(Side note, since that post our films have been listed at Blockbuster and Amazon, and that’s helped us avoid getting dragged down by the general collapse of the “adult market”, and most especially the implosion of the market for narrative-base sexually explicit films.)

So when I say Betamax vs. VHS is the wrong question, what I mean is that it doesn’t matter. Whichever format might have prevailed and for whatever reason, the future of sexuality and cinema took a decisive turn when it moved from a high risk, high expectation, high volume, high reward production and distribution format (theatrical) to a low risk, low expectation, low volume, low reward distribution format (home video).

Home video would utterly change the creative and business calculus both; replacing the need and potential reward of producing a film that could be enjoyed as a collective experience in communion with fellow audience members, with the much more fragmented task of producing erotic material that would be enjoyed in private. 

And where adult performers from the “golden age” might have only appeared in several dozen titles, a newcomer in today’s “adult industry” might rack up that many appearances in a few months in the business.

But as this need (and opportunity) for a much higher volume of production was beginning to strip away cinematic pretenses and pushing the industry toward unvarnished, self-contextualized depcitions of sex acts (this is a video of two people paid to have sex in order to make a video of two people having sex) it was also setting in motion the last significant confrontation between the camera, explicit sex, and the First Amendment.

Next up: California vs. Freeman: The revenge of the magic camera: How illegal actions become constitutionally protected speech.

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2 Responses

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  1. Tony,

    You describe what I told you several years back incompletely, giving a false impression.

    What you left out is that I said that the AVN numbers I cited in The New York Times (from which I have since retired) were about $900 million or 7.5% higher than those used by a critic of the porn industry — Jerry Ropelato.

    When we spoke you had some interesting theories as to why the $12.9 billion AVN figure is too high, but no hard data. From what you posted able it looks like you continue to lack hard data.

    I also told you that other reputable journals had relied on the same data on the porn business, which my piece broadly defined to include much more than videos.

    I also went to the best sources I could find in the hours I worked on the piece to locate and include data that was independently issued and cited them in my brief, 730-word piece.

    One set of numbers that seemed reliable were from on-demand cable video services, since these charges were run through cable companies and hotel billings. I quoted Kagan Research on this data, including the fact that hotel room porn was growing at half the rate of hotel room movie billings overall.

    I also cited data from the only publicly traded company in the business, which by law must provide accurate data to the SEC and investors. It showed a 25.1% growth in same store sales year-over-year, which ran counter to the flat sales AVN reported for the industry overall.

    A question to ask is what share of the porn industry, broadly defined, comes from sales of on demand videos charged through cable companies and hotels. If it is 4% then the industry would be $13 billion or so. If 10%, it would be $5.5 billion.

    So while it is true that I said data is hard to come by (as I wrote in my article), you fail to note that I had taken care to check out the AVN and Ropelato figures by examining hotel video revenues and the SEC data on Rick’s Cabaret.

    Also, at almost $13 billion, porn would NOT be –as you claim above — one of the biggest industries in America. Indeed, $13 billion equals less than a tenth of one percent of GDP or less than $1 of every $1,000 of economic activity. Like Hollywood movies, porn is a tiny enterprise compared to the economy as a whole.

    There is a reason that news organizations rely on attribution — and why I have long been among my peers a well-known critic of the excessive and abusive use of of unnamed sources and data without clear attribution. The $12.9 billion figure may be wrong, but it was attributed — and then checked and cross checked.

    My piece ran with a chart breaking down what AVN estimated the numbers to be, available at
    http://www.nytimes.com/2007/01/04/business/media/04porn.html

    On the basis of the hard data (from Kagan and the SEC) that did exist, I had no basis to fundamentally attack the figures from AVN and Ropelato, only to include cautions to readers like “may” and “accurate numbers are hard to come by.”

    But I did attribute and I also took the initiative to find independent numbers, as my article shows.

  2. Tony Comstock said

    Hello David, and thanks for coming by the blog!

    I’m sorry you feel I’ve mischaracterized our conversation and am happy to be able to offer you the chance to respond in the comments here!

    What I would say in response to you data, is that I think you’ve over extrapolated from the Hotel and Cable sales and Ricks Cab SEC reports; and I would offer a gentle push back on the idea that I haven’t offered any data.

    The union rolls are data. MLB salaries are data, (as are the multi-million dollar stadiums built to attract major league sports franchises) The number of people who pass through AIM’s testing facility is also data.

    If we can get relatively reliable data for the industries to which Paul Fishbein makes comparisons (from your article “Mr. Fishbein’s estimates indicate that for every dollar Americans spent buying tickets to Hollywood movies last year, they spent about 90 cents viewing sex movies in various formats.”) and then compare union rolls, equipment, quality of product, etc. we can make some not unfounded inferences; or at least no less founded than the inferences you’ve made looking at Rick’s SEC filing.

    As far as the “…biggest in the nation! Biggest in the world!” I thought that was pretty clearly a hyperbolistic flourish (not that I haven’t heard lay people say just these sorts of things, and then tell me they read it in The New York Times.)

    RE: Reputable source printing the same data

    I would invite you, as I did back when we chattd a few years ago to read these two links from Forbes Magazine:

    http://www.forbes.com/2001/05/25/0524porn.html
    http://www.forbes.com/2001/05/25/0524porn_2.html

    But more than anything I want to thank you again for taking the time to come and comment. It is very much appreciated!

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