Skin Trade...SFL - Feb, 2007
Sun, surf and sex draw thousands of young men and women to South Florida. That surfeit of human resources is fueling a blossoming pornography business rivaling the industry's long established hotbed of activity in California's San Fernando Valley.
"Miami is, in a sense, becoming the porn valley of the East Coast these days," says M.J. McMahon, associate publisher of the adult entertainment industry trade publication Adult Video News (AVN). "Miami is one of the cities that is the next tier after Los Angeles in talent pools."
The area has hosted at least two major pornography conventions: June 2006's industry-wide Exxotica at the Miami Beach Convention Center, and 2004's Internext, a trade show for the Internet pornography segment.
Many of the big names in the industry have a significant South Florida presence. Penthouse magazine publisher Penthouse Media Group Inc. has its CEO and a corporate office in Boca Raton. Playboy is eyeing Latin America as an untapped market. Hustler has put its eggs into mega-stores--one very prominent one in Fort Lauderdale and another along a seedy stretch of Washington Avenue in Miami Beach. They have plenty of competition from grassroots operations in the region, such as Miami startup Pink TV, whose founder aims to become an international "MTV of pornography."
Still, the adult entertainment market in South Florida goes well beyond media. The region has one of the most robust fetish and swinger scenes in the nation--both local and tourist--according to owners of businesses that benefit from it, such as retailers of fetish clothing and accessories and private clubs. One local monthly pay-for-admission party is the nation's largest they claim.
But cracking the market for information--let alone profit margins--is like pinning Jell-O to a wall. Not even the trade magazines following the industry can get exact revenue figures, and when they do they don't trust them because often the numbers are inflated.
Swingers clubs are called private for a reason. Adult Web providers, such as the highly prolific Bangbros Network on Miami Beach--see no reason to share trade secrets in what is a highly competitive, highly profitable market.
And then there's Glenn.
Glenn and his partner have transformed the national fetish scene, but he doesn't want his last name published, because, as he says, "I have another side of life and I don't want to commingle the two."
He says his store, the Fetish Factory Inc. in Fort Lauderdale, is considered one of--if not the--place to buy fetish gear in the nation, whether it be leather, rubber, costume, magazine or toy.
Glenn says he was tired of traveling to San Francisco, New York, or even Europe to find fetish fashion. So he opened the store in 1995 and started selling items on the Internet a year later.
"Basically, here in South Florida nobody had a clue what it took to be in a fetish community or to wear fetish clothes," Glenn says. "We basically first had to teach people what it was to wear latex rubber clothes as a fashion statement."
A decade later, the Fetish Factory's monthly party is the largest in the nation, attracting 750 people who pay $15 a head at the door. There were 2,000 people in their shiny finery at the store's Halloween party this year, each paying $20 at the door. Patrons come from all walks of life, with couples in their late 70's at the same party as 21-year-olds.
"It sounds ridiculous to say that South Florida has a bigger fetish scene than San Francisco or New York City, or every big city in the USA, but it's true," Glenn says.
And his customers are willing to pay for gear, as well. A rubber maid's uniform, for instance, goes for $250. Though reluctant to be exact, Glenn says the store pulls in about $1 million in revenue a year.
ON THE WEB
The real money, say those in the industry, is in Internet content, where customers pay to play in the privacy of their own homes. While the Internet changed the way consumers purchase everything from music to garage sale items, it probably had the greatest effect on the way they purchase and consume pornography. It challenged big-name magazines Penthouse, Playboy and Hustler in much the same way videotape challenged adult moviemakers during the early 1980s.
"In the way the VCR essentially changed the industry, the Internet is doing that right now," says AVN's McMahon.
For years, the major names were overshadowed by Web sites--some of the most lucrative based in Florida--shilling peaks at dorm room romps and voyeur exploits of amateur exhibitionists for big bucks. But now Penthouse, Playboy and other well-known brands are taking advantage of new technologies and cashing in on their brand names with product extensions.
Both the traditional magazines and a whole host of new-media, Internet-age companies today feature Web sites that are sleek and full of eye candy. It costs at least $2.99 a minute on most sites to talk to people willing to take their clothes off in front of Web cams. It's an even faster way to lose $50 bucks than online gambling--and there is no guarantee how long the models will take to undress.
South Beach's culture of beauty and indulgence has spawned niche companies such as Miami Beach-based Pride Studios Inc., which specializes in gay male adult entertainment via both the Web and DVDs.
The Bangbros Network, with offices in Miami Beach, is one of the nation's largest purveyors of adult Web content, according to industry sources, tapping talent among the young beautiful people preening on the beach and along Ocean Drive. The network invented adult Web-driven video that appears to be done on the spot by amateurs--such as the promiscuous housewife--in the vein of reality television.
According to Alexa Internet Inc., an Amazon.com subsidiary which tracks traffic to Web sites, Bangbros owns the 623rd most visited site in the world in the last three months, averaging 1.14 billion hits a day. Yahoo, the top site, in comparison, has 277 billion hits per day--but few of those "eyeballs" will be dropping money for Yahoo's content.
A three-day trial membership at Bangbros starts at $4.95, but that just gets you in the door. Downloading video costs on these Web sites. Chatting costs. It all costs. According to industry figures, the average monthly membership is $29.99 for most sites.
Brandon Shalton of T3report.com, a marketing intelligence company in Jacksonville, says there are 4,000 link sites on the Web that connect to the Bangbros network. That indicates "they are doing very well," Shalton says. "This format has a considerable amount of people as members. Their success is very word-of-mouth."
In 2005, according to AVN, about 20 percent--$2.5 billion--of the $12.6 billion earned in the pornography industry came from Web sites. McMahon would not even guess how much revenue Bangbros has made during the last year.
Tom Hymes, publisher of XBIZ, another adult industry trade publication, says that often private companies inflate their revenues to attract affiliate sites--other Web sites or sponsor programs--that will send Web traffic to them. As a result, it is near impossible to get a true revenue figure.
"What I do know, is a couple of years ago Bangbros got so big, they stopped taking affiliates," Hymes says. "That is an indication of a sponsorship program running on all cylinders. They are obviously making millions of dollars."
Nationwide, DVD purchases have decreased as more consumers simply download their pornography off the Internet, which analysts see as a sea change in the industry. Bangbros, however, discovered early on that it could repackage its Web content as downloadable videos and DVDs, getting twice the bang for its buck in a cost-efficient manner. "Bangbros Productions actually was successful in making that crossover in the earlier days of Web," AVN's McMahon says.
While some see Internet pornography as a get-rich-quick scheme because companies such as Bangbros make it look so easy, McMahon says start-ups have to find their niche, be technology savvy and know how to draw traffic. "People who are not profitable do not stay around because this is a very, very competitive business," he says.
A ready supply of beautiful models and actors is not the only reason the industry has thrived here, T3report's Shalton says. The legal climate is also considered, if not friendly, at least indifferent to these companies. Even though the US Attorney for the Southern District of Florida, R. Alexander Acosta, has done some saber rattling, calling pornography one of his top priorities, law enforcement has mostly looked the other way. Not so in other parts of the state, where authorities have gone after Internet pornographers. In Polk County, law enforcement arrested Chris Wilson and charged him with 301 charges for his Web site that included both amateur sex scenes and gory scenes out of Iraq for his subscribers. Shalton says North Florida is considered "a no-ship zone" for sellers of adult DVDs because of fear it will lead to prosecution of either the buyer or seller.
"North Florida prosecutors don't like porn, so you see South Florida kind of flourishing. You do kind of have this Mecca of porn," Shalton says.
Of course, sometimes the best thing to happen to a company or club is to have law enforcement target it.
One of the best examples of that is Tampa-based Voyeurdorm.com, run now by the innocuous sounding Yacht City Co., formerly Entertainment Network Inc. It set the standard for Internet porn when in 1995 two men set up a series of Web cams in a home full of young, consenting, college-age women. Subscribers paid $39.95 a month to watch the women shower, undress, and go about their daily activities.
The Tampa City Council tried to shut down the site in 1999, arguing that it violated zoning laws because the girls lived in a residential neighborhood. The case went to the 11th Circuit Court of Appeal, which sided with Voyeurdorm.com. "It was actually precedent-setting," says the Web site's co-owner, David Marshlack. "The court said it was new law; that really the end user was at their house, so how can you govern when nobody comes to the house and it all goes somewhere in cyberspace?" The city appealed the ruling to the US Supreme Court, which refused to review the case.
Voyeurdorm.com got so much publicity from the ruckus that traffic exploded. The company added servers to handle the traffic, and ended up using spare server space to host other Web sites. Fox News streamed out of the company's building. A preacher set up a prayer site.
Marshlack says he and his partner, Bruce Hammil, sold the hosting company to Chicago-based Hostway Corp. in a deal that made the pair multimillionaires, although he refused to say how much they received. He believes that Voyeurdorm.Com is still worth at least $30 million. Meanwhile, Hammil and Marshlack are expanding their adult entertainment empire, and now own eight adult dance clubs in Florida, and North and South Carolina.
THE BIG PLAYERS STAY IN THE GAME
That success has not gone unnoticed by major players such as Penthouse and Playboy magazines. All have made big splashes on the Web, but not before being schooled by the new kids on the block.
"They made serious mistakes in the beginning. They thought they could just transition their brand online [but they] really got their butts handed to them," Haynes of XBIZ says.
The learning curve is over. Penthouse's Web site, for instance, has gone from 300,000 visitors a month to 9 million during the past two years. When the company premiered its reworked digital edition in January 2006, it said "readers everywhere will no longer have to hide their Penthouse magazines under their mattress, or in their garages--ever again."
A group of private investors, PET Capital Partners LLC, acquired Penthouse Media Group Inc. in 2004, after its publisher had filed for bankruptcy the year prior. Current Penthouse Media Group CEO Marc H. Bell and Daniel C. Staton led the group. Bell says it was change or die when his group acquired the company. "The magazine was losing market share. It was losing everything," he says.
So, the bawdy days of founder Bob Guccione, who resigned in 2003, were left to the old century. He had started Penthouse to compete with Playboy in 1965, and regular features such as Penthouse Forums (which published readers exploits), became enmeshed in pop culture. Guccione made headlines in 1984 when he published nude photos of 1984 Miss America Vanessa Williams, who then resigned. He bankrolled the porn classic "Caligula," offered the Unabomber a monthly column and Monica Lewinsky a nude spread in the magazine.
Now, though, the monthly has features on rock bands, television and up-and-coming authors. "We're positioning ourselves somewhere between Maxim and Playboy," Bell says of the "lad magazine" and pornography competitor. "Our audited circulation went up 12 percent in the first six months of the year."
The company plans to launch mobile phone content in Europe, Latin America, Australia and New Zealand. Subscribers will be able to download photographs and stories. "I wouldn't recommend it while you drive," Bell jokes.
Bell is expanding with acquisitions such as the adult Web sites owned by Danni Ashe Inc. and Video Bliss Inc., for which PMG paid $3 million in November 2006. He is also exploring video-on-demand as a potential major growth area. The company acquired 400 feature films and 60 yet-to-be-released titles last April when it outbid Playboy, and others, to acquire Jill Kelly Productions.
Bell says now that Penthouse has caught up with new media in technology, its brand name will bring customers to the site. "There are a lot of Web sites out there, but not a lot of global brands," Bell says. "People usually go to brands they know and they trust."
Another well-known name in pornography, Larry Flint Publications' Hustler, is building on its brand in another way. Its Hustler Hollywood boutique is nearly a landmark on Sunrise Boulevard in Fort Lauderdale's old Peaches Records building.
Jessica Rust, co-manager of the 3-year-old store, says it sold $30,000 more merchandise this Halloween than projected. She says the dozen stores nationwide are doing well. The store referred most questions to the unresponsive corporate office in Los Angeles, but Rust says Hustler has big plans.
"We intend to open a lot more in the next year," she says. "This has been doing very well. We are lucky enough to have great vendors."
She adds that people come into the store because they are attracted to the story of Hustler founder Larry Flint, now wheelchair-bound, whose first-amendment battles in the name of pornography the film "The People vs. Larry Flint" immortalized.
"Everyone loves the movie about him. Everyone likes the Hustler brand name. It's as synonymous as Playboy," Rust says.
Playboy, as well, has at least one high-level executive living in Florida in charge of targeting Latin America. The company would not answer questions on this topic, but it, too, has made a big move on the Internet, acquiring smaller Web providers.
Entering the big leagues in a big way is Pink TV, based in Miami and Prague and known as Heat TV outside the United States. Like Penthouse and Playboy, it aims to tap into the on-demand market, but is also readying itself for a more interactive future in which customers, for example, can participate from their hotel rooms in game shows or by a push of a button have a private session with a model.
The 2004 upstart is the brain child of Miamian Jan Verleur, who says investors have sunk $10 million into Pink TV, with profits expected sometime next year and revenues jumping monthly.
"We are a mega-porn brand. Our goal is to be the MTV of porn: a more hip brand that transcends mainstream," Verleur says. "Television shows, game shows, reality TV, live voyeur, soap operas. What we do is a little different."
One of Verleur's main targets: major hotels. He says 40 percent of their customers buy some form of pornography. He hopes Pink TV will be in thousands of hotel rooms in some form in 2007. Its programming can also be accessed on the Internet, and Verleur projects 10,000 recurring subscribers, paying $29.99 a month, by the end of this year.
"We believe very strongly that in the next three or four years Pink TV will be on every media platform available: mobile devices, TV, Internet," Verleur says. "While HBO is pushing to be racier and racier, we are pushing from the opposite end, to become more mainstream."
Another player in Miami is the 50-employee The Score Group, which started publishing adult magazines in 1991, and since 1997 has done well in the DVD business. Its titles include Score, Voluptuous and a fetish magazine that revolve around seemingly unrelated body parts. A sister company publishes Looker, a mainstream men's magazine. Though editors didn't want to talk, Score's Web site advertises its "entirely self-contained" creative process, 25,000-square-foot headquarters and 3,500-square-foot studio in Miami-Dade.
MEMBERSHIP DUES
Finally, there are those swingers' clubs--yet another segment in the adult entertainment amalgam in South Florida. Think swingers' clubs involve polyester pants and side burns? Think again. Possibly the hottest thing going right now in South Florida may be these clubs.
There are three major clubs in the area: Trapeze in Tamarac, Plato's Retreat in Fort Lauderdale and Miami Velvet near Miami International Airport. The scene is so healthy that law enforcement has even accused some homeowners of opening their own private swinger's clubs.
It's a very cloistered lifestyle, so membership and revenues are kept under wraps, but Allen Markowitz, Trapeze's marketing director, says the industry "definitely makes millions, even in South Florida."
Trapeze also has a club in Atlanta, with plans to open another in Philadelphia. "It's a very lucrative business," Markowitz says. "Profits are way up."
Plato's is the sibling of the legendary New York swingers' club of the same name. The company is a family business, run by Claire Pernice, who took over for her husband, Frank, when he passed away.
Miami Velvet, which, according to state records is owned by Velvet Lifestyles Inc., boasts of 18,000 members and 20,000 square feet of "on-premise" luxury.
Markowitz says the best thing that happened to the clubs was Broward Sheriff Ken Jenne's 1999 arrest of 50 people in raids on two clubs. Charges were dropped, a teacher who had been arrested resigned--and now Markowitz says the clubs are doing gangbuster business, since people know it is safe to engage in consensual activities of all sorts within their confines.
He says South Florida is one of the "Meccas" of the swinging scene, attracting tourists and young people from the South Beach nightclub scene, who initially come to Trapeze out of curiosity. Cover prices at the 6,000-square-foot club range from $35 for a female on a week-night to $200 a year for a couple or $150 for a single male for a two-month membership.
"It's not taboo the way it used to be," Markowitz says.
The swinger scene mirrors every facet of the adult entertainment industry in South Florida, he adds: "It's exploding. Over the last two or three years people are coming out of the woodwork."
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