The Economics of Pornography Stripped Down
Globally, porn is one of the top 10 consumers of bandwidth,[1] with popular sites such as Pornhub attracting 64 million daily visitors and accumulating 5,246 centuries worth of watched content in 2016 alone.[2] However, this internet giant is hardly a household name, operating quite literally under the dim lights of taboo and the sheets of social stigma.
Unknown to many, one company has played a critical role in the mass production and distribution of sexual imagery across the globe. Commanding a near monopoly on the pornography industry through the ownership and operation of popular websites and production studios, MindGeek has been a key driving force in the mass commodification of pornography. Here we strip bare its hidden economic machinery and peep into the business’s future.
The Rise of the Monopolist
When faster internet led to a boom in video pornography in the mid-2000s, worldwide industry revenue skyrocketed to an estimated $40-$50 billion.[3] The advent of ‘tube’ websites, which aggregate millions of clips from across the internet and allow them to be freely viewed, cut this revenue by around three-quarters.[4] MindGeek was able to capitalise on this trend by acquiring many of the most popular tube websites from competitors, and now controls an estimated 8 out of 10 of the largest porn tubes, including PornHub.[5]
MindGeek’s market dominance has meant that even as the total economic pie is contracting, it has benefitted by taking an ever-larger slice. Performers may now make only a third of what they had previously.[6]
The company also uses data collected from 23 billion annual visits in 2016 to Pornhub alone to place targeted advertisements and direct traffic to porn sites which require payment,[7] taking up to a 50% cut for every subscription it generates.[8]
It is clear that MindGeek is a leech on the profitability of content producers, and one not unfamiliar to us – it is of the same species as Spotify and Netflix, which have dealt blows to the traditional music and film industry.
The Future of the Industry
Growth opportunities are scarce, given that porn is already ubiquitously available for low or no cost. Those who wish to compete with popular tubes must be innovative with product differentiation and able to stake out new market segments. For instance, Kink.com specialises in BDSM and in 2014, auctioned a cam session with a dominatrix for $42,000.[9] Such stunts highlight the lucrative nature of catering to niche audiences, given they are generally willing to pay a higher price due to low supply of the content they are after. On the other hand, increasing concern regarding the ethics of pornography have spurred demand for ‘fair trade’ porn sites such as Bright Desire, and films which treat performers with dignity. However, even with their own paywall sites, many competitors must still begrudgingly cooperate with MindGeek. Often, they must pay to place advertisements on MindGeek-owned websites to have traffic redirected to their sites, demonstrating MindGeek’s entrenched dominance and the company’s power to direct viewers where it pleases.
For now, it is hard to imagine content aggregators like MindGeek being blown off the map in the same way DVDs were rendered obsolete by internet pornography. Competitors with the greatest odds of success will likely have ground-breaking technology on their side, bringing pornography another dimension closer to real-life copulation – whether through sex dolls or virtual reality. Examples of this include a collaboration between VirtualRealPorn and sex toy company Lovense, with the objective of creating 3D pornography.[10] Further to this, with the Oculus VR headset dropping from $700 in 2016 to $449 this year,[11] virtual reality sex is more accessible to the average consumer than ever. However, despite new technology on the scene, MindGeek has kept pace with a plethora of 360º videos and stereoscopic VR content already available on PornHub.
MindGeek has designed a pornographic empire where it alone directs the flow of all valuable currency – audience attention. Consequently, only the most revolutionary entrepreneurs will wrestle back any sizeable market share.
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References
[1] Auerbach, D. (2014, October 23). There Is a Porn Monopoly, and Its Name Is MindGeek. Slate. Retrieved August 18, 2017, from http://www.slate.com/articles/technology/technology/2014/10/mindgeek_porn_monopoly_its_dominance_is_a_cautionary_tale_for_other_industries.html
[2] Pornhub Insights. (2017, February 2). Pornhub’s 2016 Year in Review. Pornhub. Retrieved August 18, 2017, from https://www.pornhub.com/insights/2016-year-in-review
[3] Naked capitalism. (2015, September 26). The Economist. Retrieved August 20, 2017, from https://www.economist.com/news/international/21666114-internet-blew-porn-industrys-business-model-apart-its-response-holds-lessons
[4] Pinsker, J. (2016, April 4). The Hidden Economics of Porn. The Atlantic. Retrieved August 18, 2017, from https://www.theatlantic.com/business/archive/2016/04/pornography-industry-economics-tarrant/476580/
[5] Naked capitalism. (2015, September 26). The Economist. Retrieved August 20, 2017, from https://www.economist.com/news/international/21666114-internet-blew-porn-industrys-business-model-apart-its-response-holds-lessons
[6] Ibid
[7] Pornhub Insights. (2017, February 2). Pornhub’s 2016 Year in Review. Pornhub. Retrieved August 18, 2017, from https://www.pornhub.com/insights/2016-year-in-review
[8] Naked capitalism. (2015, September 26). The Economist. Retrieved August 20, 2017, from https://www.economist.com/news/international/21666114-internet-blew-porn-industrys-business-model-apart-its-response-holds-lessons
[9] O’Connor, M. (2017, June 11). Pornhub Is the Kinsey Report of Our Time. The Cut. Retrieved August 15, 2017, from https://www.thecut.com/2017/06/pornhub-and-the-american-sexual-imagination.html
[10] Kaplan, D. (2015, July 11). Virtual Reality Porn And The Future Of Loneliness. TechCrunch. Retrieved August 21, 2017, from https://techcrunch.com/2015/07/11/virtual-reality-porn-and-the-future-of-loneliness/
[11] Tomlinson, S. (2017, August 15). Virtual Reality: Cost of viewing headsets goes down, number of experiences goes up. Retrieved August 20, 2017, from http://katu.com/news/local/virtual-reality-cost-of-viewing-headsets-goes-down-number-of-experiences-goes-up