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from www.businessweek.com – It’s not quite make-up sex, but two of the more prominent names in the pornography business have announced an amicable end to their bitter legal fight. The truce follows the arrest on tax charges of the head of one of the combatants.
In November 2011, Manwin, the Luxembourg-based 800-pound gorilla of online sexually explicit entertainment, sued ICM Registry, an upstart in Palm Beach Gardens, Fla., alleging antitrust-law violations. Manwin operates a network of sites with names like YouPorn.com, xTube.com, Pornhub, and Brazzers. It also manages online content under the Playboy trademark and runs Playboy TV worldwide. The company has 1,000 employees and claims that 70 million unique viewers visit its sites every day.
ICM, a much smaller outfit, operates the top-level domain name “.xxx,” an alternative to “.com” designed specifically to showcase pornography. As Bloomberg Businessweek reported in a cover story last year, Manwin accused ICM in federal court in Los Angeles of “monopolistic conduct” and “price gouging,” allegations ICM denied.
Specifically, Manwin said that ICM, owned and run by a British former fax-machine mogul named Stuart Lawley, seeks to squeeze out porn purveyors using the familiar “.com” domain. The suit predicted, among other ills, that an “economic phenomenon of ‘network effects’” will kick in imminently: “Users expecting to find adult content on sites associated with ‘xxx’ will migrate to the .xxx top-level domain, attracting more providers, in turn drawing more users, in turn again attracting yet additional providers, and so on.”
Manwin’s nightmare scenario is exactly what Lawley dreams of achieving with his small company—and he has already attracted thousands of customers running adult sites with the .xxx suffix—but he scoffs at the notion that ICM would attain an unlawful stranglehold on the multibillion-dollar porn marketplace. “That claim just never made any sense,” Lawley says in an interview. “We just want to help producers make more money from more adult sites.”
Now, 17 months later and after hundreds of thousands of dollars expended in legal fees on both sides, Manwin and ICM have agreed to drop their spat. The settlement is an odd one in that Manwin is walking away without ICM agreeing to pay it any money directly. Instead, ICM has said it will offer discounts on .xxx domains to adult-content producers who sign up during the month of May.
“One of Manwin’s key motivations was to make .xxx pricing lower and more competitive,” Manwin said in a press release. Beyond the May special on hard-core websites, “ICM will run similar price promotions in future years as well,” the Manwin release added.
For its part, Manwin conceded that it would now allow content from or advertising for .xxx sites on Manwin’s highly popular websites — a potentially significant breakthrough for ICM. All in all, the settlement looks pretty favorable for ICM, the underdog seeking a niche in the highly competitive world of porn.
Why would Manwin at first move so aggressively to try to stamp out a smaller competitor and then back off with so little to show for its efforts? Manwin spokeswoman Kate Miller did not immediately return a phone call seeking an answer to that question.
One possibility is that Manwin’s top management has more pressing concerns than Lawley’s little Internet shop. Last December, Fabian Thylmann, a German native who heads Manwin, was arrested in Belgium on suspicion of tax evasion. He was then extradited to Cologne, Germany, where prosecutors said Thylmann did not contest the extradition. According to European press reports, Thylmann has denied that he avoided taxes and maintains that he was merely minimizing his tax liabilities in a lawful manner.
While Thylmann sorts out his tax situation, he may not have had enough bandwidth to deal with the antitrust fight he started in the U.S. One senses, though, that this is not the last time that Manwin and ICM will collide.