Colorado- Skip the seedy Southern California movie studios and the annual adult-entertainment convention on the Las Vegas Strip.

To gauge the pulse of pornography, just peel back Colorado’s high-tech skin. You’ll find a half-dozen companies making hundreds of millions of dollars peddling X-rated movies into households and hotel rooms across America.

Some of the companies aren’t necessarily in the adult-entertainment business, and they don’t actually make the movies.

But they do allow millions of consumers to watch the films – in the privacy of living rooms across America.

From “pay-per-porn” movies to credit-card processing for adult Internet sites, these Front Range firms are tapping an adult-entertainment boom that generates up to $10 billion annually in the United States alone.

While two smaller Colorado companies – New Frontier Media and On Command Corp. – are among the leaders in adult-film distribution, some larger Denver-based firms also are feeding off the flesh.

They include Adelphia Communications Corp., EchoStar Communications Corp., First Data Corp., UnitedGlobalCom Inc. and Liberty Media Corp., which is run by cable magnate John Malone.

Adult entertainment by the numbers $10 billion: Estimated value of the adult- entertainment business annually in the United States

40% How much adult entertainment can account for in revenue from “on-demand” offerings, which include pay-per-view sales as well as services that allow consumers to choose movie start times

$4 billion: Estimate of how much adult movie rentals and sales generate annually

$9 and up: Typical price per adult movie charged by a pay-TV provider

• $3 or $4: Typical pay-TV price for theatrical movies

Adult material represents a growing – and in some cases significant – part of these businesses. But don’t expect to hear it from them.

“These companies very much keep it below the radar screen,” said Michael Goodman, a cable- and satellite-TV analyst with the Yankee Group in Boston. “But when push comes to shove, adult content can be the difference between making money and losing it. And right now, there’s an awful lot of money being made on it.”

Why the concentration of companies in Colorado? Chalk it up to Colorado’s strong high-tech foundation, its history as a cable- and satellite-TV hub and a technology evolution that has made it easier to deliver adult material directly into homes and keep it away from children.

But some community groups and family associations say pornography has no place in corporate America, let alone in the living room.

And sex on TV has become a hot-button issue in light of the high-profile Janet Jackson incident during the Super Bowl, which led the federal government to intensify its focus on television programming.

From prostitution and peep shows to X-rated magazines and strip clubs, sex has been big business for centuries.

In more recent times, adult entertainment, specifically sexually explicit movies, has rapidly moved from dilapidated downtown movie theaters to households, hotel rooms and computer screens.

The profitability of pornography has helped fuel several now-ubiquitous consumer technologies such as VCRs, DVDs and the Internet.

Early demand for VCRs, for instance, came from consumers who wanted to watch sexually explicit movies on their own TVs.

“The reality of it is that adult entertainment has been a driving force of most technological advances we’ve seen on the consumer level,” said Dennis McAlpine, an entertainment analyst with McAlpine Associates in New York. “The format may have been invented for other reasons, but the end product was really fueled by adult entertainment.”

Perhaps the biggest change during the past few years: Technology has made it possible for millions of Americans to access adult material through the Internet or on TV screens – without the surreptitious trip to the seedy sex shop.

“Basically it used to be people putting on sunglasses and a hat and sneaking down to the corner movie store,” said Eric Wold, an entertainment analyst at Merriman Curhan Ford & Co. in San Francisco. “What you’re getting now from a consumer standpoint is a big shift from where you have to purchase adult movies.”

Playboy made the first major push two decades ago toward delivering adult content directly to U.S. homes via the television. Now, all the leading cable and satellite TV providers – including EchoStar’s Dish Network, DirecTV, Comcast Corp. and Adelphia – offer such content.

Consumers can order movies and even monthly subscriptions to networks with names like Spice and Pleasure. Not only has the number of channels grown, but the explicitness of the content has rocketed as well. Some channels edit out the particularly graphic fare, while others leave little to the imagination, showing all types of sex scenes.

The expanding boundaries of what’s acceptable stem from the transition in recent years from analog to digital TV systems, analysts say. Digital TV allows cable and satellite firms to prevent “bleed-through,” or lapses where consumers can still get sound and even images from scrambled channels.

Other technology that lets consumers block programming using passwords and codes also has contributed.

“Cable and satellite operators have become more comfortable distributing this type of content as security around it evolves,” said Ted Henderson, a cable- and satellite-TV analyst with Stifel Nicolaus & Co. in Denver.

Scroll through the on-screen programming guides in hotel rooms or on pay-TV systems and you’ll find ample evidence of adult entertainment’s rise.

Movies with such titles as Private Passions: Erotic Wishes, Peep Show Special 6 and Real Wild Girls on Spring Break are listed way below Nickelodeon’s SpongeBob SquarePants, CBS’ Survivor and other pay-per-view movies such as Lost in Translation.

More likely than not, the adult movie options are made possible by at least one, and sometimes several, Colorado companies.

Douglas County-based satellite-TV provider EchoStar, which runs Dish Network, and Colorado cable firm Adelphia have contracts to air numerous adult movie channels to their millions of subscribers. Comcast Corp., the Philadelphia cable company that provides service to 680,000 customers in Colorado, also offers several adult channels.

Douglas County-based Liberty Media has a large ownership stake in Denver- based UnitedGlobalCom, which provides cable programming – including adult entertainment – in Europe, Asia and Latin America.

Liberty also owns Denver-based On Command Corp., which provides entertainment systems to nearly 900,000 hotel and lodge rooms nationwide. In addition to pay-per-view movies, video games and Internet services, On Command pipes adult movies to some of the largest hotel chains, such as Hilton and Marriott.

On the Internet side, Greenwood Village-based First Data Corp. controls a $1 billion porn and high-risk merchant portfolio, according to a recent report in Forbes magazine. One of the company’s subsidiaries, First Financial Bank, is a leader in processing credit cards for adult Web sites.

Much of the racier TV content can be traced to a company in Boulder, a decidedly unlikely place for an adult entertainment company. Tucked away in an unassuming office campus on the northeastern edge of town sits the headquarters of New Frontier Media Inc., one of the nation’s primary providers of adult movies for cable and satellite TV operators.

With more than 100 employees and stock that trades on the Nasdaq, New Frontier owns a subsidiary, Erotic Networks, which supplies a half-dozen adult channels to millions of U.S. households.

The company buys programming from third parties and sells it to some of the largest cable and satellite companies in the country, including EchoStar, Cox, Comcast and Time Warner. Founded in 1995, New Frontier has quietly built a viable business off an industry most investors shy away from.

New Frontier executives declined several interview requests for this story, but the company’s financial accomplishments speak to the rise in adult entertainment:

• Its stock, although volatile the past few years, has rocketed from 65 cents a year ago to nearly $8. At one point early this year, it hit a high of $11.40.

• The company has posted four consecutive profitable quarters since transitioning its business away from the Internet in 2002 and toward pay-TV.

• During its third quarter, which ended Dec. 31, 2003, New Frontier’s pay-TV group’s revenues grew to $10 million, a 47 percent spike over the same period the previous year. Revenue specifically from cable, satellite and hotel services jumped 72 percent.

The other main content provider to cable and satellite TV firms is Playboy. Playboy’s entertainment group, composed mostly of pay-per-view and TV subscription revenues, represents the largest portion of the company’s operating income, according to documents filed with the U.S. Securities and Exchange Commission.

Combined, New Frontier and Playboy made more than $160 million in sales last year from adult programming offered through cable- and satellite-TV providers and hotel chains.

“You take New Frontier’s revenues and combine them with Playboy’s and you can see how big this is,” said Merriman Curhan Ford & Co.’s Wold, who follows New Frontier. “I think that number will be growing every year as more and more households have access to this content.”

But that’s just a fraction of the money being made in the TV world on adult entertainment. Cable- and satellite-TV companies, as well as hotels, make much more.

Exactly how much is anyone’s guess. Cable and satellite companies don’t break out revenues by programming genre, much less by adult content.

And few of these companies are willing to talk about it publicly, given the sensitivity of the issue and some community opposition.

“For a lot of these companies, there’s a real difference between the boardroom and the bedroom,” said Fred Lane, author of Obscene Profits: The Entrepreneurs of Pornography in the Cyber Age. “They don’t want to necessarily be in bed with the adult industry; they want to make money off it.”

Still, there’s no doubt such programming has a direct effect on the bottom line. And it’s growing.

Adult-movie rentals and sales generate an estimated $4 billion annually, and estimates for the pay-TV share of that market range from a few hundred million dollars to more than $1 billion.

Either way, adult entertainment can account for as much as 40 percent of revenue from “on-demand” offerings, which include pay-per-view sales as well as services that allow consumers to choose movie start times, according to research firm In-Stat/MDR.

The profit margins are huge. Pay-TV providers charge $9 and up per movie – more for a block of channels for several hours – compared with $3 or $4 for movies such as Lord of the Rings.

For a company such as EchoStar, which generated $5.7 billion in revenue last year but showed earnings of just $224.5 million, profits from adult entertainment can be significant.

A cable or satellite company can obtain adult content for much less than for major motion pictures. The average low-grade adult movie might cost tens of thousands of dollars to make, while theatrical releases cost tens of millions.

Cable and satellite TV companies, therefore, pay a much smaller cut to suppliers and reap the benefits of a high profit margin.

Analysts estimate that cable- and satellite-TV providers keep 80 percent or more of the revenue from adult entertainment – a profit margin that makes most businesses salivate.

Aside from revenue generated when a consumer orders an adult movie or channel subscription, adult fare can help providers get customers in the first place.

“There are some customers whose choice of platform is somewhat determined by adult content, so it isn’t just revenue from adult movies, it is also from the platform,” said Matthew Harrigan, an analyst with Greenwood Village- based Janco Partners.

Adelphia, for instance, said it fell behind competitors partly because its founder, who is on trial for fraud charges in New York, was opposed to adding adult channels. The Greenwood Village- based cable company, which is in Chapter 11 bankruptcy protection, quietly added adult channels to many of its markets last year.

“It is another type of programming that a segment of our subscriber base wants to have,” said Judy Meyka, Adelphia’s senior vice president of programming. “We realize it’s sensitive, so we don’t actively promote it. The channels we offer are all pay-per-view, so the only customers who pay for it are those who want to watch it.”

In the age of heated competition between satellite- and cable-TV providers, profits from adult entertainment are hard to overlook.

Hotels also have found porn to be a profitable business. Adult movies can generate up to 80 percent of a hotel’s in-room entertainment profit, analysts say.

That often amounts to more than the sale of the Jim Beam and merlot bottles in the mini-bar.

The concentration in Colorado of large companies making money from adult entertainment is not surprising, analysts said.

After all, the state has a solid high- tech industry and is home to several content providers.

“It’s a function of Colorado’s competence in media distribution and technology; it has nothing to do with any underlying porn industry,” Harrigan said. “These are legitimate companies that deliver and get involved in content. I think the proliferation of this is more around the security side than anything else, and generally these companies have been good citizens in their markets.”

But not everyone sees it that way.

When Adelphia announced plans to offer adult channels two years ago, for instance, it met opposition in some smaller cities. Residents of Ironton, Ohio, sent more than 800 petitions demanding the company pull back on plans to introduce the channels in their community. Adelphia still went ahead as planned.

While those instances are rare, some religious and family groups vocally condemn the programming.

In 2002, two such groups, the National Coalition for the Protection of Children & Families and the Religious Alliance Against Pornography, asked consumers to send protest letters to General Motors over the adult content offered by the company’s subsidiary DirecTV.

The groups ended the protest last year when Rupert Murdoch’s News Corp. made a bid for DirecTV, thanking General Motors “for getting out of the pornography business.”

“We believe that adults have a right to view what they want, but we also believe the distribution of this material is not helpful in a manner that contributes successfully to the traditional family,” said Jack Samad, senior vice president of the coalition.

Cable- and satellite-TV companies argue that technological innovations have made it possible to block adult movies, and even titles in on-screen programming guides, by using passwords and codes.

The companies also say they offer adult content on a market-by-market basis, taking into consideration the dynamics of each community.

“You could call it another genre along with sports, science fiction, women’s and children’s programming,” said Mike Paxton, an analyst with In-Stat in Phoenix. “There is demand for adult programming around the country, and judicial and societal norms approve of that content to an extent. These companies pay attention to the way the cultural winds are blowing.”

The enhanced security measures and company awareness of the problem have allayed some concerns.

The national children and families coalition, for instance, recently applauded the cable industry’s recent push to educate parents on how to block channels.

Some companies appear to be reconsidering their involvement in the adult entertainment business.

“We process for a diverse base of merchants, but we don’t believe there’s enough benefit from this type of business for our shareholders and employees in the long run,” said Staci Busby, a spokeswoman for First Data, which has a large portfolio of Internet adult Web sites in its credit- card transaction business.

Still, with the right security measures in place, some analysts say adult entertainment serves a valid market.

“We always go right to the family,” analyst Henderson said. “But in fairness, there are millions of single people living alone, to which bringing this into the home is a much better alternative to other venues in the past.”