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Forbes Talks to Steve Hirsch, Ali Joone About Tube Sites

BURLINGAME, Calif. — from www.forbes.com – You would think that if anyone were making boatloads of money from Internet video, it would be high-traffic porn sites. You would be wrong.

“Tube sites”–adult content Web sites that mimic YouTube in hosting everything from professionally made videos to user-generated clips–have quickly risen in popularity since they came onto the scene a few years ago, and rank among the highest traffic-getters globally. Some, like Youporn and Pornhub, attract more views than the Web sites of The New York Times or Apple ( AAPL – news – people ). But like YouTube and other video-sharing sites, tube porn sites have struggled with profitability and piracy.

“Tube sites have become part of the adult landscape now,” says Steven Hirsch, co-chairman of prominent adult movie studio Vivid Entertainment. “But when all of this adult content is free, how do we get people to go from free to pay? It’s the same problem a lot of Web applications are going through, like Twitter, Facebook and MySpace.”

Five tube sites–including Youporn, Pornhub and RedTube–are among the top 100 Web sites in the world, according to web analytics service Alexa.com. Vivid.com, which charges for its content, is ranked 12,718.

Like YouTube, tube porn sites rely mainly on advertising revenue. In 2007, Hirsch was contacted by someone who said he was a founder of Youporn and was interested in selling the site to Vivid. At the time, it was only pulling in $120,000 a month from ads.

“Bottom line: We didn’t want that business,” Hirsch says. “They were hardly generating any money back then. Now, I still wouldn’t bet that they are as profitable as one might think.”

Reflecting the legitimacy tube sites have started to achieve, a tab for Vivid’s premium content can be found on Youporn. Launched in 2006, PornoTube is owned by the Adult Entertainment Broadcast Network (AEBN), a large Internet pornography company. AEBN views the site not as a profit-maker, but as an attention-grabber. “PornoTube isn’t a piggybank–it’s a portal,” says AEBN Marketing Director Suzann Knudsen.

In 2008, Vivid dropped a lawsuit against PornoTube for copyright infringement after the site made efforts to clean up its content. Hirsch says PornoTube is now one of the tube sites Vivid is working with “to develop business models … that will be mutually profitable.” Profitability is a huge concern to studios, since pornography has not proven recession-proof in this climate of “free.” DVD sales are especially hard hit.

But increasing the percentage of viewers moving from free to pay won’t be easy. Hirsch estimates that the ratios of users willing to pay for content who type in “Vivid.com” are between 1 in 200 and 1 in 400, while those for users on tube sites were somewhere around 1 in 8,000 to 1 in 10,000.

And there are still lingering concerns over piracy, unchecked by the less-than-reputable sites that regularly pop up and attract viewers with stolen content. Ali Joone, founder of the porn studio Digital Playground, estimates that as much as 99% of content on some tube sites is pirated, much of it uploaded by the tube- site owners themselves.

“They let you believe that there are all these users that are uploading the pirated clips,” says Joone of the tube sites. “It’s not them, it’s the owners.”

Digital Millennium Copyright Act takedown notices are the current recourse for studios that find their copyrighted content on sites where they shouldn’t be. Vivid has two full-time employees dedicated to scouring the Internet for pirated material, and says it sends some 700 DMCA notices out per month. But that doesn’t necessarily help.

“The tube sites don’t really take the pirated content down,” says Joone. “They change the name of the video and put it somewhere else.”

Some see tube sites that abuse copyright as either outliers or unsustainable. “I don’t see where the money is in uploading pirated videos to a free site,” says Sarah LoPrinzi, market research director for XBIZ Research. “Are you going to brand it with a logo? It’s not going to last. Chances are, someone is going to say ‘cut it out’ at some point.”

PornoTube’s Knudsen agrees. “Why would we give anything that substantial away? It would be like shooting ourselves in the foot.”

And as tube sites settle somewhat uneasily into the landscape of Internet pornography, the industry that was once ahead of the curve in innovation finds itself, for once, waiting on the mainstream for cues. Many in the industry are looking towards the outcome of the lawsuit media conglomerate Viacom ( VIA – news – people ) launched against Google’s ( GOOG – news – people ) YouTube in 2007 for copyright infringement.

What would adult studios like to see happen? Says Vivid’s Hirsch: “It would be great if tube sites were made liable for any copyright infringement–and not just this 24-hour notice, which requires constant monitoring.”

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