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From AEE 2011: Adult Industry Another Victim of Recession as Tale of the Shrinking AEE Show Unfolds

from www.lvrj.com – Add adult entertainment to the list of industries trying to figure how to rebound from recession.

With the video makers already being stung by piracy and free websites, the economy dealt a further blow by forcing people to slash discretionary spending. The fallout was visible Friday on the shrunken exhibit floor of the annual Adult Entertainment Expo that had 171 booths, four more than last year yet well below the more than 200 typical at mid-decade.

Many of the exhibitors showed an array of exotic toys, while strippers demonstrated poles and modeled black pieces of clothing that have made the expo a cult hit. But at least some of the companies paid more attention to new technology and more mainstream marketing approaches.

Much like Las Vegas real estate, porn went through a bubble that started deflating about three years ago. “In the early and mid-2000s, sales and profits kept going up all the time and seemed like they would expand infinitely, said Steve Javors, managing editor of the trade publication AVN Media Network. “But it had to come to an end and it did. The glory days of huge profits are gone and I don’t know if they will return any time soon.”

Although numbers are hard to come by in an industry populated by private companies, exhibitors agreed that many video companies retrenched or disappeared, undermined at least partially by the Internet. Industry sources estimated that a typical five-scene video, referred to as a gonzo, can be shot for anywhere from $10,000 to $40,000, while someone with a home webcam can do it much more cheaply.

One response has been a move by some in the industry to feature-length porn movies, with story lines and settings that push the budgets over $100,000. Samantha Lewis, president and CEO of Digital Playground, said its top-selling movie (by porn standards) “Pirates” came with a budget of $10 million, in part to pay for more than 600 special effects.

“You go upscale or else,” she said.

“Pirates” included an R-rated version, with the basic story minus the graphic elements.

She admits that many other producers have yet to follow this strategy, sticking with the traditional model of cranking out videos as cheaply as possible, even as DVD sales decline. Many started down that road, she said, but became nervous about the big budgets when recession hit.

On the piracy front, she said the company also maintains a full-time staff to track down unauthorized scenes posted on video sites and have them taken down.

The novelty sales side has stayed relatively stable, with some makers trying to build more technology into their products. “You can’t download a dildo,” said Javors.

San Francisco-based Minna brought out a vibrator, known as a personal sensual massager, that recharges much like a cell phone, operates by touch controls, has a memory and does not look like any part of the human anatomy. At a retail price of $160, the company hopes to get into mainstream stores and “not some sleazy back-alley places,” said Jon Thomas, vice president of manufacturing.

Taking a page from Hollywood studios, porn producers have started marketing logoed novelties to go with their videos, he said. At the same time, women have become more prominent as customers, forcing stores to clean up. “Women-friendly stores are the only ones opening,” said marketer Ron Kohls of Williams Trading Co. in Pennsauken, N.J. “They have plants and marble and are well lit. They are not dark and reeking of disinfectant.”

Merchandise has become increasingly important to stores as downloads and live webcasts continually shrink the demand for DVDs.

The expo expects attendance of about 20,000, in line with last year. Unlike many trade shows, it actively encourages fans to buy passes. Spokesman Sean Devlin estimated that about three-fourths of the attendance will come from people outside the industry. Passes at regular prices run $80 and $100 for the expo, which started Thursday and runs through Sunday.

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