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[Porn’s] Obscene Profits

Porn provides windfall profits for Vivid Entertainment and the cable giants that sell its racy fare. Now the government is cracking down for the first time in 20 years.

Porn Valley- It is midday on a cluttered movie set in an unassuming office park in a well-manicured neighborhood of Culver City, Calif., and the crew is getting restless. Penthouse Pet Sunny Leone, in cascades of jet-black hair and black lacy underthings, has taken close to two hours to struggle through three pages of dialogue for her debut film, thwarted by line flubs and interruptions from a noisy generator, rumbling trucks and the roar of planes passing overhead.

“I forgot my line already,” she giggles as the camera stops yet again. “Thank you, Jesus,” a crew member says when the actress finally nails it. “Can I get an ‘Amen’?” she says good-naturedly. By the time she begins her first make-out scene, late in the day, her moans of pleasure as fake as the plastic snowflakes that are supposed to conjure up a ski lodge, the crew is too bored to betray much interest. Other performers wander around in various stages of undress, barely meriting a glance.

This is business as usual on the set of Vivid Entertainment in Los Angeles, the nation’s largest producer of video pornography. Privately held, it claims annual revenue of $100 million. Quite possibly half that sum falls to the bottom line. Filmed in three days at a cost of $50,000, the 85-minute Sunny will likely produce total retail revenue of $5 million, much of it spread among Vivid’s “white-collar” partners–cable systems owned by Comcast, Time Warner and others, the DirecTV satellite service and hotel networks.

“I feel like this company is bubbling to the surface and will explode,” says Vivid Chief Steven Hirsch, [pictured] who cofounded it in 1984 on $20,000, much of it borrowed, and still owns it with two partners. Vivid makes some 60 films a year and releases 30 compilation discs a month. Hirsch now licenses the Vivid name for a vodka line, videogames, a Las Vegas night club, virility-enhancement concoctions, X-rated comic books and even a set of custom car wheels. He flirts with the idea of taking the company public in a few years. (So far New Frontier Media and Private Media Group are the only publicly held firms in hard-core, both of them mediocre performers.)

“This is a business, and we treat it like a business,” says Hirsch, 44, whose obsessively neat office sits across the 101 freeway from General Electric’s Universal Studios and displays a wall of plasma screens tuned to financial news, sports and dozens of security-camera feeds. His partner, William Asher, who holds diplomas from Dartmouth and the University of Southern California, says Vivid could reap riches on new outlets such as cell phones and iPods. “Adult is almost too good to be true,” he says.

But the feds are now mounting the biggest attack on porn since the Reagan Administration 20 years ago. Congress is trying to legislate new curbs, while the feds step up enforcement of existing laws, racking up 40 obscenity convictions since 2001. That compares with just four in all eight years of the Clinton Administration.

“These are dangerous, scary times,” Hirsch intones. “At the same time, there’s been an explosion of technology and delivery platforms, so there’s a disconnect with the morality police. Ultimately I believe juries understand people have the right to watch what they want to watch.”

Not if Philip Burress can help it. His Citizens for Community Values, formed in 1983 in Cincinnati, has made life miserable for strip clubs and other adult businesses in the area. In Washington he met with Alberto Gonzalez a few months after Gonzalez became attorney general, to urge him to crack down on the hotel pay-per-view outfits and the satellite and cable firms that reap porn profits. “I’ve made it clear to him we won’t make a dent in the campaign until they go after the white-collar pornographers,” Burress says.

The Justice Department’s antiporn budget has doubled since 2001, to $42 million. But DOJ has kept a low profile on the issue since recent reports brought ridicule in the press for misplaced priorities. “It’s time to confront the real terror threat–porn,” sneered one headline.

In Congress, a porn crackdown gives Democrats a chance to grab on to a red-state issue. In July a group of congressional Democrats proposed the Internet Safety & Child Protection Act of 2005, which would require age-checking software for all porn sites and impose a 25% excise tax on Internet porn. Children now first see porn at age 11, the bill’s backers announced, repeating a claim that turns out to be baseless (see related story at

In September an amendment to a porn bill sought to extend onerous recordkeeping rules to even the fake sex scenes in many Hollywood films and TV shows. The rules are intended to ensure that all performers are 18 or older, and the new measure would subject studios that fail to comply to criminal prosecution.

For now the Department of Justice has had more luck chasing down old-fashioned adult-bookstore owners and porn distributors for shipping naughty goods across state lines. In New York adult outlets are fighting in court to preserve a loophole that lets them continue to thrive despite tough zoning restrictions that were supposed to wipe many of them out.

Government has found it even more difficult to tackle Internet pornographers who distribute via broadband, often from Russia or eastern Europe. Even domestic vendors are difficult targets. The feds just lost a case against Extreme Associates, whose graphic films of fictionalized rape make Vivid look like Disney.

A U.S. District Court judge in Pittsburgh threw out the ten-count indictment in January, declaring obscenity statutes unconstitutional because they don’t let people view porn in the privacy of their own homes. Extreme Associates now cheekily markets “The FederalFive” movies that were singled out by the government, which is appealing the ruling to the Third Circuit Court of Appeals in Philadelphia. The Bush Administration says if the decision stands, it will undermine obscenity laws and “laws against prostitution, bestiality and bigamy.”

Since 1973 the boundary line between criminal obscenity and free speech was defined by the U.S. Supreme Court ruling in Miller v. California, which cited the importance of community standards and applied the LAPS test. Porn was illegal when it was sexually explicit and utterly lacking in “literary, artistic, political or scientific value.” The Internet has upended all of that. “It used to be easy to define a community because there were just adult theaters and bookstores,” says Hirsch. “Now the Internet breaks down community standards. Isn’t that what the First Amendment is about, the right to privacy?”

Hirsch hopes the Internet and its effects on community standards will keep him in business and curtail the next wave of federal prosecutions. Vivid last faced charges 16 years ago, when it got into trouble for sending a movie across state lines to a customer in Oxford, Miss. who turned out to be a postal inspector; Hirsch paid a $500,000 fine.

When he started in 1984, Hirsch’s inspiration was to reinvent, on a cheap and tiny scale, the old Hollywood studio system, mining for talent, investing in turning the new star into a bona fide brand and locking her in to make and promote more films. Hirsch’s most successful star by far is Jenna Jameson, a buxom one-woman porn factory whose movies sell upward of 50,000 copies at $50 apiece and who has licensed her name for a line of sex toys, action figures and cell phone ring-tone moans.

Sunny Leone, the rookie on the ski-lodge set, doesn’t rate such treatment yet–she will be paid $20,000 or so for her two scenes. “Loud, Sunny, get loud for us,” purrs the director, who goes by the phony name “B. Skow,” as the cameraman contorts himself to get as close as possible to the action. “Yeah, that’s the way I like it.”

Vivid’s distributors played no role in making Sunny but will reap much of the upside: sales of, say, 20,000 DVDs at $12 to $15 a pop wholesale (distributed by Hustler publisher Larry Flynt’s network) and sold for $30 to $40 at retail; up to $1.5 million in revenue for pay-per-view on cable systems and on DirecTV (each of which typically pockets up to a 90% cut); and several hundred thousand dollars more from viewings in hotel rooms (which is why, on the Sunny set the other day, a second, soft-core camera simultaneously shot the same nude scenes from the waist up).

At some point the new film will air on a Playboy-owned channel. Hugh Hefner’s company paid Vivid $70 million in 2001 to acquire the Spice networks, hard-core pay channels that Playboy now programs with Vivid’s explicit movies. Also, Vivid will resell Sunny in compilation DVDs as her library of performances builds. It also sells phone-sex ads that appear at the start of each DVD (spots that, it turns out, are impossible to skip). And it will add Sunny to the offerings on its Web site,, with tens of thousands of subscribers paying $30 a month for access and unlimited streaming video, Hirsch says.

Vivid also hopes to begin beaming out cell phone videos in the U.S. in the next few months and to keep a much bigger share of the loot than the meager 10% it gets from the cable industry.

“The numbers on our cell phone business are just phenomenal,”Asher says–already at $10 million (in retail) a year in Europe.

Hirsch vows to continue pushing porn despite the growing crackdown on obscenity. As he sees it, he’s only guilty of giving customers what they want. “These moral crusaders are hiding behind the facade of protecting children, when their real agenda is to get rid of any forms of adult material,” he says.


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