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Was Vivid Contemplating Purchase of YouPorn? Asking Price was 20 Mil

Porn Valley- DVD sales are in free fall. Audiences are flocking to pornographic knockoffs of YouTube, especially a secretive site called YouPorn. And the amateurs are taking over. What’s happening to the adult-entertainment industry is exactly what’s happening to its Hollywood counterpart—only worse.

On Friday, May 18, Steve Hirsch, [pictured] founder of Vivid Entertainment Group, the world’s largest producer of adult videos, was expecting a mysterious visitor. But Stephen Paul Jones was late. When Jones, an unknown figure in the pornography world, finally arrived in the all-white reception area of Vivid’s Los Angeles offices at 2 p.m., he was apologetic. His private plane had broken down, he explained, and he was forced to fly commercial.

Hirsch, dressed in a T-shirt and jeans, found that excuse a little slick. But he was eager to speak with Jones, so he let it slide and introduced him to two Vivid colleagues. When the four men sat down in the company’s conference room, Jones got right to the point: He wanted Vivid to buy his website, YouPorn.com.

As its name suggests, YouPorn lets users upload and watch a virtually unlimited selection of hardcore sex videos for free. The user-generated clips on YouPorn—like those on YouTube, the site it mimics—range from the grainiest amateur footage to the slickest professional product. Also, like YouTube, the site has far more traffic than income.

Just nine months after going live, in September 2006, YouPorn was on pace to log about 15 million unique visitors in May, Jones told the Vivid executives, and its audience was growing at a rate of 37.5 percent a month.

Today, YouPorn is the No. 1 adult site in the world; Vivid.com, a pay site, is ranked 5,061. According to Alexa, a website-ranking company, YouPorn’s overall rank is higher than CNN.com (84), About.com (114), and Weather.com (195). (Those numbers are averages for the three-month period from mid-June to mid-September.)

Blond, barrel-chested, and wearing a sport coat, Jones oozed Silicon Valley confidence. According to Hirsch, he mentioned his Stanford M.B.A. repeatedly.

He offered reams of documents and audience data, emphasizing YouPorn’s global reach. (Only 12 percent of the site’s traffic comes from the U.S., he said.) Jones told the men that he and one other executive, a young Malaysian man living in Australia, were the owners of YouPorn, and he stressed that with the site’s traffic, its opportunities were manifold: dating, gaming, mobile content, pay-per-view, webcams (“already very popular in China”), and more. He shared his vision of turning YouPorn into a “very cool brand, perhaps the Virgin of adult entertainment.” As Jones rambled on, Hirsch and his executives traded raised eyebrows. Malaysia?

Still, they were intrigued by YouPorn—and more than a little intimidated by its size. In recent years, competition from the internet had cut deep into the porn studio’s revenues. DVD sales, once Vivid’s financial bedrock, were down almost 50 percent since 2004, and the proliferation of cheap Web-based videos was stealing market share from the company, which specializes in high-end sex films.

Vivid and its top rivals—Wicked Pictures, Evil Angel, Digital Playground, Red Light District, Penthouse Media Group, and Hustler, to name a few—had lately been getting an unwanted glimpse of the overnight crisis that the file-sharing revolution brought to the music industry and Craigslist brought to newspaper classified ads.

The meeting lasted an hour. As Hirsch listened to Jones’ pitch, he considered the risks of acquiring YouPorn. Hirsch had been in the adult-entertainment business long enough to be mindful of its legal pitfalls, and that was a chief concern. How do you verify the age of the participants in these thousands of sex videos—or, for that matter, the age of the audience?

For the time being, Hirsch put those questions aside and focused on the business challenge: How, exactly, would you monetize this site? All the features were free, and, as Jones admitted, the advertising revenue was meager—about $120,000 a month.

Jones said he wasn’t too interested in figuring that out himself. He planned to grow the audience as large as possible and then “exit” to an established company with the resources and know-how to parlay the traffic into revenue. Not that he’s expecting the $1.65 billion Google paid for YouTube or even the $580 million Rupert Murdoch coughed up for MySpace. Jones told Hirsch he’d be willing to part with YouPorn for $20 million. Hirsch said he’d be in touch.

“It doesn’t make any sense!” Hirsch tells me a month later. It’s a hazy afternoon in June, and he is sitting behind his oak-slab desk, his eyes flickering between a pair of flat-screen monitors, one tuned to Bloomberg News and the other showing a YouPorn clip featuring a gaggle of naked women and an oxygen mask. “They’re giving porn away. You can’t make money on this.”

A compact, well-exercised man of 46, Hirsch is one of the biggest names in the $12 billion adult-entertainment business. The very picture of a respectable, down-to-earth smut peddler, he lives with his wife and two young children in a gated community in a quiet suburb in California’s San Fernando Valley, the industry’s global capital. He’s proudly sober, eschewing the rollicking parties of the sex business for quiet passions, such as his prehistoric-amber collection.

Hirsch’s life in the industry started early. In 1970s Cleveland, his father left a career as a stockbroker, says Hirsch, to sell stag films for Reuben Sturman, the porn pioneer who eventually went to jail for tax evasion.

Hirsch went to work for Sturman during high school, and Sturman nurtured the young man into a sort of porn prodigy. In 1984, when Hirsch was 23, he co-founded Vivid with the then-novel idea of signing actresses to exclusive contracts and marketing them like Old Hollywood stars.

He was just in time for the dawn of the VCR, and Vivid grew quickly. It has been the largest producer of adult videos in the world for more than a decade now, in part because Hirsch borrowed heavily from the Hollywood studios he can see from his office window: expensive sets, big names (most famously Jenna Jameson), and slick packaging. By porn-industry standards, his films are expensive. He says they typically cost $50,000 to $300,000 to produce and $20,000 to market and distribute; they sell for about $25 on DVD. The company makes approximately 60 movies a year and posts roughly $100 million in annual revenue.

But lately, success hasn’t come easily for Vivid and its upmarket rivals. Three years ago, 80 percent of Vivid’s income came from DVD sales. Today, Hirsch puts that number at about 30 percent, with the rest coming from a fragmented range of sources: subscriptions to Vivid.com, pay-per-view TV, internet video-on-demand, merchandising, and mobile-phone deals. Domestic DVD sales are down 35 percent this year alone. His revenue is flat, he says, but that’s mainly because he’s been cutting costs. Within five years, he claims, DVD sales will be close to zero.

Vivid’s situation is grim but not unusual. DVD woes plague the entire Valley, from multimillion-dollar corporate operations to backroom bottom-feeders: Total sales fell 11 percent in 2006, to an estimated $3.8 billion, according to Adult Video News, the industry’s leading trade publication.

Hirsch’s company shares the high end of the market with about 20 other studios that each claim more than $20 million in annual revenues. Outside of those are at least 100 small producers who bring in $500,000 to $5 million a year, estimates Paul Fishbein, president of Adult Video News.

These companies shoot on shoestring budgets of $10,000 or less (sometimes much less) per film. “Those rinky-dink companies are struggling to get 1,000 to 1,200 DVDs out at $8 to $10 wholesale,” says Fishbein. “That barely pays for the cost of a cheap production.”

And the decline of DVDs will only accelerate. “You’re going to see a precipitous drop now,” Fishbein says. “Hopefully for producers here in the Valley, that will be offset by internet sales. Hopefully.”

As the portion of Americans with broadband connections (47 percent and growing) continues to rise, consumers are becoming increasingly addicted to the immediate gratification of Web video. But suddenly, there’s a chasm between porn consumption and porn sales. While sales of internet-based adult entertainment grew 14 percent last year, to $2.8 billion, that figure would be substantially higher if there wasn’t so much free competition, especially from the user-generated adult sites.

So far, the Valley’s biggest players have tried to combat this by offering subscription sites, which give users access to a deep trove of content in exchange for a membership fee, usually paid monthly. Vivid.com is one of the more successful. With about 40,000 subscribers paying $30 a month, Hirsch says, the site generates roughly $15 million in annual revenue. Ali Joone, the founder of Digital Playground, charges the same monthly rate and says he has a comparable number of subscribers.

Much like the TV networks, movie studios, and record labels on the other side of town, porn companies are also engaged in a frantic attempt to diversify their offerings, filleting their films into smaller pieces that can be easily sold via an ever-shifting variety of digital distribution channels. From the pay-by-the-minute model on video-on-demand sites such as Adult Entertainment Broadcast Network and Hotmovies.com, to the four- to six-minute clips edited for mobile devices, the industry is looking to take the 90-minute sex videos from its old business strategy and carve them into bite-size moneymakers.

But for many companies, the sum of these new revenue streams doesn’t even come close to offsetting the decline in DVD sales. What’s happening in porn right now is directly analogous to what’s happening to the music industry—CD sales are down 16 percent since 2005, according to Nielsen SoundScan—but worse.

“What you’re losing in the DVD market, you’re not making up on the paid internet side,” says Fishbein. “Instead of 99 cents a song on iTunes, these guys are doing 10 cents a minute for porn.”

The irony is that Hirsch and his ilk have always been the first to experiment with—and profit from—new technologies. The revolution began with VHS, which moved porn out of the theater and into the home. This made watching pornography private, an advance that created millions of new customers overnight. But to buy the stuff, you still had to venture out to the store, and who knew who you might run into?

The Web, in its early days, solved this problem. Few industries, if any, figured out e-commerce faster than the adult-entertainment business, and online DVD sales soared as a result. But Web 2.0, the catchall term for the crush of user-driven startups that have emerged in the past few years, has left the porn industry’s biggest players scrambling to keep up. For the first time, technology is hurting Big Porn. “Everyone was excited because they thought the internet was going to affect our business in a positive way, and it’s been the opposite,” says David Joseph, the founder of Red Light District. “It’s been a little scary.”

“Instilling the most fear are YouPorn and its closest competitors, Adult Entertainment Broadcast Network’s PornoTube and Megarotic, which draws in users with a limited layer of free videos, then tries to sell premium memberships that offer more content and faster video streaming.

These sites didn’t invent free porn; they just made it exponentially easier to access. Of the three, YouPorn most closely resembles YouTube, with its stripped-down interface, unobtrusive advertising, and—for now, at least—content that’s 100 percent free. PornoTube and Megarotic feel more commercial, with plenty of links to the for-pay features.

But the free parts of all three sites are basically the same. Some videos are lengthy (30 minutes or more), but most are closer to three minutes. Some are bona fide amateur videos, shot and uploaded by exhibitionists, but most are clips of copyrighted professional pornography. Of these, some are scenes from high-end features, but a larger percentage are so-called gonzo clips—unscripted, rough-cut footage in which the camera operator often jumps into the action. Some clips are posted by the porn companies themselves, as trailers for the full-length versions available on their own sites, but most are uploaded by users from their own collections. Some are gay, some are straight.

In other words, there’s something for everyone—and the sites are ridiculously easy to use. You don’t even have to log in to watch videos, much less pay. (You’re simply required to say you’re 18 or older.) And the sites can’t prevent users from uploading proprietary material produced by the major porn studios. All of which is why Hirsch and his counterparts in the Valley are at least as nervous as the Viacom executives who have filed a $1 billion copyright suit against Google, YouTube’s owner.

But for now at least, there’s no significant push to shut down the sites. Although producers in the Valley have largely resigned themselves to the fact that the copyright genie is out of the bottle, they’re putting user-generated sites on notice about former moneymaking features that are now posted for all to enjoy.

A few major porn companies say they regularly monitor postings on PornoTube and YouPorn and email requests to take down copyrighted material. In July, Red Light District sent a cease-and-desist letter to YouPorn after a user posted “One Night in Paris,” the “official” full-length version of the Paris Hilton sex tape, which Red Light distributes. YouPorn removed the video.

By their very nature, though, user-generated sites might be vulnerable to other kinds of legal problems. If anonymous users post child pornography, it could be difficult for site owners to verify the ages of the performers. While these sites generally require viewers to confirm that they’re over 18, “my 11-year-old could go on at any point,” says Red Light’s Joseph.

Earlier this fall, a German internet provider temporarily blocked access to YouPorn because the site didn’t comply with German age-verification laws. Up to now, U.S. user-generated porn sites have not been prosecuted.

There’s no sign on the door of PornoTube’s headquarters, in Charlotte, North Carolina. The building is concealed in a low-slung office park on the outskirts of the city, next to the railroad tracks and an aluminum factory.

Inside the air-freshened warren of bunkerlike offices, Suzann Knudsen, a PornoTube marketing executive who moonlights as a D.J. for sex-fetish parties, shows me around. She explains that despite PornoTube’s 15 million monthly visitors, the website’s parent company, Adult Entertainment Broadcast Network, views it as a marketing expense, not a profit center.

The site was originally conceived as a feature within Xpeeps.com, A.E.B.N.’s X-rated social-networking site, to provide a way for members to trade sex videos. But soon after it launched, in July 2006, PornoTube had dwarfed Xpeeps’ traffic, and A.E.B.N. decided to turn it into a separate site. The company has tried to monetize it by striking profit-sharing deals with two dozen porn studios to create promotional channels that funnel traffic toward the studios’ own sites. A.E.B.N. won’t disclose the value of these agreements or the small amount of advertising revenue generated by the ads placed on page margins, saying only that PornoTube breaks even. It’s worth it, Knudsen says, for the traffic.

But when traffic means tens of millions of people sharing porn, there are some unique business challenges. Daphne Reeder, a customer-service rep for PornoTube, spends her days trolling the site, investigating clips that have been reported as problematic. On the July morning when I visit, she had more than 500 videos to review, most of which had been red-flagged because their descriptions included words such as little boys, force, or rape. She says the community polices itself, with users and porn companies emailing to alert the site about child pornography, copyrights being violated, ex-boyfriends uploading once-private videos, and other issues.

Adult-video producers are legally required to verify that performers are of legal age. The 2257’s, as the verifications are known (after the corresponding section of the federal code), are a costly hassle to the porn studios. Vivid, for example, has an employee whose sole responsibility is 2257 compliance, and Vivid makes only 60 films a year. Reeder is one of 10 people working on compliance at PornoTube, which has about 210,000 videos. Every clip on the site is supposed to contain a link to “2257 info” documenting the age and identity of the performers, but many of the clips (mostly the genuine amateur videos) include no such information. In these cases, PornoTube attempts to perform its own verification. If it can’t, the clip is removed.

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On Friday, May 18, Steve Hirsch, founder of Vivid Entertainment Group, the world’s largest producer of adult videos, was expecting a mysterious visitor. But Stephen Paul Jones was late. When Jones, an unknown figure in the pornography world, finally arrived in the all-white reception area of Vivid’s Los Angeles offices at 2 p.m., he was apologetic. His private plane had broken down, he explained, and he was forced to fly commercial. Hirsch, dressed in a T-shirt and jeans, found that excuse a little slick. But he was eager to speak with Jones, so he let it slide and introduced him to two Vivid colleagues. When the four men sat down in the company’s conference room, Jones got right to the point: He wanted Vivid to buy his website, YouPorn.com.

As its name suggests, YouPorn lets users upload and watch a virtually unlimited selection of hardcore sex videos for free. The user-generated clips on YouPorn—like those on YouTube, the site it mimics—range from the grainiest amateur footage to the slickest professional product. Also, like YouTube, the site has far more traffic than income. Just nine months after going live, in September 2006, YouPorn was on pace to log about 15 million unique visitors in May, Jones told the Vivid executives, and its audience was growing at a rate of 37.5 percent a month. Today, YouPorn is the No. 1 adult site in the world; Vivid.com, a pay site, is ranked 5,061. According to Alexa, a website-ranking company, YouPorn’s overall rank is higher than CNN.com (84), About.com (114), and Weather.com (195). (Those numbers are averages for the three-month period from mid-June to mid-September.)

Blond, barrel-chested, and wearing a sport coat, Jones oozed Silicon Valley confidence. According to Hirsch, he mentioned his Stanford M.B.A. repeatedly. He offered reams of documents and audience data, emphasizing YouPorn’s global reach. (Only 12 percent of the site’s traffic comes from the U.S., he said.) Jones told the men that he and one other executive, a young Malaysian man living in Australia, were the owners of YouPorn, and he stressed that with the site’s traffic, its opportunities were manifold: dating, gaming, mobile content, pay-per-view, webcams (“already very popular in China”), and more. He shared his vision of turning YouPorn into a “very cool brand, perhaps the Virgin of adult entertainment.” As Jones rambled on, Hirsch and his executives traded raised eyebrows. Malaysia?

Still, they were intrigued by YouPorn—and more than a little intimidated by its size. In recent years, competition from the internet had cut deep into the porn studio’s revenues. DVD sales, once Vivid’s financial bedrock, were down almost 50 percent since 2004, and the proliferation of cheap Web-based videos was stealing market share from the company, which specializes in high-end sex films. Vivid and its top rivals—Wicked Pictures, Evil Angel, Digital Playground, Red Light District, Penthouse Media Group, and Hustler, to name a few—had lately been getting an unwanted glimpse of the overnight crisis that the file-sharing revolution brought to the music industry and Craigslist brought to newspaper classified ads.

The meeting lasted an hour. As Hirsch listened to Jones’ pitch, he considered the risks of acquiring YouPorn. Hirsch had been in the adult-entertainment business long enough to be mindful of its legal pitfalls, and that was a chief concern. How do you verify the age of the participants in these thousands of sex videos—or, for that matter, the age of the audience?

For the time being, Hirsch put those questions aside and focused on the business challenge: How, exactly, would you monetize this site? All the features were free, and, as Jones admitted, the advertising revenue was meager—about $120,000 a month. Jones said he wasn’t too interested in figuring that out himself. He planned to grow the audience as large as possible and then “exit” to an established company with the resources and know-how to parlay the traffic into revenue. Not that he’s expecting the $1.65 billion Google paid for YouTube or even the $580 million Rupert Murdoch coughed up for MySpace. Jones told Hirsch he’d be willing to part with YouPorn for $20 million. Hirsch said he’d be in touch.

“It doesn’t make any sense!” Hirsch tells me a month later. It’s a hazy afternoon in June, and he is sitting behind his oak-slab desk, his eyes flickering between a pair of flat-screen monitors, one tuned to Bloomberg News and the other showing a YouPorn clip featuring a gaggle of naked women and an oxygen mask. “They’re giving porn away. You can’t make money on this.”

A compact, well-exercised man of 46, Hirsch is one of the biggest names in the $12 billion adult-entertainment business. The very picture of a respectable, down-to-earth smut peddler, he lives with his wife and two young children in a gated community in a quiet suburb in California’s San Fernando Valley, the industry’s global capital. He’s proudly sober, eschewing the rollicking parties of the sex business for quiet passions, such as his prehistoric-amber collection.

Hirsch’s life in the industry started early. In 1970s Cleveland, his father left a career as a stockbroker, says Hirsch, to sell stag films for Reuben Sturman, the porn pioneer who eventually went to jail for tax evasion. Hirsch went to work for Sturman during high school, and Sturman nurtured the young man into a sort of porn prodigy. In 1984, when Hirsch was 23, he co-founded Vivid with the then-novel idea of signing actresses to exclusive contracts and marketing them like Old Hollywood stars. He was just in time for the dawn of the VCR, and Vivid grew quickly. It has been the largest producer of adult videos in the world for more than a decade now, in part because Hirsch borrowed heavily from the Hollywood studios he can see from his office window: expensive sets, big names (most famously Jenna Jameson), and slick packaging. By porn-industry standards, his films are expensive. He says they typically cost $50,000 to $300,000 to produce and $20,000 to market and distribute; they sell for about $25 on DVD. The company makes approximately 60 movies a year and posts roughly $100 million in annual revenue.

But lately, success hasn’t come easily for Vivid and its upmarket rivals. Three years ago, 80 percent of Vivid’s income came from DVD sales. Today, Hirsch puts that number at about 30 percent, with the rest coming from a fragmented range of sources: subscriptions to Vivid.com, pay-per-view TV, internet video-on-demand, merchandising, and mobile-phone deals. Domestic DVD sales are down 35 percent this year alone. His revenue is flat, he says, but that’s mainly because he’s been cutting costs. Within five years, he claims, DVD sales will be close to zero.

Vivid’s situation is grim but not unusual. DVD woes plague the entire Valley, from multimillion-dollar corporate operations to backroom bottom-feeders: Total sales fell 11 percent in 2006, to an estimated $3.8 billion, according to Adult Video News, the industry’s leading trade publication. Hirsch’s company shares the high end of the market with about 20 other studios that each claim more than $20 million in annual revenues. Outside of those are at least 100 small producers who bring in $500,000 to $5 million a year, estimates Paul Fishbein, president of Adult Video News. These companies shoot on shoestring budgets of $10,000 or less (sometimes much less) per film. “Those rinky-dink companies are struggling to get 1,000 to 1,200 DVDs out at $8 to $10 wholesale,” says Fishbein. “That barely pays for the cost of a cheap production.”

And the decline of DVDs will only accelerate. “You’re going to see a precipitous drop now,” Fishbein says. “Hopefully for producers here in the Valley, that will be offset by internet sales. Hopefully.”
As the portion of Americans with broadband connections (47 percent and growing) continues to rise, consumers are becoming increasingly addicted to the immediate gratification of Web video. But suddenly, there’s a chasm between porn consumption and porn sales. While sales of internet-based adult entertainment grew 14 percent last year, to $2.8 billion, that figure would be substantially higher if there wasn’t so much free competition, especially from the user-generated adult sites.

So far, the Valley’s biggest players have tried to combat this by offering subscription sites, which give users access to a deep trove of content in exchange for a membership fee, usually paid monthly. Vivid.com is one of the more successful. With about 40,000 subscribers paying $30 a month, Hirsch says, the site generates roughly $15 million in annual revenue. Ali Joone, the founder of Digital Playground, charges the same monthly rate and says he has a comparable number of subscribers.

Much like the TV networks, movie studios, and record labels on the other side of town, porn companies are also engaged in a frantic attempt to diversify their offerings, filleting their films into smaller pieces that can be easily sold via an ever-shifting variety of digital distribution channels. From the pay-by-the-minute model on video-on-demand sites such as Adult Entertainment Broadcast Network and Hotmovies.com, to the four- to six-minute clips edited for mobile devices, the industry is looking to take the 90-minute sex videos from its old business strategy and carve them into bite-size moneymakers.

But for many companies, the sum of these new revenue streams doesn’t even come close to offsetting the decline in DVD sales. What’s happening in porn right now is directly analogous to what’s happening to the music industry—CD sales are down 16 percent since 2005, according to Nielsen SoundScan—but worse.

“What you’re losing in the DVD market, you’re not making up on the paid internet side,” says Fishbein. “Instead of 99 cents a song on iTunes, these guys are doing 10 cents a minute for porn.”

The irony is that Hirsch and his ilk have always been the first to experiment with—and profit from—new technologies. The revolution began with VHS, which moved porn out of the theater and into the home. This made watching pornography private, an advance that created millions of new customers overnight. But to buy the stuff, you still had to venture out to the store, and who knew who you might run into?

The Web, in its early days, solved this problem. Few industries, if any, figured out e-commerce faster than the adult-entertainment business, and online DVD sales soared as a result. But Web 2.0, the catchall term for the crush of user-driven startups that have emerged in the past few years, has left the porn industry’s biggest players scrambling to keep up. For the first time, technology is hurting Big Porn. “Everyone was excited because they thought the internet was going to affect our business in a positive way, and it’s been the opposite,” says David Joseph, the founder of Red Light District. “It’s been a little scary.”

“Instilling the most fear are YouPorn and its closest competitors, Adult Entertainment Broadcast Network’s PornoTube and Megarotic, which draws in users with a limited layer of free videos, then tries to sell premium memberships that offer more content and faster video streaming.

These sites didn’t invent free porn; they just made it exponentially easier to access. Of the three, YouPorn most closely resembles YouTube, with its stripped-down interface, unobtrusive advertising, and—for now, at least—content that’s 100 percent free. PornoTube and Megarotic feel more commercial, with plenty of links to the for-pay features. But the free parts of all three sites are basically the same. Some videos are lengthy (30 minutes or more), but most are closer to three minutes. Some are bona fide amateur videos, shot and uploaded by exhibitionists, but most are clips of copyrighted professional pornography. Of these, some are scenes from high-end features, but a larger percentage are so-called gonzo clips—unscripted, rough-cut footage in which the camera operator often jumps into the action. Some clips are posted by the porn companies themselves, as trailers for the full-length versions available on their own sites, but most are uploaded by users from their own collections. Some are gay, some are straight.

In other words, there’s something for everyone—and the sites are ridiculously easy to use. You don’t even have to log in to watch videos, much less pay. (You’re simply required to say you’re 18 or older.) And the sites can’t prevent users from uploading proprietary material produced by the major porn studios. All of which is why Hirsch and his counterparts in the Valley are at least as nervous as the Viacom executives who have filed a $1 billion copyright suit against Google, YouTube’s owner.

But for now at least, there’s no significant push to shut down the sites. Although producers in the Valley have largely resigned themselves to the fact that the copyright genie is out of the bottle, they’re putting user-generated sites on notice about former moneymaking features that are now posted for all to enjoy. A few major porn companies say they regularly monitor postings on PornoTube and YouPorn and email requests to take down copyrighted material. In July, Red Light District sent a cease-and-desist letter to YouPorn after a user posted “One Night in Paris,” the “official” full-length version of the Paris Hilton sex tape, which Red Light distributes. YouPorn removed the video.

By their very nature, though, user-generated sites might be vulnerable to other kinds of legal problems. If anonymous users post child pornography, it could be difficult for site owners to verify the ages of the performers. While these sites generally require viewers to confirm that they’re over 18, “my 11-year-old could go on at any point,” says Red Light’s Joseph. Earlier this fall, a German internet provider temporarily blocked access to YouPorn because the site didn’t comply with German age-verification laws. Up to now, U.S. user-generated porn sites have not been prosecuted.

There’s no sign on the door of PornoTube’s headquarters, in Charlotte, North Carolina. The building is concealed in a low-slung office park on the outskirts of the city, next to the railroad tracks and an aluminum factory.

Inside the air-freshened warren of bunkerlike offices, Suzann Knudsen, a PornoTube marketing executive who moonlights as a D.J. for sex-fetish parties, shows me around. She explains that despite PornoTube’s 15 million monthly visitors, the website’s parent company, Adult Entertainment Broadcast Network, views it as a marketing expense, not a profit center. The site was originally conceived as a feature within Xpeeps.com, A.E.B.N.’s X-rated social-networking site, to provide a way for members to trade sex videos. But soon after it launched, in July 2006, PornoTube had dwarfed Xpeeps’ traffic, and A.E.B.N. decided to turn it into a separate site. The company has tried to monetize it by striking profit-sharing deals with two dozen porn studios to create promotional channels that funnel traffic toward the studios’ own sites. A.E.B.N. won’t disclose the value of these agreements or the small amount of advertising revenue generated by the ads placed on page margins, saying only that PornoTube breaks even. It’s worth it, Knudsen says, for the traffic.

But when traffic means tens of millions of people sharing porn, there are some unique business challenges. Daphne Reeder, a customer-service rep for PornoTube, spends her days trolling the site, investigating clips that have been reported as problematic. On the July morning when I visit, she had more than 500 videos to review, most of which had been red-flagged because their descriptions included words such as little boys, force, or rape. She says the community polices itself, with users and porn companies emailing to alert the site about child pornography, copyrights being violated, ex-boyfriends uploading once-private videos, and other issues.

Adult-video producers are legally required to verify that performers are of legal age. The 2257’s, as the verifications are known (after the corresponding section of the federal code), are a costly hassle to the porn studios. Vivid, for example, has an employee whose sole responsibility is 2257 compliance, and Vivid makes only 60 films a year. Reeder is one of 10 people working on compliance at PornoTube, which has about 210,000 videos. Every clip on the site is supposed to contain a link to “2257 info” documenting the age and identity of the performers, but many of the clips (mostly the genuine amateur videos) include no such information. In these cases, PornoTube attempts to perform its own verification. If it can’t, the clip is removed.

One of the items on Reeder’s to-do list is an age-verification complaint about a video called “Adriana Lima Blowjob.” It has no 2257 info. So Reeder cuts and pastes the name into a search engine and clicks through a few sites that say Adriana Lima was born in 1981. Reeder is about to move on when I point out to her that Adriana Lima is in fact a fairly well-known model and that the woman in the video is probably not she. Is PornoTube concerned about that? Knudsen, standing behind Reeder, tells her to take it down quickly. “We do the best we can,” Knudsen tells me repeatedly.

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TMZ: Kanye West Changes Tune, Sets Out to Launch ‘Yeezy Porn’

Rapper Kanye West, according to TMZ, has not only renewed his ardent interest in blue cinema ... he now wants to produce it.

Carnal Media Signs Jay Stryker to Exclusive Contract

MINNEAPOLIS — Carnal Media has added Jay Stryker to its roster of exclusive performers. The Idaho native will make his Carnal debut in scenes for studio brands FunSizeBoys and HungFuckers. "I dabbled as a hobby, shooting fan content over the…

UKPornParty Streets ‘Gangbang Slut Debuts’

UKPornParty is debuting "Gangbang Slut Debuts," a new gonzo release available now on DVD and VOD.

Disruptive to Release Micah Martinez’s ‘Case of the Ex’ in November

LOS ANGELES — Disruptive Films will release "Case of the Ex,” a featurette written and directed by Micah Martinez, in November. The scene — co-starring Derek Kage and Tony Genius — follows the journey of two men who had a messy…

Platforming the Pleasure Industry’s Voice Through Voting

Very early in my business career, I learned not to mix business with politics or religion. This was a foundational tenet that just made sense. For much of my career, that was easy. However, it has become increasingly difficult to…

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