Very succinct and clear article from The Huffington Post on why the business of content is dying.
"Content is king," many people believe, meaning that films, television shows, music, news and information are more profitable assets than the technology used to deliver them. But there’s an older, cautionary aphorism that applies as well: "Uneasy lies the head that wears the crown." Content may be king, but, ironically, its perceived value today is being driven towards zero. In the eyes of consumers, content is becoming a commodity — more a commoner than a king.
The more I talk to traditional DVD-centric porners, the more I am concerned that their children will not have the opportunity to attend Ivy League schools and receive BMWs for their 17th birthdays. As the DVD business atrophies at a dizzying pace (3-4 years seems to be the agreed upon life expectancy for DVD as a viable business model), these old school smut peddlers are scrambling to evolve. Blu-Ray and any other high-definition physical model is going to be an afterthought. A never-ran. These companies continue to cash their $5000 AEBN royalty checks, a model in which they are getting paid 15-20% of gross. Of course in the process, they are teaching their customer that spending $35 on a DVD is absurd.
The smart ones partnered with web-savvy companies years ago, or spawned their own competent web divisions. New Sensations/Digital Sin has done it as well as any. Their affiliate program, NSCash, is strong and well-supported within the web industry. Others have tried. Wicked, Vivid, Evil Angel, Anabolic, Shane’s World have all started up their own web divisions, and went through multiple incarnations before arriving here today.
Most independent producers (Jules Jordan, Erik Everhard, Brandon Iron, etc.) have partnered with companies like Braincash and Meatcash so that they can focus on content production. But again, they are giving up somewhere in the neighborhood of 50% for the privilege. Compare that to the traditional 30-35% that DVD distributors take.
Web-based companies like Brazzers and RealityKings spread their riches around in production circles, which in turn keeps production costs on the upslope. At some point, the 20% of VOD royalties and the 50% of paysite revenues won’t be able to justify the cost of shooting high-priced gonzo movies. Foreign and broadcast money is almost non-existent, due to the high supply and low demand for the content.
When will this simple arithmetic break Porn Valley?