Just witness the ongoing spectacle of mainstream media pundits claiming shock and revulsion while endlessly talking about alleged presidential blowjobs. And, as accidental as this juxtaposition may seem, the newscasters and many other are well aware: Our fascination with sex translates into profits.
In economic terms, sex is highly inelastic. You can raise the price and demand doesn't drop. That means if you sell sex, you will almost certainly make money. And with around $9 billion in revenues in 1996 alone, the sex industry comes to the Internet well positioned to dominate the sale of online content.
It happens that the sex industry in America (which includes movie sales and rentals, strip clubs, phone sex, cable pay-per-view and web sites) is already bigger than the entire CD-ROM gaming industry, bigger than the music industry and bigger even than Hollywood's box office revenues. Profits from erotica drove early development of the VCR and the cable industry. Hotels reap great profits from porno-on-demand premium channels.
Cheaper to produce and easier to sell than mainstream material, erotica is also just about the only content successfully being sold on the net. ESPN has some sports content for which they charge, and the Wall Street Journal continues to charge for their online content. But almost every other commercial content venture has failed.
Sex online is particularly lucrative to site developers, and enticing to consumers for several reasons. It's anonymous, easy, everybody wants it, and it's an impulse buy commanded by an urge that can supplant hunger and even sleep.
A recent edition of Wired tells an instructive tale about the sex trade. Seth Warshavsky got started in the industry way back in 1990 at the age of 18, launching a phone sex service with a $7,000 credit card investment. Four years later, his corporation was bringing in $60 million a year. More recently, Congress and the FCC started cracking down, making it more difficult for entrepreneurs like Warshavsky to generate significant profits.
Around the same time, the popularity of the net exploded. And Warshavsky took note, forming his Internet Entertainment Group in early 1996. With a bank account tumescent with phone sex profits, he was able to invest heavily in infrastructure and programming innovation.
Today, with over 60 high-end servers and a pair of massive T3 data lines (which cost around $25,000 a month), IEG has some 400,000 subscribers who collectively pony up nearly $40,000 daily. This cash flow allows members to watch virtually non-stop, live video of naked gals in the shower, in "the dungeon," and a dozen other scenarios constructed at IEG headquarters.
What's more, the service is interactive-via keyboard or phone-which is apparently very important to enthusiasts. The streaming technology which provides steamy scenes allows viewers to contact the performers. One reports (again in Wired) that one of the most common chat requests she gets is to wave at the camera-more common, even, than, "let me see your ass."
It's a live-sex strip club in the privacy of one's home. No seedy back-alley theater, no embarrassing sex shops.
IEG, with its network of a couple of dozen revenue-generating websites is not alone. One directory of adult sites lists 28,000 "erotic destinations." The vast majority of these are amateurish free sites plastered with banner ads for the paying sites-for which they receive a few cents per click. There's so much money flying around the paying sex sites that banner ads alone can finance a site.
Forrester Research, a well-respected forecaster of trends on the net, predicts that profits from online sex sites could grow five fold by 2000.
As technology improves, the profits of the online sex industry will likely grow by leaps and bounds. In early 1998, the biggest online revenue stream is the sale of videos and "accessories," expected to gross near $5 billion dollars this year.
Streaming video is still in its early stages-a choppy three frames per second over most standard dial-up connections. But compression innovation, which allows more data to flow in a shorter time, is being driven by the prospect of video-on-demand: full-screen, full-motion, live and interactive television quality images.
For Warshavsky, the web is just one of many potential media. He's also in talks with giants like Viacom and Time Warner, discussing the prospects of truly interactive cable television. And as for those who would bemoan the dilution of the utopian vision of the web as the great equalizer, the great connector, the great many-to-many communication medium, the cold, hard reality is simply that sex sells.
As reported last winter in Seattle's alternative newsweekly The Stranger, "for all the high-minded talk about the Internet's revolutionary potential, ultimately somebody has to make some money to keep the Web explosion going."