At first glance, his ambition for iPorn seems, well, foolish. There are plenty of entrenched providers of VOD. HotMovies, for example, celebrated its 100,000th clip on Aug. 2, 2008. Additionally, the "tubes" are bringing free content to the masses. So, the market for paid content online is tightening ... and already crowded.
And, let's take a second to talk about original content. The industry is doing to the Web what it did to the video market. Growth opportunities are drowning in a sea of monotony. The only difference is that online shelves infinitely expand, which only conceals the market's saturation cues. The last thing we need is another content pipeline, yet iPorn will develop and offer it. In fact, Koenig is forming a new production company under AdultVest. He is jumping right into a commodity market.
What the hell is this award-winning, hedge-fund guru thinking? Can't he see this gamble is destined to fail?
Well, Koenig probably is thinking something you're not. While the odds are against the rapid and overwhelming success of yet another adult website, it appears that he has found in commoditization the cracks that can be used to make a new site stand out.
While iPorn still is more a plan than an actuality, it's easy to see where the company is headed. Under the leadership of Koenig and Mike Weiss (handpicked by Koenig to be Chief Executive Officer) iPorn truly could become the first integrated, one-stop shop for adult media. Blending VOD and live performances across several platforms, Koenig's vision is focused on the future of adult entertainment.
There are two adult entertainment sectors that are fairly immune to piracy: adult novelty and gentlemen's clubs. Adult novelty's insulation is obvious. If you've ever tried to download a dildo, it probably didn't take you long to realize the futility of the task. Of course, there is the risk of brand piracy - like the Louis Vuitton knockoffs sold from nondescript boxes a few blocks from my apartment - but this flavor of theft is not as menacing. Since these hard goods already are manufactured at low prices and sold at reasonable margins, there is little reason to pirate. Clubs offer a live experience that cannot be recreated; interaction is spontaneous and directed by the guest. Good luck finding that on RedTube.
Weiss explains that these advantages are not lost on him. To succeed and stand out in a crowded market, he says, adult media needs to find a way to become piracy resistant. To this end, iPorn will offer live performances by top-tier entertainers. Discussions are ongoing, according to Weiss, which is why he would not drop any names.
Live performances have become ubiquitous, and there already is an established market. So far, it seems like iPorn is getting ready to go head-to-head with ImLive, among others. To make their offering unique, though, Koenig and Weiss plan to offer interactive experiences with major personalities in the adult industry. Fans and stars can communicate by voice, keyboard or SMS. One-on-one experiences also will be available ... for a price. "That," Weiss says, "is piracy proof."
To entice performers to engage fans via iPorn, the company is offering a series of $5,000 prizes based on end-user voting. Also, stars are being invited to distribute Web site content through iPorn to expand their reach. Scheduled live performances are intended to help build buzz as much as generate revenue.
The salient implication is a broader content offering intended to attract registered users. There is a subtler dynamic, as well, which could prove to be quite powerful. If iPorn is successful in quickly seizing market share, it will be able to help performers overcome the challenges of a fragmented market by tapping into an existing large base of potential customers. The end result would be a lower cost of revenue for performers and other content providers (translation: lower marketing expenses), as the share of revenue allocated to iPorn would replace existing marketing and operating expenses. In an ideal world (except for iPorn's competitors), the lower cost of business for content contributors would lead to higher profit margins for everyone.
This unique approach to customer acquisition and retention is only part of the competitive advantage that iPorn perceives. The other is access to a new platform, one that porn has not been able to reach.
Finally, a Bite at the Apple
To date, adult media has fought (or, more accurately, conceded defeat to) a formidable digital-media foe: Apple. At Adult Entertainment Expo 2006, everyone was talking about the hope afforded by the video-enabled iPod. Two years later, the technology has advanced, but the dream has not. iTunes had found a way to thrive without a jumpstart from porn, immediately distancing itself from the legacy of the VCR. The iPod, as a result, has been a symbol of unattainable success, as Apple effectively has kept adult content out of the environment.
iPorn's recent experience, however, implies another way into this market. The new venture seems to have found a way to capture a share of Apple devotees without requiring acceptance from the corporate machine.
"Did you know," Weiss said, "that 45 percent of our [pre-launch] traffic comes from the iPod/iPhone?" The traffic is browser-based, he added, but it still offers a way onto the iPod platform, bridging Apple's intentional gap.
The new company's domain name obviously has been helpful. Since iPorn has not marketed the website yet, all traffic has been organic, most of which, Weiss says, can be attributed to the domain name. It seems as though Koenig and Weiss have discovered the secret handshake with this particular name, as others have tried various combinations during the past two years with lesser results.
Nevertheless, revenue will determine success. Solid, organic, traffic growth now will help build interest in iPorn, but the company must deliver an environment that retains these visitors and attracts more, especially in a business that suffers from thoroughly documented problems of commoditization.
iPorn is in the Business of Solving Problems
iPorn believes it can overcome two of the most substantial problems this industry currently faces. The company has been able to find a way to differentiate itself and access a new, and relatively unavailable, audience through technological savvy. In a market in which something "new" is necessary, this appears to be it. According to Weiss, there was no alchemy in the strategic planning process. The vision he and Koenig developed was easy and simplistic. "We watched the market," he explained." "If we can just listen to the market and be smart, the sky's the limit.
So far, iPorn has fewer than 10 employees, as Koenig and Weiss believe in the importance of keeping headcount under control. They will add people, Weiss says, as the company grows and business needs warrant more full-time employees. Most of the software development has been the work of outside consultants who can be released when the project is completed. Business discipline, particularly important for startups, appears to be iPorn's mantra.
A successful launch - let alone long-term revenue growth - is far from assured. By most accounts, the paid-content market basically is flat, as the number of competitors is increasing. Listening to the market, in this case, usually would mean finding another industry, or buying and building upon an existing company. But, AdultVest has decided to make a bold move with iPorn. The venture is well capitalized, which certainly gives it an advantage.
As a result of its war chest (through AdultVest), iPorn could become a large, vertically and horizontally integrated adult-media enterprise. As such, it would have economies of scale generally unattainable in this space. Pressure on margins, all too common in our industry, would be eased, facilitating ongoing investment in promotion and new product development. The sky, as Weiss says, in fact would be the limit.
Whether it can work remains to be seen. Access to capital does not assure results, and a crowded market can render innovation impotent. It has happened before. Maybe iPorn is ahead of its time (remember the Apple Newton?). But, I tend to place bets on seasoned management teams and well-planned, carefully executed strategies. iPorn appears to have both, not to mention plenty of buzz. I'm sure I won't be the only person carefully watching this launch. If iPorn cannot change the adult-media landscape, then nothing can.
This article originally appeared in the November 2008 issue of AVN Online. To subscribe, visit AVNMediaNetwork.com/subscribe.