Isn’t this stuff about the consolidation of AVN Media Network’s magazines a business issue, rather than a law issue? No. It is a product of a mixture of the economy, technology, business and law. So, there needs to be legal input.
Up front, understand that all of this is an intensely personal issue for Clyde DeWitt, the author of this and other AVN legal columns for roughly 20 years, and a defender of the rights of adult entertainment companies for close to 30 years. As a result, this perhaps is as much editorial opinion—with which this column always is laced—as legal information. Thus, “Clyde DeWitt” will be used in the body of this column for the first and maybe last time in the column’s history. Usually, this is about legal nuts and bolts. This one is a little different.
How We Found Ourselves Here
A little history puts some of this into perspective. When Clyde DeWitt resigned from the district attorney’s office in 1980, most adult motion-picture consumption occurred in run-down movie theaters, video being in its infancy. In those days, an adult VHS or Beta (How many of you remember Beta?) might cost $80 retail—$200 in today’s dollars—and videotape recorders were a grand or so—perhaps 2,500 of today’s dollars.
When the first home-video recorder/player surfaced, Hollywood went berserk. Universal Studios sued Sony, claiming that they were just copyright infringement machines. Hollywood saw videotape as a substitute for box-office sales. Despite that, home video skyrocketed—because of adult. All of a sudden, erotica could be viewed in the privacy of the viewers’ homes. By the time the Universal case reached the Supreme Court (which ruled against them), the Hollywood studios were on board and thriving from the VHS market. It turned out that videotape did not cut into theater revenue; rather, it added another revenue stream. Thank you, adult!
Long before Al Gore threw his support behind the fledgling internet, TPG galleries were flourishing. Most customers had dial-up connections, and internet motion pictures were not yet feasible. But the galleries were humming. The confluence of the growing popularity of TPG galleries and, of all things, 2257, triggered the creation of Adult Check, one of the most successful adult internet operations in history.
In those days, there arose a magazine and trade show called IA2000—even though the year 2000 was still several years out. Not all that long after that, industry giant AVN acquired IA2000, and the rest is history: Many issues of AVN Online; many Internext conventions (including probably more Clyde DeWitt speeches than you wanted to hear); many online postings of information.
The early Internext conventions were bursting at the seams, with parties such as the Players Ball financed by adult internet companies that were making so much money they could not figure out where to spend it all. It was an echo of the 1980s, when the adult videotape industry was in its heyday.
Around that time, while the VHS business still was humming, there was an adult video industry summit in Cancun. Clyde DeWitt was an invited guest speaker, along with two or three other industry attorneys. Rather than an upbeat legal analysis of how well everything was going, as everyone else was promoting, Clyde DeWitt was the soothsayer: “Beware the Ides of March!” The music industry, he reported, was circling the drain because of Napster. The adult video industry, he predicted, would be next. Piracy would do more damage to the industry than could ever be done by 2257 or by obscenity prosecutions—even with 1457, RICO and money-laundering forfeitures looming.
Gene Ross published that gloomy prediction on his internet site and was bombarded with emails, some of which had equations supposedly proving that any meaningful damage to adult video by the internet was impossible because of connection speed and file size. No problem, right? After all, adult TPG sites were humming.
Nobody believed Clyde DeWitt’s response: “In the next decade, we will see exponential increases in speed, bandwidth and storage media; everyone will be able to download a 30-minute clip in a few minutes and hold hundreds of them on storage media that fits in a laptop.” Well, it would turn out that Fulton’s Folly not only would sail the Hudson, but all of the rivers of the world. Remember when a gigabyte was a huge hard drive? It was then; but the Old Man remembered when 20 megabytes was a huge hard drive. History would repeat itself.
The End of the Wild West
Also, the goose that was laying golden eggs hit a snag when merchant processing tightened up at the turn of the century. The chargeback limit was ratcheted down from 2 percent to a half-percent. Then third-party processors became the norm and VISA/MC struck back, requiring disclosure by the third-party processors of their merchant-customers so that VISA/MC could keep a watchful eye on the ultimate beneficiaries of the transactions. And American Express pulled out of adult altogether. The lifeblood of adult internet was at stake.
On the regulatory front, the Bush II administration finally got obscenity prosecutions and 2257 inspections into gear. While enforcement as to both was sporadic to say the least, the industry sure took notice.
The Ides of March
Nearly a decade after Clyde DeWitt’s soothsayer prediction, it proved to be accurate. “Et tu, Bruté? —Then fall, Caesar.” Technology has done to adult internet and video more than the government could have done if the entire Department of Justice had specialized in obscenity and 2257 enforcement. First, there was the same species of file swapping that brought down the music industry. But the sword piercing the heart of the industry was in the tube sites. And you know the story from there.
As has been written here before, the great airlines of America should not be Delta, American, United, American and Southwest; they should be the Union Pacific, Burlington Northern, New York Central, B & O and Southern Pacific. When air travel first became feasible using World War II aviation technology, these great rail companies were ideally poised to become leaders in air transportation, both passenger and cargo. They had the entire infrastructure in place required to enter the air transportation business. Instead, they had the Kansas City Zephyr and the Southwest Chief, which never could compete with the Lockheed Super Constellation or the Boeing 707.
Going forward, survival requires thinking like the airlines did, rather than the railroads.
Clyde DeWitt is a Los Angeles and Las Vegas attorney, whose practice has been focused on adult entertainment since 1980. He can be reached at firstname.lastname@example.org. Readers are considered a valuable source of court decisions, legal gossip and information from around the country, all of which is received with interest. Submission of books, pro and con, for review is encouraged, but material will not be returned. This column does not constitute legal advice but, rather, serves to inform readers of legal news, developments in cases and editorial comment about legal developments and trends. Readers who believe anything reported in this column might impact them should contact their personal attorneys.
This article originally appeared in the September 2009 issue of AVN.