Is the Sex-Entertainment business shrinking?

Changes in X-rated entertainment consumption.

Before the 1970s, the sex-entertainment trade was at best a small, under-the-counter enterprise, and at worst illicit. But the sexual revolution, accompanied by sweeping transformations of community mores and laws, changed that and the business of sex entertainment grew into a multi-billion-dollar industry.

Many social analysts credit technology as the primary driver of the sex industry’s growth. Certainly without the advent of videotape cassettes and players — which allowed consumers to view X-rated entertainment content privately and anonymously in their own homes — growth would have been slower.

Even though sex entertainment has been a “legitimate” industry for some time now, accurate figures on its size have been notoriously difficult to obtain.

In a 2001 New York Times article, Frank Rich estimated that pornography accounted for between $10 billion and $14 billion in annual sales. Suggesting that pornography was bigger than any of the major league sports, perhaps bigger than Hollywood, he wrote that it was “no longer a sideshow to the mainstream…it is the mainstream.”

Until recently, no other source put industry revenues nearly that high.

In 1998, Forrester Research published a report on the online “adult content” industry, which it estimated had $750 million to $1 billion in annual revenues.

In 2000, even Adult Video News (AVN), an industry trade magazine, estimated that Americans spent only slightly more than $4 billion to buy and rent adult videos.

Forbes magazine, compiling a number of sources, estimated that the entire “business of smut” accounted for between $2.6 billion and $3.9 billion in sales last year.

Though the sources varied on exact numbers, they all agreed that video sales accounted for the vast majority of revenues. But things are changing, again.

Speaking at a trade convention in Las Vegas, Paul Fishbein of AVN said that the sex-related entertainment business grew in 2006 by just 2.4% — roughly the rate of inflation — to just under $13 billion.

While not agreeing on the exact number but estimating the size of the business at only $12 billion, Jerry Ropelato of TopTenREVIEWS.com told The New York Times, “The porn industry is still growing, but not at the growth rates experienced in the past.”

And for the first time growth is not being driven by video sales. Once again, technology is changing the dynamics of the industry. While television revenues and viewership are declining in many areas, in porn they are rising.

Kagan Research estimates that $1.6 billion was spent on cable pay-per-view, video-on-demand and similar services in 2006, and roughly a third of that, $515 million, was for sex entertainment.

Over the next 10 years, Kagan projects that paid-for programming on cable will grow by roughly 13% annually, and sex-related content will account for nearly half of that, or 6.4%.

The most recent figures from AVN confirm the shift, showing that sex video sales and rentals fell 15.4% last year, while cable and pay-for-view revenues rose 32.2%.

In addition, AVN estimated that sex entertainment sales were up 13.6% online and 11.4% on mobile phones.

The sex-entertainment business may not be shrinking, but merely changing partners.

Courtesy of http://www.emarketer.com