Sales Down, Problems Up for Adult Home-Video Industry

Anti-pornography groups haven’t squashed the X-rated home-video business but they have certainly inflicted damage. The industry, which prefers to be called adult rather than X-rated , is suffering from dwindling profits, decreasing visibility and a steady shrinkage of outlets.

Anti-pornography groups such as Citizens for Decency Through Law and the American Family Assn., working mostly on a state and local level, usually attack video retailers, encouraging the passage and enforcement of laws that forbid the sale or rental of “obscene” materials.

“When retailers are prosecuted, they have to hire lawyers, which is costly,” said David Kasten, president of the Adult Video Assn. “Some retailers unite to fight the legal battles, but it’s still a financial drain. Some retailers find it easier to just stop stocking adult titles. In some states--such as Utah, Florida, the Carolinas, Virginia--you can’t really market adult films.”

Lamenting the shrinking number of outlets, Mara Epstein, vice president of sales and promotion for the adult company Arrow Films and Video Inc, said: “Most of the big national chains don’t stock adult titles any more--too many complaints and hassles.”

And those that do tend not to make it obvious.

Explaining why the Tower chain still carries adult titles, product manager John Thrasher said: “Adult movies are about 5% of our business. We just try to provide as wide a range of titles as possible for our customers. Retailers just have to be smart about it. They put them in a special section or under the counter or in some out-of-the-way place. They have to be very discreet about displaying them.”

But out of sight doesn’t mean out of mind.

There’s still a big audience for these movies. The sale and rental of adult movies represents 12% of the home-video business, according to Adult Video News, the industry’s most respected publication. Based on calculations from Paul Kagan Associates that the entire home-video industry last year generated $6.4 billion worth of rentals and $1.5 billion in sales, that would work out to a whopping $948 million in the sale and rentals of adult movies.

And the adult business is actually even larger than these figures indicate. The numbers don’t include business done by mail order or through adult-only stores. According to Adult Video News, there are about 1,300 adult stores in the country.

“There’s no way to measure the volume of business done through these outlets,” said Paul Fishbein, editor and publisher of Adult Video News. “These people don’t reveal financial figures, but a lot of money is generated both by the adult stores and mail order.”

Nevertheless, profits in the adult home-video industry are down. Part of the problem is that prices have dropped drastically since the gravy days of the early ‘80s, when retail prices were often in the $80-$90 range. Though major new releases still retail for $40-$60, many titles sell for $14-$20.

Shipments are down too. “With fewer outlets, you can’t ship as many copies as you could years ago,” said Arrow Video’s Epstein. “Now you ship about 2,000 copies of a title--5,000 is great. In the old days you could ship 25,000 copies of a good title.”

The industry has made some changes in an effort to adapt. Some companies, including Arrow Video, are exploring other outlets--such as liquor stores--and different marketing techniques, such as using low-key, inoffensive pictures on the packages so that store-owners will be more inclined to stock the titles.

In addition, 98% of the adult movies are now shot on videotape rather than film because it’s cheaper. The average movie on videotape now costs between $10,000 and $50,000 to make, Fishbein said, compared to about $100,000 to shoot on film.

It used to be that shooting on film was necessary because most of the movies would first be shown in adult theaters. But the home-video boom doomed the theater business. According to Fishbein, there were about 1,500 adult theaters in the country at the beginning of the decade. Now there are fewer than 300.

Along with shrinking profits, another problem plaguing the adult home-video industry is what various officials describe as a drop-off in the quality of the product. “Only about 15% of what’s coming out is quality,” Fishbein said. “There are too many garbage movies on the market--poorly shot, poorly made.”

Much of this inferior product is released by small, low-overhead companies that are the scourge of the industry. Such outfits sell old movies as if they were new, use low-quality tape, duplicate on slow speed (often resulting in a fuzzy picture) and frequently package the same movie under a different title. Major adult companies such as Arrow, Caballero and VCA are furious at these renegade firms for flooding the market with low-cost product, which drives all prices down.

These low-quality tapes, Fishbein insisted, undermine the adult industry by turning consumers off. “They feel ripped off, so they stay away from adult movies,” he said. “The way things have been going, this industry can’t afford to alienate customers.”