L.A. Economy’s Dirty Secret: Porn Is Thriving

While Hollywood is fretting about a downturn in production and the flight of jobs to cheaper markets such as Canada and Australia, a certain niche of the entertainment world is quietly flourishing: porn.

This summer, grips, gaffers and best boys of mainstream movie-making are marching down Hollywood Boulevard in an effort to save their jobs. But in the San Fernando Valley, where the bulk of the world’s adult films are made, stagehands willing to stretch a boom over a couple in bed have zero problem finding work.

It’s not an industry that civic leaders embrace, and many people find pornography morally offensive. But the Valley’s adult film business plays an increasingly large role in the region’s economy and is having its most prosperous year ever, indicators show.

While feature-film shooting in Los Angeles County has decreased 13% this year, adult movie production is up 25% and rising, according to the Los Angeles County Economic Development Corp.

In July, one out of five shoots was a porn film, even though these productions cost just a fraction of a Hollywood release, according to the Entertainment Industry Development Corp., which oversees the granting of film permits in the area.

And though major studios are trimming the number of features they produce annually, adult video producers are stepping up production. This year, the industry is on track to release 10,000 new titles, according to trade publication Adult Video News, up from 8,950 last year--an X-rated milestone that probably won’t make it into the mainstream trade magazines.

Powered by the explosive growth of the Internet and shifting social mores, the Valley’s $4-billion porn industry has proved seemingly impervious to the bean-counting, cost-cutting culture seeping into Hollywood.

“You may not approve of the product, but the adult film industry is an amazingly large business,” said Jack Kyser, chief economist of the Economic Development Corp. “Given the distress in the entertainment industry, the success of the adult segment is a welcome anchor in the wind.”

And it doesn’t look like this anchor will be dropped anywhere else. One of the biggest stories in Hollywood this summer has been runaway production. A growing number of mainstream producers are shooting in other countries because of foreign tax rebates and cheaper labor costs. Last year, between $573 million (the Canadian estimate) and $2.8 billion (the U.S. estimate) of filming skipped off to Canada.

But for porn, there’s really nowhere to run.

Canada’s film and television tax credit regulation specifically bars government subsidies for skinflicks, as well as for award shows and reality TV programs such as “Cops.”

“Pornography is not in keeping with the community standards and social mores of Canada,” said Rob Egan, president of British Columbia Film, a quasi-government agency.

The Other Side of Hollywood

A crasser, darker side of Hollywood, the adult film industry makes its staggering sums quenching lust--often with youth. There’s no getting around the fact that porn is a business that transforms apple-cheeked young women, many only one or two years out of high school, into buxom sex workers. It’s a business with little oversight, no unions and serious health and safety risks.

Los Angeles Mayor Richard Riordan wishes the industry was headquartered somewhere else. Although he may not be planning a war on adult businesses like his counterpart Rudolph Guiliani waged in New York, he is “ashamed” of the porn industry, he said.

“It’s a black eye on our city,” Riordan said.

Many religious leaders, feminists and social conservatives condemn the industry in even stronger terms.

“The success of pornography is a reflection of the deterioration of American culture,” said Art Croney, a lobbyist for the socially conservative Committee on Moral Concerns in Sacramento.

But porn is entrenched here for a reason. Close to Hollywood, the Valley’s adult video industry benefits from the busloads of young starlets coming to town, the entertainment infrastructure and the easy morals of the region.

“Why would we want to leave?” asked Greg Alves, vice president of hard-core producer Metro Global Media Inc. in Van Nuys. “If I need something printed, I can go to a printer and they’ll do it, no questions asked. If I go just 30 miles from here, they’ll say, ‘Hey, I don’t do that.’ ”

A Growing, Worldwide Business

Home to the world’s largest community of porn stars (around 1,600) and 50 of the 85 top porn companies, the Valley has earned the nicknames Silicone Valley and Valley of Sin. Though nobody knows exactly how many local jobs porn creates, economist Kyser estimates the number between 10,000 and 20,000.

The industry has been based here amid the aging strip malls and countless cul-de-sacs since the mid-1980s, when the home video revolution opened up huge opportunities for porn.

Today, the Valley is full of signs of prosperity--if you know where to look.

In Canoga Park, Jenna Jameson, a 25-year-old actress with a tattoo below her belt that reads “heartbreaker,” races around in a $90,000 Mercedes. She and other top female performers--with stage names such as Jenteal, Sky, Asia and Lexus--earn as much as $5,000 per sex scene, compared with the $500 a scene typically paid to male performers.

In Chatsworth, Metro Global Media is building a 35,000-square-foot office, double the size of its current building. The new office will even have a sign out front, a first for the company.

Earlier this summer, the porn community celebrated its gravy days at a Bonaventure Hotel banquet. Middle-aged executives strutted around with teenage beauties on their arms. Paparazzi flashes popped. Champagne glasses clinked.

“The thing about this business,” said porn star Richard Pacheco in a speech, “is that when even when it was bad, it was good.”

Since the mid-1980s, porn hasn’t seen the ups and downs of mainstream Hollywood where major studios often produce a string of big-budget features one year and then fiercely cut back on production the next. Revenues for top porn players have steadily risen in lock-step with adult video rentals and sales, which climbed from $1.6 billion in 1992 to $4.1 billion last year, according to Adult Video News.

And porn is global, with Valley producers typically making a third of their profits by selling rights to foreign territories such as Germany, France and Brazil, several producers said.

“The audience keeps growing,” said David Leibowitz, a managing director at Burnham Securities Inc. in New York, who follows some adult companies. “Adult entertainment now has more acceptability in the mainstream, and with the Internet and other new formats, this product can be delivered into people’s homes without anyone being the wiser for it.”

Porn Expands Into Internet Market

Twenty years ago, sex movies were found only in seedy movie theaters. Today, porn is sold on the shelves of Tower Records and Fry’s Electronics. X-rated material is among the fastest-growing areas on the Internet, with $1 billion in sales, according to Forrester Research Inc., a Cambridge, Mass.-based Internet tracking company.

Soon, porn producers say, people will be able to download any adult film ever made via the Internet or video-on-demand services provided by cable TV companies.

Porn, it seems, is poised to keep expanding.

“I don’t see how this business can be cyclical with demand growing the way it is,” said Ken August, an entertainment consultant with Deloitte & Touche.

The insatiable demand for new titles is driven by men, who watch the movies to see their favorite female stars, which explains why women make much more than men in this business. An evolving trend among top producers is more couple-friendly porn, graced with plot, shot on 16mm film and often costing more than $200,000 to make. Still, 71% of sex videos are watched by men by themselves, according to Adult Video News.

Though the business is rapidly evolving, 1999 wasn’t a perfect year. Adult video sales and rentals leveled off to $4.1 billion last year, down a touch from $4.2 billion in 1997, partly because porn is available via the Internet, cable TV and digital versatile discs.

And while the proliferation of new titles--175 to 200 released each week--may be a dream come true for skinflick junkies, it means lower prices for producers. A common refrain is that the glut of adult product, much of it amateurish, has dragged down prices from $70 per new release five years ago to $40 today.

Still, there are few flops in the adult world.

“You have to try really hard to lose money in this business,” said Steve Orienstein, president of Canoga Park-based Wicked Pictures.

But porn may not be bulletproof, and industry insiders acknowledge concerns about government intervention. Though an FBI spokesman said there is little indication today that pornography is controlled by organized crime as once widely believed, porn companies are still vulnerable to obscenity prosecutions. The Clinton administration has pursued few, but some producers said they worry about a return to the days of the Reagan era anti-pornography commission, especially since porn now can easily be downloaded by minors over the Internet.

A Computerized Sex Suit?

Most porn companies, though, are betting that won’t happen. Take Vivid Video Inc., whose aggressive, well-capitalized pursuit of technology may revolutionize the mainstream DVD business.

Since it was founded in 1984, Van Nuys-based Vivid has been a consistent porn pioneer, recognized within the industry as the first company to sign a contract star, the first to specialize in plot-driven sex films, the first, even, to encourage its women stars to wear little gold necklaces with the company name.

The necklace practice has evolved as a way of creating brand identity among the different companies--and, porn detractors might say, a way of treating women as marked property.

Now Vivid, which claims annual revenue of $50 million, is leading DVD production with 600,000 porn discs made in 1998--and twice that this year. Vivid’s DVD technology is so advanced it’s almost disturbing. Sex scenes can be viewed from four camera angles, viewers can customize fantasies they watch, and the image quality is as sharp and lifelike as anything on TV.

Vivid programmers are trying to invent three-dimensional, interactive DVDs that would be viewed with special glasses for the most virtual sex yet. And David James, Vivid’s co-founder, is developing a computerized sex suit that would enable people to stimulate partners via the Internet.

No doubt porn still has its stigma, which it carries to the financial world as well. A handful of porn companies have gone public. Stock prices for some, such as New Frontier Media Inc. of Boulder, Colo., and Sioux Falls, S.D.-based LodgeNet Entertainment Corp., have more than doubled this year. Nonetheless, mainstream Wall Street isn’t biting.

“It’s like alcohol and gaming,” said Leibowitz, the securities analyst. “Porn stocks are perceived as sin stocks and well-known brokerage houses won’t get involved because it could scare away potential clients.”

But porn has plenty of its own loyal clients. At this minute, hundreds of people are pulling down adult Web pages, popping in sex videos, watching porn on a hotel room TV and flicking through X-rated movie catalogs that grow thicker each month.

“This has always been a dynamic business, but right now is an especially good time,” James said. “I don’t think any of us are going to be out of work any time soon.”

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Porn Titles

Number of adult video titles released, in thousands:

1999 projection: 10,000

Source: Adult Video News