Interview with Frederick Lane

Frederick Lane : Lawyer, Author, “Obscene Profits”

Interview by Robin Benger:

How big are the profits in the porn industry?

It depends on what market you’re talking about, but if you’re talking globally we’re talking something on the order of 50 to 55 billion dollars each year.

How much of the internet is that?

Frederick Lane
Well certainly on average in the United States, for instance, the internet has been accounting for 10 to 15%. Latest figures have put the US internet portion at 1.5 to 2 billion dollars out of a total market probably on the order of about 15 to 20 billion dollars. If you extrapolate that worldwide, then, you’re talking an internet portion that’s in the 5 billion dollar range.

You made the comparison to the California gold rush.

Well, I think it’s actually a great analogy because you have these unopened territories that people were just discovering. There were new ways to exploit them. People rushed from the east coast in order to mine for gold. They were making, if you will, obscene profits doing it, and the internet was very much the same thing back in 1994, 1995 when the world wide web began to roll out. People realized that there were ways to monetize this new resource, and they rushed to do it. And one of the things that “Obscene Profits”, my book, was intended to show was the way in which technology was used in order to make it more accessible. Make pornography more accessible for people. And the internet is a classic example for that.

Describe how pornography and internet mesh together at an incredible pace.

Well, I think that’s a great story. 1994, 1995 you’ve got Mark Andrieson releasing Netscape Navigator 1.0, I think back then it was actually called Mosaic. It was the first graphical web browser. And what it meant was that for the first time people could use the internet to distribute text and pictures at the same time, and people could use a browser to view that. The rate of growth in 1994, 1995 with the web was somewhere in the order of 350,000%. It’s staggering how many people leapt online. At the same time people began to realize that you could digitize photographs. You could actually turn them into bits and send them across the internet, and people could view them.

Not surprisingly one of the first categories of pictures that people decided to send out were scans of Playboy and Penthouse and so forth. And when people realized how much attraction there was for that, how much of a market there was, you began to see the first websites being set up, where people would pay a small subscription fee to compensate someone for the work of doing the scanning and so forth, and it just exploded from there. In a very basic way you began to see people using digital cameras to broadcast themselves, admittedly band width was a huge problem, so of course it started out with photographs first. But obviously people were willing to pay in order to get access to these materials. So that was part of it.

The other piece of it that was really significant was that the computer made it possible to get access to these materials much more privately than had previously been done. That’s the key piece of any technological development in terms of the pornography industry. It both needs to make it easier and more private. And the computer achieved that, because you no longer had to leave your house in order to get access to materials.

To what extent did porn drive the internet?

Well, certainly I think in the first two to three years, maybe even the first five years that are often referred to as the golden age of online pornography, you are talking a significant percentage, probably 20, 25% of the available material. That rapidly declined. I think that that’s one of the things that people lose sight of, is once the adult industry demonstrated how easily this could be done, you begin to get much more mainstream non-adult, if you will, non-pornography uses of the internet. And overall, the size of the pornography industry is dwarfed by most other industries, both in the United States and globally. I mean, even in the United States, if we’re talking a 20 to 25 billion dollar business, that’s roughly what people pay for underwear in the United States alone.

So, we’re not talking, really, in strict terms a very large industry. But it’s an industry that gets a great deal of attention, both politically and socially in the United States and elsewhere as well. So, I think now you’re talking about an industry according to the latest statistics I’ve seen that’s down around one or two percent of overall traffic on the web. That’s not to say that a significant portion of internet users don’t visit adult sites, but in terms of what the net’s actually being used for, it’s really a pretty tiny percentage.

Whats been the profitability of porn on the internet?

I would say pornography remains as profitable, if not moreso, than most other industries. A lot depends on what the industry is designed to do. The point of the pornography industry really is the delivery of digitized material from the producer to the consumer. That’s one of the reasons the adult industry succeeded so well on line because its product, which is essentially images or textural fantasy, is tailor-made for digital delivery. That’s what you do. Other businesses that rely ultimately on the delivery of a physical product have more of a challenge because they get hit by delivery charges and so on and so forth. So, for instance when you look at the long, slow growth of Amazon which ultimately has done pretty well I think. It’s growth pattern was vastly slower than the more successful adult businesses because it was still dependent on shipping an actual product. That’s not what the adult industry has to do. They just basically turn it into bits and as long as those bits can be delivered, they’re good to go.

What impact have free sites had on money-making?

That’s a good question. I think that when you look at the transition from the quote, unquote, golden age to the more mature model of the adult industry, the rise of free sites had a lot to do with it. I mean ultimately you look back and you can see that the adult industry started with free sites. Then they began to monetize them and figure our that people would pay subscriptions to use them. Then the quote, unquote, free model arose where people were putting material online in order to get advertisers and drive traffic from one site to another. That had, I think, the ultimate impact of wiping out the middle layer of the online adult industry. You have the large sites like Penthouse, for instance, or Playboy or Cybererotica or some of these other sites, which are so big and offer so much diverse content that they’re able to ride out that kind of thing. There’s a quality level there that is very different from the free material that’s available. And people are still willing to pay a premium for that. At the other end of the scale, you have people who are much, much smaller, but they’re producing unique content. Content that no free person, no free site can provide to its users or its visitors and people are still willing to pay for uniqueness as well. So those two ends managed to survive the middle layer of free sites, but I definitely think that the free sites had an impact on the overall industry as a whole.

How do the sites ramp up the cost of access…

One of the challenges now that you’ve got a more mature industry by far is that you need to distinguish yourself in some way. What you need to do is demonstrate some uniqueness, some unique appeal to consumers. Frankly, it’s not all that different from your local shopping area. You need something that will draw people in. And one of the things that you find is that producers go farther and farther out onto the fringes of the material that they produce and market. That has a couple of different effects. Number one, because some of this material is difficult to find, you tend to get very loyal customers. People who have been looking for a particular kind, a particular fetish, now they can find it. They tend to be very loyal subscribers and that’s one of the things that keeps smaller sites in business. The flip side of that is that in the United States there are obscenity laws, basically the Miller test from 1973 that, among other things, say that if certain material violates the contemporary community standard, then it’s obscene, and it’s not entitled to First Amendment protection, which most speech in the United States is entitled to.

The kink material edges closer to that obscenity line and risks the possibility of an obscenity prosecution. Because the risk is higher, one of the things that kind producers will do, or fetish producers, is charge a premium for that material. And again, that’s one of the things that helps keep them profitable, helps keep them in business.

Is the definition of obscenity up in the air because we are now dealing with a…global audience.

That is completely part of the issue, I think that’s exactly right. Because the Miller test includes this phrase “contemporary community standard” and because the internet is available across the entire United States at any given moment in time, the issue then becomes what community do you use to interpret that particular law? And I think from a legal perspective, the United States Justice Department and the state prosecutors in each of the different states have been more reluctant to bring obscenity prosecutions because the internet, I think, has effectively changed the community standard everywhere. One of the things you can do now as a defence attorney, if someone’s being charged with obscenity, is basically say the material that this person is being charged with is no worse than what you can see in your living room or bedroom at any given moment. And I think that that has actually had a practical effect in terms of obscenity prosecutions.

In 2001, we were told that BDSM producers put what they wanted on the internet and nothing has happened…are there any internet obscenity prosecutions underway in the US today?

There’s one prosecution that might fall into that category, and that was the prosecution of the couple, was it Rob Black and his wife…Extreme Associates, yes, thank you. Well, the Extreme Associates prosecution in Pittsburg is, I think, the test case for the United States government as to how much they can prosecute for material distributed across the internet. And there’s a bunch of different legal issues that are raised by that. Not obviously the pure speech issues, but also the question of what constitutes a work. For instance, they’re being prosecuted for trailers basically, hat they’re sending to people, which are only a minute or two of content. Well, that’s obviously not the entire work that they’re offering to sell. So, is that enough to convict them, that one minute snippet or two minute snippet? That kind of thing.

But with the deluge of could stop one producer, but there’d be 3-thousand other sites churning it out.

Well, that’s the other piece of the internet that you have to look at when you’re talking about obscenity prosecutions, which is to say, are there remotely enough prosecutors in the United States to take on all of this material at every particular pressure point or every particular fetish that might be of issue to people.

Describe the effect on internet porn of the Clinton administration.

Right, I mean I think one of the huge frustrations that Christian conservatives and religious conservatives in the United States had with the Clinton administration was that they essentially abandoned the idea of obscenity prosecutions. The unfair part of that is that they took all of those resources that had been directed in that way and turned them into child pornography investigations and prosecutions. They put a huge amount of effort into wrestling with that problem, and I think it made significant progress during the course of his administration. That actually was continued to some degree under the Bush administration, although obviously religious right groups got much greater access to the president because that was a significant part of his political support. Had 9/11 not happened in 2001 I think there would have been a much stronger push against the adult industry in general, and for general obscenity prosecutions than actually happened.

The controversy or the incident with Monica Lewinsky, I think, was interesting because the fact that it happened in the internet era made the whole prosecution an obscenity issue all by itself. And I remember doing some research, I was working on my next book, “The Naked Employee” at the time that that came out, and the release of Ken Star’s report, I think it was in 1998, about what had happened between the President and Monica Lewinsky, caused a huge amount of productivity loss in the United States. Because people were downloading the entire report at work and they were reading it. But it also raised some interesting obscenity issues because the language of that report was extremely explicit.

Now in the United States we have tended not to prosecute text anymore for obscenity. But still, none the less coming from a conservative prosecutor it was pretty ironic.

Legally-speaking has the adult industry gotten a free pass…

I think that is a fair statement to say that the adult industry has managed to develop without a great deal of interference from the federal government, and certainly not from state governments. I think they fairly saw this as a federal issue. I think that the United States Congress has taken a number of different attempts at trying to reign in the adult industry, but those attempts have run up against the First Amendment. And the United States Supreme Court has been very clear on the point that the nternet is the most democratic form of communication that we have managed to invent yet. And because of that inherent democracy, or democratizing effect, you don’t want to limit the kind of speech, except under the most grievous circumstances. Child pornography is one of those. And the Court has made it absolutely clear that you can do that. But short of that, they give a great deal of deference to the speech capabilities of the internet.

What are the Economic demographics of the porn market on the internet…

I think that my perception based on the research I did for “Obscene Profits” was that the internet was a uniquely suited medium to the adult industry for a number of different reasons. Remember we talked briefly about the concept of delivering a physical product? Well, prior to the internet, of course, the adult industry did deliver a physical product. It delivered a magazine, it delivered a video, et cetera. And that delivery could be complicated because in some jurisdictions it was riskier to deliver something than in others. Because the essential product isn’t really the DVD or the magazine, it’s what’s being depicted, the fact that you could turn those into bits means that the adult industry was able to reduce its delivery cost to essentially zero.

So yes, you have overhead for servers, you have overhead for the computers, overhead for digital cameras or scanners or whatever you’re using. But relative to putting out a magazine or delivering a thousand DVDs across the country with all of those costs, the internet was a godsend because the essential product can be delivered for next to free. And that makes the actual margin much greater for online adult industries. You see the impact on video stores, even as we speak. The number of brick and mortar stores is dropping precipitously. Because not only do you have the costs, but the legal challenges of getting a store situated are tremendous. So, all in all the adult industry saw tremendous advantage. Some of that, not enough but some of that, spilled over to people who work in the industry in the sense that because you’ve got greater profit margin, you can, in fact, pay your performers better. Now, I don’t think it’s fair to say that there aren’t still problems with the adult industry, because there obviously are. But in terms of the actual wages being paid, certainly they were able to vastly outbid Walmart or McDonalds or whatever their competitor was.

Then, on top of that, the other piece of that that’s been interesting to follow is that because the entry costs for doing an adult business online are much lower than almost any other comparable business you could name, it’s much easier for women, people of colour, individuals who have been marginalized for one reason or another, to start their own websites. And again, it’s difficult to compete with the CyberEroticas or the Playboys, but it’s not difficult to compete with other, smaller websites. So, you have got some interesting layers in that as well.

Statistics show that one half of movies paid for in American hotel rooms at any time are porn?

I mean, during the course of my research, which was primarily 1996 to probably ’99, the figure that was most startling with respect to hotel room usage was, I think it was more along the lines that of the movies rented, half were adult movies. So that’s no surprise given sort of that businessmen travel and so forth. Since then I think what’s been startling and I think that this is an influence of the internet as well, is that you see the movies themselves getting much more explicit than they used to be. And what I think you are seeing hotel chains doing, essentially, is competing with what people can get using the wireless that all hotels provide as it is right now. So, I wouldn’t be surprised, again, like other things, where either the movies continue to get more explicit in order to compete with the internet, or you start seeing overall rental rates decline.

The other thing, of course, that is consistent with everything else that we’re seeing, is that the movie rental rates for the adult movies are often twice or sometimes three times what renting the latest Hollywood film is in the hotel rooms. And I think part and parcel of that whole thing, the reason I was looking into the hotel rental rates and the hotel movies in general, is that it’s part of that tendency of mainstream corporations to try to find ways to participate in this industry without obviously doing so.

And certainly the hotel chains have been at the forefront of that. The telecommunications companies are perfectly happy with the amount of traffic that travels across their backbones of one kind or another because the fees that they charge the ISPs for access to their conduits and so on down to the consumer all filter back up to them. So everybody’s a player to one degree or another in all of this. But, to what extent they are willing to let their shareholders know, it is an entirely different question.

In “Obscene Profits” you do a very through job of tracking how mainstream corporations make money out of internet porn…

I think when you start looking at the mainstream corporations, certainly in terms of telecommunication companies, that profit ultimately from the amount of traffic… you’re talking about AT&T, you’re talking about Sprint, you’re talking about Verizon, all of the major backbone carriers to one degree or another are a player in this. Your hosting companies up and down the coasts and in between that host adult sites, they’re certainly companies that specialize in that, but there are many that don’t, and simply rent out pieces of their servers to whoever shows up. I think that the examples that are most common to folks are the hotels, whether you’re talking about the Hyatts or the Mariotts or some of the others, certainly Hilton is on that list as well. What you’re seeing, I think, is an effort to maximize their profits, and at the same time, frankly, provide consumers with what they’re looking for. I mean, I don’t think that they would offer it if it weren’t being bought.

So you’ve got a double edge sword here, and I think that’s another piece of the commentary, which is how are the tastes of America changing? And I think yes, we can point the finger at corporations who certainly subscribe to these services, like Lodgenet, for instance, is one of the major distributors of these adult films. And then they bury it in some corporate report under a name that doesn’t look anything like that. But at the same time, we have to look in the mirror and say, as consumers we’re out there purchasing it and making it worth the hotel’s while to do that.

…why do mainstream corporations hide the money they are making from porn

It’s totally…the reason that corporations don’t want this showing up very easily on the corporate reports is twofold. Number one, there’s sort of a propriety issue. You know, an unwillingness of Wall Street to be in bed, if you will, with the adult industry, any more than it already is. The other piece of it, frankly, is that I think to a lesser degree now than it used to be, the meetings, the shareholder meetings of these major corporations were seen as a lobbying opportunity, and a pressure opportunity for groups that were unhappy with how the corporations were behaving. And by hiding these relationships and hiding these profits, they reduced the likelihood that people would show up at the shareholders meetings and try to embarrass them with unfriendly resolutions, or try to jettison the board of directors or something like that. There certainly have been groups that have taken that approach over the years, but they haven’t been very successful for the obvious reason, which is that the corporations are both large enough to resist the pressure and making enough money that it’s overall in the shareholders’ interest to do so.

It turns out, when it comes to curbing porn on the internet that the Christian right has been quite ineffective…

They’ve been ineffective in a number of different ways. It’s interesting that you say that because I just released another book called “The Court and The Cross” which is about the religious right and the Supreme Court. And the central message of that is that they’ve been working on the issue of the federal judiciary in the United States for really 30 years, and it’s only in the last couple of appointments of Chief Justice John Roberts and Justice Samuel Ledo where they’ve started to see the kind of progress they expected to make back in 1980 when Ronald Reagan was first elected president, because that was their first big success. I think the overall success of the adult industry…excuse me, the religious right with respect to the adult industry has been minimal. And I think the large part of the credit for that goes to the First Amendment. That ultimately at the end of the day, even conservative judges are looking at the First Amendment which says, “Thou shalt make no law bridging the freedom of speech”, and that’s pretty clear cut. And it takes a very strong governmental interest and lo lack of, or no available alternative method in order to overcome that. And that’s the problem that both Congress and the religious right have run into.

How can the First Amendment protect somebody beating a women half to death at the click of a key…

Sure, that is among the more difficult questions you could ask. Because the…I think the answer lies in the absolute language that the framers of the Constitution chose. Which is to say that if you have the government trying to dictate what should or should be seen or heard by the American people, they have a very high burden for doing so. And the United States Supreme Court, when it’s been looking at issues of sexual expression has concluded that unless you can get a group of like-minded individuals in a community to say that a particular form of sexual expression violates their contemporary community standard, then that content regardless of how distasteful it is to you, is protected by the First Amendment. Because to do otherwise would be to so damage the First Amendment, that it would threaten the other kinds of speech that are critical to the United States’ successes of political entity.

Now, that being said, I think that the issue that the internet raises is, what community are we going to be talking about? And I think that ultimately what I’ve been arguing since “Obscene Profits” is that the community in question needs to be considered the household. That we don’t want, given the value of the First Amendment as a political document, we don’t want the State and we don’t want the Federal Government trying to dictate what kinds of expression sexual or otherwise, should be consumed. But that it is completely appropriate for the household to do so. Because each household is entitled to determine its own sense of decency. And there are certainly many technical ways that you can help do that, you know, in terms of what comes in through the internet. But it absolutely shouldn’t be the government doing it, because the potential for abuse there is so profound.

…explain the drive of the porn industry to become mainstream…

I think that is a great question, as to whether or not the pornography industry has become mainstream. I think it is moving in that direction, frankly. I think that after looking at it…I mean we’re talking a full decade, maybe 12 years now that I’ve been studying this particular industry. In that 12-year period you’ve seen the rise of conventions, I think, within mainstream media that emulate a lot of what the pornography industry does. You’ve got the concept of porn chic showing up in a lot of fashion shoots now. You definitely have the concept of pornography being talked a lot more or discussed a lot more. You see it showing up in sitcoms as a plot device sometimes. I mean even “Friends”, that sort of mainstream show, had at least a couple of episodes that oriented around that theme, in very open ways, and also I think, in very gender neutral ways which was kind of interesting. Overall, I think that it will continue to be a good long period of time before, for instance, you see adult companies, besides Playboy at least, being publicly traded. I don’t think that there’s any rush for that to happen. But, I think ultimately economics is the test. Is it worthwhile to do?

The other thing, too, is that certainly from a business point of view, one of the things that you’ve seen is that the adult industry has grown more mature in terms of its handling of business affairs. You’ve got more people using attorneys, accountants, much better tax records than they previously did, greater adherence to federal regulations with respect to age of models and that kind of thing. So, I think overall as the business demonstrates that it is more mainstream in its behaviour, then it becomes more arguable that there could be greater relationships between mainstream companies in the adult industry. I think it’s a very slow process. But I also think that the internet is changing social morays. And I think it is making the concept of adult much more open than it used to be. And I think ultimately that will continue.

…In Obscene Profits there’s an 18th century story of how sex sells…

There is some wonderful examples and I appreciate your referencing the history in “Obscene Profits” because that actually was one of the fun parts of that particular book. As you point out, I did star 25,000 years ago with the Venus of Villandorf which was discovered in Austria. Fr the viewers who haven’t seen it, it’s this tiny, totemic statuette of a very voluptuous woman. I think it was pretty clear that it had erotic overtones to it. Its exact purpose is probably unnoble at this point.

But I think the more interesting piece for me in all of this, particularly with respect to the internet, is the relationship between the adult industry and technology. And I think you can even point to Johannes Gutenberg in 1452, most famous, of course, for doing the Bible, but within years of the printing press being created, you had Boccaccio’s Decameron, which is sort of a precursor to Chausser with these body tales of Italian priests and so on and so forth. Very risque and banned by the church, of course. Not long after that you had Pietro eretto drawings, etchings, of very explicit sexual positions that were sold for a penny a piece or whatever the equivalent was and stamped out viciously by the Church. At the same time Netishun’s Venus of Irvano, or Veno was being held by the pope in this monestary or its palace.

So, you can really see, I think, a couple of things. You can see the relationship of technology and the creation of sexually explicit materials. You can also see the class element to it, which is that one of the things that technology does is, it makes it more accessible for people to get access to these images. Those tend to be stamped out, or the attempt tends to be made to stamp them out. While at the same time you’ve got higher end materials, probably equally erotic, which are upheld as great art. So it is an interesting tension there.

I think in terms of more modern technology, the camera of course, coming along first in 1842, probably the estimate is the first erotic photograph was taken within weeks after it was invented. But it certainly became a rapid industry.

Tell me how Hefner launched Playboy by putting all his money into one photo…

Sure, you had a young man in the middle west, obviously a relatively conservative area of the United States. And he got the idea, actually, after seeing I think the success of Esquire, which was one of the first sort of risky, risque men’s magazines. And he invested $500 in this photo of a relatively unknown actress named Marilyn Monroe kind of sprawled out on a red curtain that had been originally used for a garage wall calendar. And he built a magazine around that photo and managed to raise from friends and family, I think, was it a relatively small amount of money, two or $3,000 to print 24, 28 page magazine. Because he couldn’t afford actual writers, he wrote a few articles himself, but then he actually republished some of the stories from the Decameron that Boccaccio had gotten in trouble for 500 years earlier. And then had a huge success, I mean sold……