While the lack of accurate data makes it difficult to gauge the market size of the adult entertainment industry, analysts are creating revenue forecasts around the mobile arena, where they see the most adult growth taking place. The Yankee Group pegs the U.S. mobile market for adult content to reach between $543 million and $1.5 billion by 2009. Strategy Analytics estimates worldwide revenue to hit $5 billion by 2010. Whatever the case may be, the mobile platform, already hitting its stride in Europe, is the torch bearer of new revenue opportunities for adult content providers. That’s a notion not lost on Michael Klein, president of Hustler TV.
Just two short years ago, Hustler TV was little more than a concept, according to Klein, who oversees all broadcasting, Internet and mobile operations. Yet, in one month, Klein said Hustler TV became the most widely distributed adult network in Europe and now enjoys carriage in 34 countries.
As president of Hustler TV and its parent company LFP Broadcasting LLC, Klein previously headed up programming for on-demand content solutions provider TVN Entertainment; ran his own consulting company, Next Step Entertainment; and has held management positions at In Demand Networks, On Command Video, Spectravision, Showtime, Playboy Entertainment and Rainbow.
Klein recently spoke with Multichannel News contributor Tim Clark about the secret to creating new revenue streams in a crowded adult marketplace and how to partner with skittish operators on promotional activities. An edited transcript follows:
MCN: How do you set yourselves apart in such a crowded marketplace?
Michael Klein: The big factor for us is our product. Prior to launching the channel, we sold our movies to other networks and we were told that our product was among the top performing movies; so we pulled it all back, stopped selling it and aired it on our channel backed by the Hustler brand. It takes a lot to build a strong brand, and since Hustler has been around for about 32 years, we had a strong brand name to begin with and a large collection of titles because we’re also one of the largest distributors and producers of adult DVD titles.
We built up the channel by cutting deals with the other top studios, according to Adult Video News. Partnering with the studios that are moving in the right direction in the DVD marketplace translates into higher [video-on-demand] and pay-per-view buys.
MCN: While some might argue that sex sells itself, it’s still important to keep the adult entertainment audience apprised of new programming and developments at Hustler TV. Historically, operators haven’t placed the promotion of adult entertainment at the top of their “to-do” list. How do you get the word out?
MK: You’re right, cable operators are always going to be a little bit skittish to partner on promotions. We utilize all of the other elements under the Hustler TV brand to include our 23 different Web sites, 13 different magazines, Hustler Hollywood retail stores and Hustler clubs. We constantly run promotions in all of these areas.
We also offer operators the ability to, if they want, target customers that have purchased adult content to give them free access to some of our Web sites as a reward for making a purchase. If those people translate to paying customers of our Web sites, the cable operators receive some of the financial benefit of that. It’s a nice cross-promotional vehicle for us but it’s imperative to be selective and sometimes create parental control mailings with operators, that makes it clear that once you buy Hustler TV, parental control options are available.
Operators are more keen to partner on this type of promotion. But it’s not always necessary to do. One operator told me they experienced a 111% buy-rate increase in the first month of the launch of Hustler TV. They were shocked because there was no advertising or marketing. The word of mouth just got out there.
MCN: And you attribute this high level of buy-in to internal cross promotion across all of the Hustler properties?
Fans of the Hustler brand are going to find out about the TV channel.
MCN: What types of challenges still keep you awake at night?
MK: Trying to convince operators to launch the channel. Many affiliates tell us we’re the top performing network in their system so we try to spread the word to the rest. Since we’re obviously not going to see the buy rates of our competitors, we have to go on the word of the affiliates. Hopefully, they spread that word to the rest because you obviously have to get people to believe you because everybody is going to say that they are doing better. So we still have issues of getting the word out about the channel.
MCN: Any concerns about Playboy or TEN encroaching on Hustler TV terrain?
MK: You always have to be aware of who’s out there. Having a strong brand is a good thing — certainly Playboy has a strong brand too — but you have to be cognizant of other players in the market, especially if they spread rumors about you that are untrue. Unfortunately, you sometimes have to be combative about that. We understand that operators are not going to launch just one adult network, just as they don’t launch one premium channel. We don’t tell operators to launch only Hustler TV. But we do tell them that if they launch us we’ll probably do better than everyone else.
MCN: So do you think there is enough room for other adult entertainment channels, or do you fear that the marketplace is becoming too saturated, thus weakening the Hustler TV brand?
MK: It’s definitely a saturated marketplace, but I think eventually there will only be three or four major players. When you start to see a lot more channels coming out it doesn’t really make any sense. People that don’t have a strong brand will get some carriage but it won’t be wide so a time will come when operators will look at how many they actually need to carry. Three to four is fine. Beyond that I think it’s a bit much.
MCN: Where do you see future growth taking place for the channel? Is multiplatform distribution a part of the plan?
MK: We’re doing very well with multiplatform content now. The Hustler mobile platform recently launched in Europe and is proving to be a nice revenue source for us already. We expect that success to translate into the U.S., once better age verification tools are put into place.
As for other mobile delivery like iPods; I think putting adult content on them is just a passing fad. There’s always going to be a new method on the horizon to distribute content. Using the Internet to burn DVDs is something that a lot of different networks are exploring now, ourselves included. We just want to be sure that the DVDs will be non-pirated before we embark on this medium.
Everyone right now can do a burn-to-DVD format, but can you make sure that DVD doesn’t spawn multiple copies once it’s done? We have a strong DVD business right now but we do anticipate it waning a bit in three to four years with the expansion of VOD in all of the cable homes.
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