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Adult Entertainment is Still the King of Online Content
December 24, 2002

A report by the National Research Council estimates between 2 - 8 million subscribers to adult entertainment sites paid between U.S $40 - $100 for a year.

Authors Dick Thornburgh and Herbert S. Lin gathered information about the size of the online adult entertainment business as part of a book, "Youth, Pornography and the Internet". They said the industry in the U.S generates as much as $1 billion in total, including web site advertisements, product sales and age verification services.

Some analysts in the industry expect this figure to grow to $5 - $7 billion over the next 5 years, barring unforeseen change.

According to the best information available to the committee, subscription sites with adult content exceed 100,000 in the United States and about 400,000 for-pay adult sites globally.

The business entities responsible for these U.S. sites include about 1,000 U.S. firms operating as genuine business enterprises, with perhaps another 9,000 or so operating as (usually small-scale) affiliates of other established online adult entertainment firms.

Compared to the totality of content on the public World Wide Web, adult-oriented sites account for a relatively small fraction (about 1.5%). However, these sites account for a significant amount of web traffic.

According to industry statistics, approximately 70 million different individuals per week view at least one adult Web site on a global basis. 20 million view adult pages that are apparently hosted on sites in the United States or Canada.

The number of paying subscribers is on the order of several million in the United States, and may be as high as 10 million.

The majority of these viewers and subscribers are male, though the fraction of female viewers may be growing. On average, a paid subscription generates $20 to $40 per month in revenue. The majority of subscribers cancel within a month, but of those who remain after a month, the typical retention time is approximately 3 to 4 months.

Revenue in the online adult entertainment business, as in other businesses both online and offline, results from the sale of products or services (including subscriptions) or advertising.

The largest amounts of revenue are obtained from the end-user customer, who typically uses a credit card to subscribe to a site.

As a subscriber, he obtains unlimited access, though the average subscriber only uses the subscription 1.5 times per month (one viewing session typically involves seeing around 75 to 100 pages).

A web site owner can also obtain revenue from advertisers with typical values of $3 per CPM and $0.05 per CPC.

All of these payment schedules usually adjusted on the basis of the value of the user to the advertiser.

For example, if the traffic sent to the advertiser is highly qualified, the payment rate per ad-click might be $0.20 instead of $0.05. If the customer who subscribes to the advertiser's web site stays more than 2 months, the web site owner might receive a bonus of an additional 25 percent of the first month's revenue.

Subscriber retention is extremely difficult for these pay sites without a constant supply of fresh content that they must produce themselves or license from providers.

Even then, because sites have designs, styles, themes, and tastes that eventually become tiresome to the member, a high percentage of members leave after the first month, and even more leave after the first few months.

But these customers don't give up on adult content. Effectively, they simply transfer their membership by canceling with one site and signing up at another until they become bored and move on again.

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