DirecTV Blames Weak Porn Sales for Pay-Per-View Revenues Dip

Aug 5, 2011 8:00 AM PST

NEW YORK — Porn took another hit yesterday as satellite provider DirecTV blamed “lower adult buys” for weaker pay-per-view revenues reported in the company’s second quarter earnings.

According to a Wall Street Journal report, DirecTV customers simply aren’t buying adult content like they have in the past.

The admission follows Time Warner Cable's news last week that a decline in the adult category was responsible for more than a third of a $14 million drop in VOD revenue.

The Journal report said that although porn accounts for only a small portion of Time Warner’s $4.9 billion revenue for the quarter, it’s one of the most profitable segments.

It’s no surprise that free Internet porn is hurting mainstream VOD and pay-per-view, but the Journal said its now causing TV executives to rethink adult content.

Comcast Corp. also noted a slowdown in pay-per-view revenue on its second-quarter earnings call on Wednesday, but a spokesman for the company declined to comment to the Journal regarding porn’s impact.

Playboy TV and its Spice channel have also been hurt, seeing its numbers fall consistently in recent years from $75.8 million in 2007 to $44.4 million in 2010 (its last report since the company went private).

The company said in a 2009 securities filing that the slide reflects the shift to Internet porn and it expects the trend to continue.

According to estimates from research firm SNL Kagan, VOD and pay-per-view porn accounted for about $899 million in revenue for overall, cable, satellite and telecommunications companies that offer TV service in 2010, down from a peak of $1 billion in 2008.

And 2011 forecasts show no growth.

The Journal report said that because TV companies shy away from discussing their porn business, it’s tough to get a handle on how much actually contributes to their bottom line, despite it being a consistent source of profit.

"It's a relevant business simply because of its profitability," Craig Moffett, a cable and satellite analyst at Sanford C. Bernstein, told the Journal.

Vivid Entertainment co-chairman and co-owner Bill Asher said that porn faced little competition when cable and satellite providers started airing it early in 2000. "It was found money" for cable companies, he said. "It was the dirty little secret that nobody talked about."

But now, Asher said, cable providers must compete with the Internet by offering competitive prices and more exclusive content, elements in line with Vivid’s current strategy.

"I don't think you want to get down in the trenches and slug it out with cheap porn on the Internet," Asher said. "Our job is to come up with unique, interesting content, not just more of what's out there."

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