Porn industry’s billion-dollar new frontier

Your eyes open to a beautiful woman, scantily clad in red lace lingerie. She bats her eyes flirtatiously, then slowly makes her way over to you.

But this is not a flesh-and-blood woman; it’s a three-dimensional performer in a 360-degree immersive video so convincing you can barely tell the difference. In virtual reality, as nowhere else, donning a pair of clunky goggles allows you to pursue your wildest sexual fantasies.

For virtual reality to become a viable business, pornography, which tends to rank among any new technology’s earliest and most eager adopters, will need to play a starring role, analysts say.
By 2025, such adult content is forecast to be a $1 billion business, the third-biggest virtual-reality sector, after videogames ($1.4 billion) and NFL-related content ($1.23 billion), according to estimates from Piper Jaffray. It’s the next “mega tech theme” in the U.S., akin to the mobile-phone industry 15 years ago, analyst Gene Munster said.

Piper Jaffray
The relationship between adult film and virtual reality will likely be mutually beneficial for the top players — with pornography bolstering the sales and use of headsets, and subscriptions giving the porn industry a much-desired new revenue stream, said Piper Jaffray analyst Gene Munster.

“It could revolutionize an industry that has been stagnant for many years,” he said.

The porn industry is betting new advances in the technology can convince more people to pay for the content, since sales of traditional adult video have actually been slowing. Revenue growth among adult and pornographic websites increased at an annualized rate of just 0.3% to $3.3 billion over the five-year period ending in 2015, as the business grapples with high piracy rates and the proliferation of free sites such as PornHub that offer homemade content with few ads, according to IBISWorld Market Research.

The investment in virtual-reality porn comes as the long-hyped technology is finally getting mainstream attention. Facebook’s FB, +4.53% Oculus Rift virtual-reality headset goes on sale in the first quarter of 2016 after two years of beta testing. It will join Google Cardboard GOOGL, +16.26% for Android phones and Samsung Electronics’ 005930, +1.79% headset for the Galaxy Note 4, which both went on sale last year.

“Tech giants are in an arms race to put this technology is your living room,” said Jeremy Bailenson, founding director of Stanford University’s virtual-reality testing center, Virtual Human Interaction Lab, speaking more broadly about the uses of virtual reality in entertainment at the Tribeca Film Festival in April.

Now that the technology has improved, content creators are exploring all kinds of alternate worlds and applications for the technology in sports and entertainment. In January, Samsung Electronics announced a partnership with the NBA to shoot behind-the-scenes and live-action footage that may one day bring the courtside-seat experience to the general population. Samsung has also tapped “Walking Dead” producer David Alpert to develop thrilling virtual-reality content through its Milk video streaming service. Earlier this year, Facebook launched Story Studio, led by a team of former Pixar executives, and began premiering cartoony shorts at film festivals in the U.S.

Mark Zuckerberg may not be touting virtual reality for use in pornographic video, but adult filmmakers are preparing for the technology’s widespread adoption anyway.

The higher costs of producing the virtual-reality content, as opposed to the two-dimensional videos that can be produced by anyone with an iPhone, means subscriptions will likely play an early role — at least until there are more consumer-geared cameras capable of filming in a 360-degree format.

VirtualRealPorn, which has been producing virtual-reality adult films since January 2014, makes money by selling subscriptions: a 15-day trial for 5.95 euros, a month-to-month plan for €15.95, a three-month contract for €29.95 and a one-year contract for €89.95.

Porn-industry companies are hoping they can increase revenues dramatically if virtual-reality adult content catches on and stays behind a paywall due to the high barriers of entry, which result largely from filming challenges.

The initial filming struggles prompted VirtualRealPorn to build its own custom cameras to shoot in 360-degree stereoscopic 3D. “There are many things to change in the shooting regarding the actor and actress positions, distances to the cameras, poses, etc.,” said VirtualRealPorn spokeswoman Linda Wells.

GoPro Inc. GPRO, +2.53% became the first mainstream consumer technology company to try and bring virtual-reality production capabilities to everyone when it announced a cube-shaped mount in May that can hold six of its action cameras. The footage can be pieced together into 360-degree video segments using technology from Kolor, a virtual-reality production company GoPro bought at the end of April. But for what it’s worth, virtual-reality production remains in infant stages.
Part of what separates virtual reality from traditional video – and makes its production more difficult -- is that its experience is designed to be so powerful and immersive it tricks people into believing they are fully present in a simulated world. The porn industry has taken that a step farther, partnering with makers of digitally-connected sex toys -- a budding field known as teledildonics – to sync virtual videos with the physical movements of toys.

‘We see a growing interest in connecting sex toys with porn.’
Eddy Olivares, Lovense
Among the key players in this industry is Lovense, which has been developing interactive sex toys since 2010 but only recently began investing in virtual reality through a partnership with VirtualRealPorn. Lovense toys, which sell for $99 apiece, are commanded based on on-screen action in real time. The films are pre-programmed, with software developers synchronizing toys and content in post-production, similar to the way filmmakers add subtitles to Hollywood films.

Lovense said it had turned down offers to align its toys with animated content in the past but “immediately saw the opportunity” in the use of real actors. Initial demand was so high Lovense ran into supply issues, but the company said it is now convinced there is enough interest to develop a line of sex toys specifically for virtual-reality content.

“To be honest, we are surprised at the response we’ve gotten,” said Eddy Olivares, marketing manager at Lovense. “We see a growing interest among consumers and businesses in connecting sex toys with porn, and lots of money to be made.”

Also see: Virtual reality gets ready to invade your home

Despite the prevalence of porn, the Internet’s biggest players remain on the prudish side when it comes to adult content. Google Inc.’s YouTube, along with the app stores tied to both Android and Apple Inc.’s iOS AAPL, +0.86% , ban adult content. However, this has done little to dampen pornography’s proliferation, as related apps have long been accessible through third-party app stores, and videos are easily accessed through major Web browsers, such as Chrome.

Juniper Research recently forecast that a whopping 136 billion adult videos will have been watched in 2015 alone — a figure that Juniper expects to skyrocket to 193 billion by 2020. On a global scale, each smartphone user of adult content is expected to watch an average of 348 videos this year, with the biggest growth expected to occur in the U.S., where video views are predicted to grow by almost 55% by 2020, according to the report.

Juniper Research
The grassroots players in the virtual-reality industry seem more willing to embrace it. Earlier this year, Oculus founder Palmer Luckey hinted at a conference that X-rated content would not be banned from Oculus, pointing to the fact that Oculus Rift is an open platform and the company doesn’t micromanage software content. Since Oculus is owned by Facebook, which has been notoriously strict regarding nudity on its social network, explicit apps will likely be banned from the official Oculus Store, but they can be expected to be accessible in other ways.

But as pornography companies invest more money in virtual reality, activists contend they are doing so at the expense of industry performers.

“This shows the industry still doesn’t give a damn about performers and all they care about is their bottom line,” said Cameron Adams, a former performer who went by the stage name Cameron Bay and, through an affiliation with the nonprofit AntiPornography.org, now speaks out against damage done by the pornography industry.

If pornography businesses have the extra cash to spend on new technologies, they should, Adams argued, be doing more to protect performers, such as by providing health care for those who contract sexually transmitted diseases while working and paying for resources to ensure production teams are abiding by federal laws that, for example, require adult-film actors to wear condoms during filming.

“It’s clearly going to cost a hell of a lot more money to produce these virtual-reality films using different cameras and things of that nature,” Adams said.

There are also concerns that developing too-immersive simulated sexual experiences through virtual reality and teledildonics could lead to mental and physical health issues in users.

Alyssa Friedman-Yan, a licensed New York City–based therapist, said it has become common for the therapeutic community to meet individuals or couples seeking treatment for either addictions to, or problems in partner relations related to, Internet porn.

“As people are able to access and watch such a variety of extreme sexual activity, this can affect the actual act of ‘standard/vanilla’ sexual activity with partners,” she said.

Despite the anecdotal evidence pointing to these harms, Nicole Prause, a UCLA professor who studies sexual behaviors and desire, said there is a lack of scientific evidence directly linking pornography and addiction, and no reason to think virtual reality will necessarily make pornography any more damaging to viewers. In a recent interview with MarketWatch, she provided a number of examples for how this technology might also be used in a therapeutic capacity.

“Porn has always been a trailblazer in adopting new technologies,” said Michael Aaron, a licensed psychotherapist and sex therapist in New York City. “I think porn, like most anything else, can have elements of pros and cons.”