director of marketing for Danni's Hard Drive, one of the
most popular softcore websites on the Internet.
How big are the profits in this industry?
It depends a great deal on how people run their businesses. It's been
well-publicized that Playboy isn't yet making a profit online, even though
there are enormous revenues there. I'm sure that's in part due to how they
run their business and the number of people they employ.
We're very profitable ourselves. We don't make as much profit as we could
because we're picky about how we do things. We'll have a model in for a day
and maybe get 20-40 stills out of that day. There are people who are
getting a thousand stills on a digital camera. But I would say that profits of
30 percent plus were relatively commonplace. ... I'd say we're on the very
top tier. ...
Danni sells something which everybody's always wanted forever and
ever.
Absolutely.
Does she have anything else to offer?
She has an enormous amount to offer the business community in terms of the
technologies that she's built the adult company on. One really interesting
comparison is the medical imaging business -- that is exactly the business that
Danny has built to provide people in France and Australia and Japan with
pictures of naked models. That technology could be used, entirely unchanged, to
deliver pictures of brain scans and CAT scans to doctors worldwide.
And that's an enormously profitable business and something that's really valid.
People are beginning to see those affinities.
And the systems that have been built for processing credit cards are among the
best in the industry, if not the best in the industry. ... There are lots of mainstream companies who'd make more money if they processed using the technologies that Danni's built than trying
to build their own.
founder and CEO of Danni's Hard Drive, which Ashe says made $8
million in 2001.
So explain Danni's Hard Drive to me.
... When you come to Danni's Hard Drive you'll find a lot of things. We post a
lot of regular content: picture of the week, model of the day, we have news
features, the joke of the week. You can preview e-zines, read through all of
the model biographies, read my FAQ and biography. You can see sample photos, we
do parodies and fun little features. But what you'll quickly find is that the
model's directory is at the center of the site. It's at the center of the file
structure. Everything comes and goes from the model pages, everything.
How much money, how big a success over the last few years?
... Last year Danni's Hard Drive made $6.5 million; this year
we expect to make $8 million. We now employ 45 people, and
the business continues to grow and expand. ... Over the years, we've had to
develop a lot of technology to support the business of Danni's Hard Drive -- streaming video technology, hosting technologies, credit card scrubbing
technologies, processing, customer service. And all of these things are now
working so well that they have value to other companies, and we're beginning to
market those technologies to other companies. And that's actually the largest
area of growth in our business right now.
And the other area that we're moving into is taking the Danni brand, which is
probably the only pure adult Internet brand in the space, and moving it to
other forms of media. We're doing a video and DVD line, I'm writing a book,
we're talking about doing a magazine, doing cable and pay-per-view shows. So
I'm trying to sort of expand in some more traditional forms of media.
How attractive is a company like Danni's Hard Drive to outside
capital?
... We have taken meetings with some of the biggest companies on the Internet.
Every time they come in, they want a piece of our audience, they want a piece
of our revenues, they just want a piece of the market. But in the end, we
always get right up to the altar and they get cold feet. Somebody on the board
says, "Oh, no you don't," and the deal is dead. It happens all the time.
president of Vivid Entertainment Group, one of
the largest adult-video production companies in the U.S.
How big is this industry, and how do we know?
The numbers that have been bandied around are somewhere between $4 [billion] and $10 billion, generally. And I know that portions of the estimate of $4 billion are low. Ten billion is probably high, but it depends on, also, what you group into the adult industry. Technically [it's not just] videos and DVDs and television and Internet; it also includes everything from strip clubs to magazines. I would say that with any definition it's about $4 billion. ... It's probably less than $10 billion right now.
The key, though, is the growth factor. And all of a sudden you have Internet
and broadband. And once video can be seen over the Internet without the
choppiness, that's when you're going to see it grow by five times in a year.
Particularly when you add in what's happening internationally. Right now when
we talk about this number, we're talking about domestic number, predominantly.
The rest of the world is taking off in terms of entertainment, in terms of
accessibility, in terms of technology. And that's going to be a huge growth
area for businesses like my own.
Why is it doing so well?
Well, it's relatively recession-proof. I mean, people want it. As a matter
of fact, it's entertainment that, if you can see it in your home, it's cheaper
than going out and taking a huge family to the movies or going to the ballpark.
It's not really an expensive proposition, for adult entertainment again is just
distribution. Can I get the product to the consumer? You know, it used to be
that someone would have to rent a video in the store, and before that it was a
movie theater. Now, as television comes into the home, the privacy of your own
home, there's no embarrassment factor, there's no issue with privacy. The
Internet is a personal technology and that's very well suited to adult
entertainment.
And what was the variety of your videos that you offered on the [cable] tv channels?
What we offered on the TV side could be as simple as a more-edited version
of films, literally meaning that it was more the plot, the sensuality, rather
than the sexuality. We wouldn't show graphic content, meaning explicit
content. And then we had movies that we'd literally show almost the version
that you would see in the video store that contained anything that people
wanted to see.
Before you sold [your tv channels] to Playboy in July 2001, how many
households were you getting into?
Our three networks, at the time we sold them, were in around 40 million
households. ...
Is there any way to judge how many of those households would then use
the service?
Well, privacy is a very big factor in our industry. ... We did know what's
called a buy rate, which is for every million homes you're in, in any given
month we'll know how many times someone bought a movie. Generally our buy
rates for the networks were between 10-20 percent, meaning that if
there's a million homes in a given month, for every million homes you'll do a
hundred thousand, hundred-thousand-plus buys.
So 40 million homes you were in and the profit was?
I won't go through all the details of our contract, but with that 10
percent buy rate, 40 million homes would equate to approximately
four million movie buys per month.
President of Larry Flynt Publications, which puts its worth
at nearly $400 million.
Help me understand the breadth of the Flynt empire. How big is it?
Well, LFP started as just a publishing company with Hustler magazine. And from there we started publishing 20 publications, of which some were adult,
some not. We've got everything from gaming magazines to music magazines to
adult magazines. And from there we started branching out. We started retail
stores, an Internet division, a video division. And recently we're starting
clubs. So we've become very diversified in the last 10 years.
You're vertically integrated, as you've said. How does it
work?
We've got the magazine, which is sold on the retail level. From
that, a magazine is also put on a website, with additional complimentary
material. You've got the videos, which are a separate area. Again, they're
sold separately to satellite, to video on demand, and also offered on the
Internet. They're also ordered through a mail-order division. You got the
retail stores, which also handle a lot of product in addition to other product.
The business core is right here in this building. ... We've got about 200,000
square feet here, of which we're using 100,000 square feet. We run our Internet
division. Our retail operations, they're managed through here. The video
division is managed through here. The magazines are actually produced here.
Why has this business exploded in the last 10 years?
Well, we've made a real emphasis to get diversified, not to be solely
holding to one particular item like Hustler magazine. So, as the economy goes
up and down in certain areas, our company continues to gradually grow and get
bigger. ...
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