THE INTERNET: MILITARY MADE, PORN PERFECTED
The way you know if your technology is good and solid is if it’s doing well in the
porn world.1
—SUN MICROSYSTEMS SPOKESPERSON SUSAN STRUBLE
You may think a world without porn stars sounds like the distant past, but according to Tera Patrick, one of the biggest names in adult entertainment, it could also be the near future. That’s because in the world of pornography, what the internet giveth the internet can also taketh away.
Born Linda Ann Hopkins to a Thai mother and British father in 1976, the raven-haired, olive-skinned beauty is a veritable legend in the business. This status is achieved through a combination of her exotic look, some entrepreneurship and a lot of hard work. (Believe it or not, being a porn star is not just about having copious amounts of sex and going to wild parties; there are also many long and dreary hours, tiring travel and repetitive publicity to contend with.) Hopkins’s journey began early, when as a teenager she modelled for mainstream clothing catalogues. By the late nineties, she was posing nude for adult magazines such as Hustler and Swank and in 1999 she took the full dive into porn, changing her name to “Tera” to reflect her earth-consciousness and “Patrick” for her father’s middle name.
Patrick is not the stereotypical sex-crazed bimbo. She earned a bachelor of science degree at Boise State University and was set to become a nurse, but found the potential riches of porn too hard to resist. Over the next decade, she appeared in nearly a hundred films, and in 2009 was inducted into the Adult Video News Hall of Fame, the industry’s equivalent to the Oscars’ lifetime achievement award.
After working for some of the biggest porn producers in the world, including Vivid and Digital Playground, Patrick struck out on her own with Teravision, a production company devoted to putting together what she calls a “beautiful, sexy video library.” The internet gave her all the necessary tools to get a business up and running, and in 2003 she launched ClubTera.com, a website where customers could buy online access to her photos and videos and order DVDs. ClubTera also allowed her to cross-link with other adult sites, promote personal appearances and interact with fans.
Talking to me from her office in Los Angeles, Patrick is upbeat and cheerful when discussing how she wants to be seen as a positive role model for other women in the industry. Her mood darkens, though, when she starts discussing her reasons for going solo. While the producers of her films, who were always male, capitalized on her popularity, the riches she had been promised never came. “The guys take advantage of the girls. The girls work for free or cheap and the guys make all the money. The producers make all the money,” she snarls. “I was one of those girls who was working my ass off and making very little while the company took all my money ... [Now] I’m one of the few women in the industry that does make money.”2
This empowering equalization, what Thomas Friedman would call a “world flattener,” extends far beyond porn into what is the most dynamic force in the world today.3 The internet has given a voice to the disenfranchised and created opportunities where they never existed, from the very macro level right down to the micro. India, for one, has used the internet to become the world’s high-tech support centre, transforming itself into one of the most important global economies after decades of poverty and hopelessness. Companies such as Google, eBay and Amazon, formed in garages and basements, have used the internet to fundamentally change the way we live by literally bringing the world’s information to our fingertips, or by allowing us to acquire all our earthly needs without ever leaving the house. At the lowest level, individuals—whether they are porn stars like Patrick or just simple teenagers—have been empowered to start their own businesses or blogs, or to connect, communicate and share with others through social-networking sites and tools such as Facebook and Twitter. The internet has opened a new horizon of possibilities for people around the world, and its transformative abilities and effects are only beginning to be felt.
The internet is also destroying the old ways of doing things. We’re seeing the effects of this on an almost daily basis: if it’s not a music label complaining about declining sales, it’s Hollywood suing websites for disseminating copyrighted video or a newspaper going out of business. Traditional industries are having to come to grips with the fact that in the new digital world, the old ways of doing business may no longer work.
This is also true in the porn industry, where anyone with a computer, a webcam and a high-speed internet connection can now become a producer. The old production system, which revolved around the creation of big stars like Patrick, is under attack. On the consumer side, meanwhile, the porn industry is facing the same problems as mainstream media: its digitized content is increasingly being circulated for free. Having ridden the internet porn wave to the top, Patrick understands that the system she came up in is being squeezed on both ends. “I don’t know if there’ll be another big porn star again because the market is too saturated and there’s so many girls that no one really stands out,” she says. “If you can go on the internet and download free porn, why would you go to a girl’s pay website, unless you were a big fan of hers?”
Few internet users know that this global network, on which they now watch YouTube videos, post Twitter messages and share Facebook photos, was actually invented by the U.S. Department of Defense, then perfected by the porn industry. But the porn industry is already starting to rue all the effort it put into helping develop the internet into what it is today.
Bees in the Bonnet
It all started with President Eisenhower’s other secret weapon against the Soviet Union, the Advanced Research Projects Agency. Like NASA, ARPA was formed in 1958 as a direct response to the Soviet launch of Sputnik, and also like NASA, it was a civilian-run agency, designed to oversee all advanced military research and to make sure the United States was never again beaten to the technological punch. Roy Johnson, a vice-president at General Electric, was appointed its first director and given an annual budget of $150 million. His ambitious vision included the creation of global surveillance satellites, space defence interceptor vehicles, strategic orbital weapons systems, stationary communications satellites, manned space stations and even a moon base.4 The agency, which added a “D” for “Defense” to its name in 1972, was organized differently from a traditional research group in that it was small, decentralized and run by a handful of program managers scattered around the country. Tony Tether, who stepped down as agency director in 2009, was fond of saying, “Program managers do not work at DARPA, they are DARPA.”5 The managers, almost always leading scientists or engineers in their fields, have typically been recruited for four- to six-year periods and worked wherever they were based, travelling around the country as they were needed. Some observers have characterized the agency as “100 geniuses connected by a travel agent.”6
ARPA’s early priorities centred around ballistic missiles, developing technologies for space and detecting nuclear tests by other countries. By the late sixties, much of the work in those areas, including the Apollo program’s Saturn rocket and the Corona satellite, had matured and was shuffled off to NASA and the relevant military and intelligence branches. ARPA’s priorities shifted to investing in what its directors like to call “the Far Side,” technologies that were still unknown or risky. Vint Cerf, whom many today revere as the “father of the internet,” was brought on board in 1976 as project manager for an ambitious new concept the agency was working on. The young engineer was an assistant professor at Stanford University, but he was enthused about building a worldwide telecommunications network, an idea that was only a dream at the time. He was a perfect match for the agency. “DARPA hires people who have bees in their bonnets and who want to make things happen,” he says.7
Cerf is one of my favourite people to interview. He has a straightforward manner of speaking, and although he works for Google as its “chief internet evangelist,” he rarely sounds like he’s preaching company spin.8 Moreover, I love his wry sense of humour. During a speech to computer science students at the University of Waterloo in Canada in 2007, he flashed a slide of himself wearing a T-shirt that read, “IP on everything.” To the nerds in attendance, it was comedic gold.
Nowadays, Cerf spends most of his time in Washington lobbying government officials to keep the internet open and free. Google’s digs in the capital are more serious-looking than its other locations, with fewer primary colours and less of the kindergarten feel the company’s offices are known for. Cerf, the company’s elder statesman, fits in well, with his trademark three-piece suit and impeccable manners. As usual, during our interview he was modest about his role in the creation of the internet. The ARPAnet, its precursor, came about through the confluence of the ideas of three people, he explains. Paul Baran, an engineer working for the RAND Corporation military advisory group in the early sixties, was charged with “thinking the unthinkable”—designing a communications network that could withstand a nuclear attack. Baran came up with the concept of a “command-and-control” system based on the idea of hot-potato routing. Rather than just directing a phone call from point A to point B, his system called for redundancy, so the call would be distributed to a number of nodes in different locations—from point A to B and C and D and E, for example—and stored there. That way, if some of the nodes were disabled, say, by a nuclear attack, others would survive and communications could continue. Phone companies such as AT&T, seeing that such a network would be expensive to build, scoffed at the idea and told Baran he didn’t know how communications worked.
The second prong came from J.C.R. Licklider, an MIT computer scientist who was appointed head of ARPA’s Information Processing Techniques Office in 1962. Licklider, or “Lick” to his friends, was interested in the psychology of using computers and in harnessing the power of many. Throughout the sixties, he developed his concept of an “Intergalactic Computer Network” in a series of memos that predicted just about everything the internet has now become. If one mainframe computer was powerful, Lick argued, two computers working together were even more powerful, and the power only increased as more computing capability was added. He had trouble convincing MIT officials, though, who preferred to spend money on buying computers rather than connecting them.
The third prong was Welsh computer scientist Donald Davies, who came up with the term “packet switching” while working for the U.K.’s National Physical Laboratory. His ideas were virtually the same as Baran’s, except they involved transmitting non-voice data in “packets” over a decentralized network. Davies built a small network in his lab but couldn’t get funding to take the idea further either.
The prongs converged at a systems engineering convention in Tennessee in 1967 attended by all three parties. Notes were compared, common beliefs were discovered and before anyone knew it, Licklider’s fellow MIT professor, Larry Roberts, was contracted by ARPA to head up development of a new packet-switching voice and data network. A plan was drawn up, the agency approved a budget of a few million dollars and the Massachusetts-based technology company Bolt, Beranek and Newman was hired to build it. UCLA and Stanford, where Cerf was working, were selected as the first two nodes for the network, and on November 21, 1969, the first permanent link in the ARPAnet was established. The first communication, however, didn’t go very well—UCLA sent the word “login” to Stanford, but after receiving the letters “l” and the “o,” the system crashed. Nevertheless, in a moment akin to the brief firing of the first nuclear reactor in Chicago in 1944, history had been made. For many of the computer scientists working on the project, establishing a network for defence purposes came second to creating new efficiencies in computing ability. “It had a command-and-control flavour to it,” Cerf says, “but it had everything to do with sharing computing resources, because they couldn’t keep buying new computers for everybody.”
Selling Out
As more nodes were added to the ARPAnet and more data, like pictures of Playboy playmates, was sent across the network, a new problem emerged: the mainframe computers being used across the country in the early seventies were all built by different companies and ran on different software. IBM machines, for example, could only talk to IBM machines. It would be a full decade before personal computers started to take off and standard operating systems made by the likes of Apple and Microsoft started to gain traction. If there was any hope of expanding the ARPAnet into a truly universal network, which is what many of its creators hoped, it needed a common language to run on. That’s where Cerf came in. After his appointment to DARPA in 1976, he came up with the Internet Protocol Suite, a common set of rules that determined how transmissions across the network worked. In order to get commercial computer manufacturers and network equipment makers to accept their protocol, Cerf and DARPA did the only thing they could do: they made it available for free. “We knew we couldn’t possibly make this an international standard if we in any way constrained access to the technology, so even in the middle of the Cold War, DARPA flew under the radar,” he says. “We kind of hoped the Russians would pick it up and it would occupy them for the next twenty years.”
The network soon started paying dividends. DARPA found that using networked computers meant fewer machines were needed, so its mainframe costs shrank by 30 percent.9 The rule of unintended consequences, so common when dealing with technological inventions, also reared its head. Scientists found the network was also good for sending electronic text messages. The “killer application,” a term often used for the first practical application of a new technology, was discovered: email.
With most of the work done, Cerf left DARPA in 1982 for telecommunications company MCI, where he put together the first commercial email system. In 1983, with 113 nodes in operation, the American military split off from the ARPAnet into its own MILnet. The remaining ARPAnet nodes switched over to a new network constructed for academic use by the National Science Foundation, the NSFnet, which today sounds like something used to capture serial cheque bouncers. The final piece of the puzzle came in 1988, when regulators allowed Cerf’s MCI email system and others like it to connect to the NSFnet. MCI made the link in the summer of 1989 and the commercial internet was born.
The early internet was mostly all text, but even at this early stage, porn was there first. By 1995 the text-based Usenet was dominated by sex and porn; chat rooms such as alt.sex made up four of the ten most popular bulletin boards, drawing an estimated 1.85 million readers.10 Adult businesses helped develop uuencode, a tool that transformed lines of text code found on the Usenet into pictures, many of which carried ads for magazines and sex-chat phone lines.11
The internet didn’t really take off until it got a shiny new paint job in the form of the World Wide Web. Text was nice and all, but people really wanted to see stuff on their computers, especially when it came to porn. Tim Berners-Lee, a British-born MIT professor working at CERN in Geneva, got the ball rolling. In the late 1980s he put together some code called Hypertext Markup Language (HTML), which formatted text and electronic images onto a single page and allowed such pages to link to each other. On August 6, 1991, CERN uploaded its page, the very first thread in what Berners-Lee called the World Wide Web. The page contained links to information on how to create a browser that could view HTML code. Marc Andreessen and Eric Bina, two programmers working at the National Center for Supercomputing Applications at the University of Illinois, used the information to create their own web browser, Mosaic, which they made available to the public for free in 1993.
Mosaic, which eventually morphed into Netscape, was the first browser to seamlessly integrate text, graphics and links into an easy-to-use interface. Its release was also timed perfectly with the first generation of university students graduating and going off into the real world. As Cerf puts it, “People left university and they’d say, ‘Where’s my internet? Where’s my connection?’” The stage was set for the internet and the web to take off, and the porn people were waiting. Berners-Lee knew it. “We have to recognize that every powerful tool can be used for good or evil. Legend has it that every new technology is first used for something related to sex or pornography,” he said years after unleashing his invention. “That seems to be the way of humankind.”12
A Playground for Porn
With the launch of its website in August 1994, Playboy Enterprises was one of the first big businesses to embrace the web. Company executives say Playboy was the first national magazine with a website.13 The reasoning was pretty simple— porn is very much a visual medium, and the web removed the biggest obstacle to selling pornography and sexual services: the shame of being discovered.14 Not surprisingly, people flocked to sites that displayed nude pictures. On its launch day in March 1995, Penthouse’s website received 802,000 visits. By 1997 Playboy was racking up five million visits a day, making it one of the most popular sites on the web.15
This instant success, however, meant that the big adult magazines were also the first victims of the problem that has plagued the internet since its inception: copyright infringement. Even before the web, enterprising computer programmers were digitizing Playboy and Penthouse photos for transmission over the Usenet (and image researchers were downloading the Lena picture). The web made it even easier because anyone could copy pictures from Playboy’s or Penthouse’s site and start their own clone website. The solution for the magazines was to innovate, both technologically and legally. In 1997 Playboy unveiled technology that inserted a digital watermark into its images. The watermarks were invisible to the naked eye, but could be detected by a “spider” tool that crawled the web looking for them. “The worm is very appealing,” a magazine executive said. “We try to see who’s doing what, where and when to our stuff.”16 Every major content producer on the web now uses some variation of this sort of technology. On the legal front, in 1998—well before the big music and film industries went after copyright infringers with lawsuits—Playboy won a $3.7 million judgment against a California operation that was selling the magazine’s images on the Usenet for $5 each.17 All of a sudden, Playboy was in the unusual position of suing someone else for distributing pornographic material—its own!
Photographs would only do for so long, though, and soon porn entrepreneurs turned to developing online video. A full decade before YouTube, Pythonvideo.com was streaming live video from a number of sex theatres in Amsterdam’s red-light district. Launched in 1995, the endeavour was limited by the early video compression standards and slow internet speeds of the time, but the small, choppy streams proved immensely successful. Originally intended as a promotional vehicle to encourage tourists to visit the theatres, by 2001 Python was streaming live video content to three thousand websites.
Other players, such as Virtual Dreams, took Python’s idea a step further and introduced two-way video-conferencing strip shows. Visitors to the site typed in their requests to the man or woman at the other end, who then acted them out. Presciently, Virtual Dreams’ owners predicted the technology would benefit “medical, educational and a whole host of commercial and industrial transactions.”18 Of course, video chat is now a standard tool offered by the likes of Apple, Google, Skype, Microsoft and Yahoo. Burger King even copied the idea years later with its hilarious “subservient chicken” website, where a man dressed in a chicken suit took requests from visitors.
Into the new millennium, several porn producers, including Los Angeles-based heavyweight Wicked Pictures, pushed the adoption of better compression standards, particularly the H.264 codec (also known as MPEG-4)—now widely used in online video—to take advantage of the higher internet speeds being made available to consumers. “We don’t sell millions of copies of a title on hard goods like a mainstream studio does, so we choose to support new avenues to deliver our products,” Wicked founder Steve Orenstein says. “We embraced H.264 early on as our primary codec for online delivery for both archived and live high-definition streaming.”19
The porn industry’s video innovations did not go unnoticed by mainstream businesses, which quietly adopted them for their own purposes. One senior executive who would prefer to remain anonymous told me of how the multinational bank he worked for co-opted porn technology to help advise clients on their investments.20 In 2003 the bank was looking for a way to distribute a video multicast of each morning’s investment tips, but no one was offering such a service commercially and the bank’s own IT research team was stuck. “Then we said, ‘Hold on, having a talking image distributed by the internet is something the porn people have been doing for a long time,’” the executive says.
The IT team came up with the idea of having an employee sign up to various porn sites to snoop around, but the bank’s human resources department was, not surprisingly, “dead against it.” A junior member was sent home armed with a credit card, instructions to expense all his research as meals and a mandate to figure out how the porn companies were broadcasting their videos. He came back a few weeks later with a fully functional video system. “It was a direct analogue. It was completely the same approach and the same technology,” the executive says. “The higher-ups didn’t care, they were completely in on the game and used to just laugh. They were completely conflicted.”
Mainstream businesses also latched onto the security methods developed by porn companies, which by the nature of their business had huge targets painted on them. “The mixture of how ‘adult’ is seen as less accepted in society and the idea that money flows like water through this industry makes it an ideal target for hackers,” says Paul Benoit, chief operating officer of the company that runs Twistys.com, a popular video download site. “Adult companies are less likely to work with the FBI or RCMP in dealing with hacker attempts since the nature of their business isn’t as accepted as banking or book selling.”21
Aside from having to deal with the same issues as mainstream websites, such as denial-of-service attacks, worms and viruses, adult sites also have to prevent hackers from stealing their content, which is usually hidden behind a paid membership wall. “This includes making sure our members area is locked down to authorized and paying customers only, but we also have to have defences in place to prevent password sharing, password brute forcing, proxy server abuse and such,” says Jack Dowland, systems administration director for a number of adult sites, including Pink Visual. “Everyone wants something for free. And not just free stuff for free. They want stuff that you would normally have to pay for for free. Add in the technical challenge, and you have a playground ripe for would-be crackers.”22
Porn sites have thus been a target for every horny fifteen-year-old computer geek with too much time on his hands. As with Playboy and its watermark software, porn sites have had to make big investments early to protect their content and customers’ private information. For many, security has become almost as important as producing the sexual content. As such, while having “porn star” on your résumé may not get you acting gigs opposite Clint Eastwood or Meryl Streep, having “porn webmaster” can result in a warm welcome from mainstream companies looking for innovative IT employees. That’s not to say that many porn webmasters want to jump the fence—they tend to get paid well and enjoy more freedom at what are almost always smaller, more flexible companies. Working in the porn industry, Twistys’s Benoit says, means doing “whatever our imaginations can generate.”
While many web developments came from companies that simply made erotic films, the darker and creepier side of human sexual desire has also, unfortunately, inspired big advances. The arrival of Java, a programming language that made possible many multimedia applications, is one such example. Patrick Naughton was part of the team at Sun Microsystems that designed Java in the mid-nineties. In 1999 Naughton was nabbed by an FBI sting at the Santa Monica pier in Los Angeles, where he arrived for what he believed would be a sexual rendezvous with a thirteen-year-old girl he had met online. Naughton, who at the time was overseeing Disney’s internet content, was convicted of travelling across state lines to have sex with a minor, but avoided jail time by brokering a deal to help the FBI capture pedophiles online.23
Java, meanwhile, proved to be a great tool for web designers to create all sorts of in-browser applications, from games to interactive weather maps to real-time chat functions. It also allowed designers to create new functionality without having to worry about how to get past the firewalls used by many corporations, which tend to block employees from downloading add-on software for their computers. This proved to be a huge boon to the porn industry, which sees about 70 percent of its traffic happen during the nine-to-five work day.24 Observers within the IT industry, meanwhile, have for years speculated about why Naughton was so interested in creating communications tools that could bypass corporate firewalls.
Show Me the Honey
The porn business is a business, after all, and none of these innovations would have happened if there wasn’t a whole pile of money to be made. To cash in, adult companies were quick to develop a variety of payment systems, some good, others bad. Aside from adapting the automated credit card payment systems they had developed for phone sex, porn producers also invested in things like e-gold and OmniPay, digital currency transfer systems that allowed people to pay for goods online without a credit card. These systems have fallen into disrepute in recent years because they’ve become the primary payment vehicles of online casinos, which in North America are largely banned from accepting traditional financial transactions. (They did, however, inspire well-regarded systems such as eBay-owned PayPal.) One of the shadiest systems required customers to download and install special software. In one of the most insidious scams the Federal Trade Commission has ever seen, the software then made its own connection to an internet provider in Moldova where, unbeknownst to the customer, it racked up huge long-distance phone charges. Customers only found out when their phone bill arrived.25
On the plus side, porn companies also pioneered cooperative affiliate systems where one website advertised on another. If a visitor followed a link on Site X to Site Y and ended up joining Site Y, Site Y then gave Site X a payment for the referral. Not only did mainstream businesses such as Amazon and eBay co-opt this innovation, it also formed the basis for Google’s entire context-based advertising system. When you enter a query on Google, a number of text ads pop up on the right hand of your search; if you click on one of those ads, the company behind it sends Google a payment for the referral. In ten short years, Google has used this ad system to become the massively profitable behemoth it is today.
Regardless of the payment systems used, putting porn on the internet was—and is—akin to printing money. The traffic and revenue numbers have been simply huge, even if they have been hard to accurately measure, since most producers are not large, publicly traded companies required to report earnings. Still, analyst estimates have painted an astounding picture. In the early days of the web, sexually oriented products accounted for an estimated 10 to 30 percent of the entire online retail market.26 By the turn of the millennium, while mainstream content providers such as The Wall Street Journal charged online subscribers $59 a year, adult sites such as Danni’s Hard Drive were able to charge $25 per month, which explained how porn accounted for more than half of the estimated $2 billion spent on online content in 1999.27 The most profitable non-sex category of websites, online gambling, took in only $150 million in 2000, a paltry amount compared to the $1.7 billion raked in by adult sites.28 Mainstream businesses also quietly benefited from the heavy traffic being generated by porn. Of the eighty-one million people who accessed popular search sites Yahoo and MSN in March 2001, more than thirty million made their way to an adult site.29 At the same time, about 40 percent of Germany’s and Italy’s entire web traffic was aimed at porn sites, with similar numbers found across Europe.30 That traffic helped the portals sell advertising space on their sites.
Internet service providers also reaped the benefits as customers converted their slow dial-up connections to more expensive high-speed broadband. In the United States, about 20 percent of AT&T’s high-speed customers paid to watch porn online. In Europe, where high-speed subscriptions grew 136 percent in 2002, music file-sharing services and adult content were identified as the two leading reasons for why people switched to broadband.31 “Adult content is the obvious subscriber service to go for because there is already a proven business model,” one analyst said at the time.32 The revenue growth in online porn continued through the mid-2000s, particularly in the United States, where producers raked in close to $3 billion of the total $5 billion global porn pie in 2006.33 In 2009 an estimated 25 percent of all search requests were for adult content while a third of all websites were pornographic, garnering as many as 68 million hits a day, or 28,000 surfers a second watching porn of some kind.34 Today, $89 is spent on porn every second.35 Even taken with a grain of salt, the numbers are astounding.
Too Much of a Good Thing
But this money-printing business is now under attack. A recent estimate by E-commerce Journal pegged the online porn market at $2 billion, or about the level it was at in the early part of the 2000s.36 DVD sales and rentals, meanwhile, are down by about 15 percent. For the first time in its history, the supposedly recession-proof adult entertainment business is contracting in terms of revenue. Adult Video News, the Wall Street Journal of the industry, attributes the decline to the same two factors that have Tera Patrick worried: too much product and too much piracy. “The laws of supply and demand have been turned upside down. We’re on par to put out fifteen thousand new releases this year, which is just insane,” said AVN founder Paul Fishbein in 2008. “Secondly, there’s a battle with pirated or free material on the internet. Much like the music industry, adult producers are trying to figure out how to stem free or pirated content.”37
Ironically, the product glut is the result of internet innovation. With the ability to create and distribute videos more cheaply and easily than ever before, everyone with an internet connection can now be considered a competitor to the likes of Vivid and Hustler. Piracy, meanwhile, is coming in two forms: file-sharing and free websites. The mainstream music and movie industries have felt the damage of websites such as Pirate Bay and Mininova, which contain directories of “torrents” that allow users to swap files for free. The potential hurt could be much worse for the porn business since, as Wicked’s Orenstein said, it has no other revenue stream—such as live shows or box-office earnings—to fall back on. Even worse are a rash of porn-flavoured YouTube clones, including YouPorn, RedTube and Tube8, which allow users to upload sex videos. The sites are drawing considerably more traffic than the big porn companies’ own online operations, and they’re rife with copyrighted material. That has the producers hopping mad. “This needs to be treated like a bank, like someone is going in and robbing a vault. As far as I’m concerned, for the music business, for Hollywood and for our industry it has to be treated the exact same way,” says Digital Playground president Samantha Lewis. “We’ll all be out of business at this rate.”38
The producers’ retaliation has come in several forms, some more successful than others. They have done remarkably well in keeping their content off torrent sites, for example. While Warner Bros. declared victory in 2008 by announcing it had kept its blockbuster Batman movie The Dark Knight off torrent sites for two whole days after its theatrical release, whereupon it became easily available, the big porn companies are taking comfort in the fact that many of their films are file-sharing rarities. Lewis claims that this is the result of a persistence not practised by Hollywood. Digital Playground, for one, has two full-time employees monitoring torrent sites who take immediate action against any and all infringements. “All we do is shoot off an email and it’s down in thirty seconds. They really don’t want a lawsuit,” Lewis says. “We’ll get something down and then they’ll mix it around, maybe change the spelling of the name and put it right back up in fifteen minutes. We’ll be on them again. If it happens again, then they get the letter [from lawyers]. You just have to be persistent and they know we’re serious.”
Some feel the ultimate solution to stopping piracy lies with what brought the industry to the dance: innovation. Stoya, winner of several “new starlet” awards in 2009 and porn’s current “it” girl, says lawsuits and technological restrictions like copy protection haven’t worked for the music and movie businesses, and they won’t work for adult entertainment. Maybe, then, it’s time to get creative. “It’s not so much that they’re fighting a losing battle, but they’re fighting a different battle. The solution is to think outside the box,” she says.
There is also the matter of too much product. The solutions there will follow the same economics as in any other industry: consolidation or expansion. If revenues continue to decline, some producers will fall by the wayside or get swallowed up by competitors. As for expansion, there are plenty of countries that still actively ban porn. Getting a foothold in some of those now may reap huge rewards down the road. “The Chinese wall keeping pornography out is going to fall some day,” says Kim Kysar of Pink Visual, which is trying to build its brand in neighbouring Asian countries in anticipation of that eventuality. “As soon as it does, it’s obviously going to be the biggest market there is.”39
Nevertheless, many are still worried. Hustler president Michael Klein agrees with Tera Patrick. If the big porn producers can’t figure out how to deal with piracy and the glut of product, they’re going to have to figure out an entirely new way of doing business. “It’s going to be harder to find the next Jenna Jameson or Tera Patrick, someone who’s going to be a standout star,” he says.40
The Final Frontier
The irony of the entire situation is that the destructive power of the internet lies in the very seeds of its formation—the decision by Vint Cerf and DARPA in the seventies to freely distribute the rules that govern connections between computers. That seminal move was duplicated by Berners-Lee in the early nineties when he released his web browser code for free. Both actions, fundamental to the formation of the commercial internet and web, created the “culture of free” that has turned media business models—porn or otherwise—upside down over the past decade. The longer people use the internet for free, the greater this sense of entitlement grows. Perhaps that is the way of the future and businesses will have to figure out a way of working within the new system, or perhaps old models will somehow reaffirm themselves, possibly through a continuation of lawsuits and enforcement of copyright laws. I suspect it’ll be a mixture of the two: content creators will eventually figure out how to do business and make money in the new paradigm, while users will accept that not everything on the internet is automatically free.
There is, of course, one other possibility. Cerf is working with NASA’s Jet Propulsion Laboratory in Los Angeles on developing the “intergalactic internet,” a new communications network that will connect all the satellites and spacecraft up in orbit with facilities here on Earth. The network got early DARPA funding in 2000, followed by a second round in 2007, then moved into production in 2009 after successful testing. Under the current system, if scientists on Earth want to retrieve data from, say, the Hubble Telescope, they need to schedule a download connection for when the sensor array passes over a node on Earth.
The new system follows the “hot potato” routing idea of the original ARPAnet, where data is stored at nodes and forwarded as soon as possible. Satellites and other craft will be able to automatically transmit their data to other nodes whenever they pass by them, eliminating the need for complicated logistical scheduling. This “delay-tolerant” feature, which sends information even if there are connection disruptions, also has applications here on the ground. The U.S. Marine Corps has tried it and loves it, as have Sami reindeer herders in northern Sweden, who tested it for DARPA in 2005. Commercially, the system could theoretically be rolled out by Google on its Android cellphones for significant bandwidth savings. One Android user could, for example, download a map over the cellular network and then radiate it out to other Android users, thereby saving the other users from having to download it as well.
Given the history of the internet so far, if the principles behind the “intergalactic internet” are ever commercialized, there’s little doubt that porn companies will once again be first in line to figure out how to capitalize on them. Who knows— maybe expanding porn sales to outer space is the solution to their problem of shrinking revenues here on Earth.
And how does the “father of the internet” feel about the porn industry’s role in nurturing and developing his creation? “It’s slightly embarrassing to think that it might have grown up around that,” Cerf says. “On the other hand, this is where VCRs did very well, too.”
Outsourcing Burgers
Of course, it’s not just the porn industry that is looking for ways to reimagine its business for the internet era—fast-food companies are using it in increasingly inventive ways too. One of the most controversial by-products of the internet has been the outsourcing of labour from developed to developing countries. Businesses of all stripes, from banks to phone companies to computer makers, have taken advantage of the low-cost communications made possible by the internet to relocate their customer-service and IT operations to countries such as India, Brazil or the Philippines. After all, if a customer is calling for help from New York, it doesn’t really matter on the service level if the company representative is in Houston or New Delhi. And it’s much cheaper if the representative is in a developing country, where wages are a fraction of what they are in the United States or United Kingdom.
Outsourcing has been a double-edged sword, though. It has allowed companies to cut costs and create scores of jobs in places such as India. On the flip side, many customers resent having to deal with service agents on the other side of the world— they’re seen as impersonal, unsympathetic and an example of how cheap the company employing them is. This discontent is largely psychological; even though Indian customer agents often provide the same level of service as their local counterparts, many Americans prefer to take their gripes to other Americans, while Australians simply want to complain to fellow Australians.
Big fast-food companies have been quick to jump on the outsourcing bandwagon. Through the early part of the new millennium, most moved in lock-step with other multinationals in transferring their customer service and IT operations to developing nations. But the fast-food chains did one better: they outsourced their drive-thrus. McDonald’s, as usual, was the first to test the idea in 2004, moving order-taking from one state to another. How it works is simple: customers drive up and place their order as they normally would, but the person on the other end of the speaker is located hundreds or thousands of kilometres away. The connection is made using the same internet-based calling technology that makes communicating with India so cheap and easy. The order-taker then relays the customer’s order back to the restaurant, to be filled by employees there.
The new system, which has spread to many fast-food chains both in the United States and around the world, has several advantages over the old. It frees in-store employees from multitasking—rather than running around wearing a headset, taking multiple orders and then assembling those orders, workers can concentrate on one simple job, which reduces mistakes. It also speeds up the order-taking and processing of drive-thru customers. Wendy’s, for one, has been able to shave between thirty seconds and a minute from customer order times. Given that fast-food restaurants make up to two-thirds of their sales from their drive-thrus, those extra seconds translate into big dollars. In 2006 Wendy’s said sales had jumped by 12 percent at stores testing the system. “It’s the future of the industry. I can’t believe how stupid I was not to do this sooner,” said one Wendy’s executive.41
One other benefit of the new system is the ability to move labour to less expensive jurisdictions. In the United States, this means outsourcing drive-thru order-taking from a state where the minimum wage or required benefits are relatively high to one where they are relatively low. The advantages of employing a call-centre employee in Mississippi, where there is no minimum wage, for example, are obvious if your restaurant happens to be in, say, California, the birthplace of fast food, where the minimum wage in 2009 was $8 an hour. Taken to its next logical step, there seems to be little argument against fast-food companies taking the full plunge by outsourcing drive-thrus to call centres in developing countries, where they’ll save even more on labour costs. Some, in fact, are already doing so— in 2006 one London curry restaurant outsourced its corporate take-out orders to India. “It is amusing that the orders travel nearly five thousand miles to be finally delivered just half a mile away,” the restaurant’s owner said.42
Fast-food companies may prove once again to be on the cutting edge by taking internet-based outsourcing and applying it in new and innovative customer service applications. Bronco Communications, the company that managed McDonald’s early outsourcing tests, is eyeing a way to expand its technology to retail chains such as the Home Depot, where customers would be equipped with internet-enabled shopping carts. A call-centre operator could then guide the customer through the store. A Bronco founder explains how this system would work: “You’re at aisle D6. Let me walk you over to where you can find the sixteen-penny nails.” Such possibilities, with their upsides and downsides, are virtually limitless. Fast food, meanwhile, will only get faster thanks to the internet.