"In contrast to previous economic eras,
intellectual property will be the primary source
of new wealth in the 21st century."
- Gregory A Piccionelli, 1989
 
AREAS OF PRACTICE
• Internet Matters
• Music & Other Entertainment Matters
• Intellectual Property Rights Enforcement
• Crowdfunding Matters
• Freedom of Expression Matters

The Future, Your Success and The Anti-Piracy Roundtable

MAY 2008

As we come to the end of the Bush Administration it appears that in the coming years intellectual property theft will likely pose a greater challenge to the survival of most adult entertainment companies than federal obscenity prosecutions. Recognizing this reality, the Free Speech Coalition in association with the Global Anti-Piracy Agency presented the adult industry’s first Anti-Piracy Roundtable at the Phoenix Forum earlier this year.

The primary purpose of the event was to provide attendees with basic legal and practical instruction to help them combat the growing problem of online copyright infringement and other forms of content piracy. I was honored to be asked by FSC’s President Diane Duke to deliver the Roundtable’s keynote address and to participate as one of the seminar’s four group instructors.

In my keynote presentation I expressed my optimism for the future of the industry with the end of the Bush Administration in sight and the prospect of industry-wide prosecutions diminishing daily. I also stated that for me, as one of the industry’s first intellectual property attorneys, the refocusing of the industry on content protection and exploitation issues felt like I was coming full circle in my representation of the industry.

 

I know that for many of our readers, like many attending the Anti-Piracy Roundtable who had entered the business after George Bush was elected, references to the intellectual property side of my law practice might come as something of a surprise. I knew that many in the industry primarily identify me as a free speech advocate because of my roles in FSC’s 2257 and Utah Email Registry law suits, my meetings with the 2257 FBI inspectors in Washington, our high profile 9th Circuit federal obscenity spam case appeal, the many articles I have written, and the many legal panel appearances that I have made in recent years where the focus has been on criminal law enforcement issues that have confronted the industry. So thanks to nearly eight years of threats directed toward the adult industry by the Bush Administration, those that know me as primarily an intellectual property attorney are now generally either my clients or those who were in the industry prior to the Bush presidency (i.e., a more enlightened time when Presidents spoke English and Americans felt reasonably confident that their our chief executives actually read the Constitution before swearing to preserve, protect and defend it).

 

Fortunately, with the threats of widespread governmental prosecutions hopefully abating, I am looking forward to writing and speaking more frequently about intellectual property matters, an area of law I know and love well. For I am, like most entrepreneurs in the adult business, an owner and exploiter of intellectual property rights myself, albeit primarily in the areas of technology and music.

 

More importantly inspiring my affection and respect for intellectual property law, however, is my sincere belief that intellectual property rights are nearly as fundamental and important as free speech rights. In fact, I strongly believe that the United States has become the greatest nation in history of world in no small part because our laws strongly protect both our rights to express ideas and our rights to make a buck from the exploitation of that expression of ideas.

 

But being a committed advocate for both robust intellectual property rights and free speech rights I am deeply concerned about the somewhat ironic situation currently confronting the adult entertainment business. After the industry has successfully weathered decades of governmental attacks on its rights of expression, now on what seems to be the eve of victory against its oppressors, the industry is now forced to confront formidable new challenges to its survival precisely because its success and social acceptance has simultaneously produced a global glut of content production and a plague of unrestrained content piracy.

 

This dilemma was prominent in my consideration about what I would speak about in my keynote address. I didn’t want to go to Phoenix just to warn of the potential demise of the adult industry as we know it or to rail against those who stubbornly cling to collapsing business models that dangerously depend on profits from the sale of easily piratable content. Besides, I was sure that everyone attending the event already knew the industry was in dire straits due to rampant content theft anyway.

 

Instead, in my keynote address I elected to tell the folks at the Forum the plain and simple truth: there is no panacea for digital piracy, and there is no slam-dunk way to prevent online content theft. In fact, there isn’t even any surefire way for a traditional adult content business to survive the difficult times ahead.

 

But I also told those in attendance something else that I sincerely believe: in the next chapter of the adult entertainment industry many many companies will survive, many will thrive and a few will get so big that they will probably redefine what it means to be an enormously successful adult entertainment business. This latter group, I predicted will likely point the way to future profitability by exploiting what I proceeded to describe as a simple two-part strategy composed of (1) effective branding and (2) effective exploitation of new technologies and the new business models they will generate.

 

Effective Branding.

 

Companies that have established strong widely-recognized brands like Vivid®, Hustler®, Penthouse®, Playboy®, Digital Playground®, Redlight District®, Spearmint Rhino®, Deep Throat®, Virtual Sex®, Jesse Jane®, Jameson®, Earl Miller®, etc., are simply more likely to survive the difficult times ahead than typical adult content companies whose profits are dependent exclusively upon content sales associated with a lesser known brand. This is primarily because strong brands enable the companies that own them to monetize the good will associated with those brands by associating them with goods and services that are not easily pirated. For example, strong adult brands are commonly used to create new profit centers through licensing and other exploitation of their trademarks and service marks in the areas of adult toys, live chat, online dating, gentlemen’s clubs, casinos, clothing, energy drinks, etc. Companies with strong protected trademarks have thus, in effect, diversified their risk and made themselves less vulnerable to the negative effects of collapsing content profitability.

 

For those content companies that have not yet established a strong brand, there are always opportunities for doing so. Consider, for instance, the fact that even in the current environment of a seemingly endless ocean of free adult content, there is always something fresh and new that strikes the public’s fancy that, at least temporarily, generates a spiked demand for the new content. Those who have produced such content are afforded the chance, albeit often a limited window of opportunity, to establish a subsequently exploitable brand by careful and purposeful association of a memorable trademark with such successful content. The establishment of the Bang Bros® brand in large part because of the phenomenally successful Bang Bus® series is an example of this. But, it is important to note that this strategy will only work if the content is consistently and uniquely associated with a protected trademark brand.

 

Thus, the need for effective, if not perfect, copyright and trademark enforcement was an important topic of discussion at the Roundtable.

 

Effective Exploitation of New Technologies and Emerging Business Models.

 

In the future, the adult entertainment industry can reasonably be expected to continue to be an early adopter, if not developer, of new technologies and new business models.

The industry’s past history in this regard, in fact, was the driving force in the establishment of the home video market and e-commerce via the Internet. The likely continuation of this trend into the future provides another basis for my confidence that there will always be a place for the production and distribution of interesting new adult content.

 

Ironically, in fact, I think it is likely that the same kind of early technology adoption that first brought us the adult Internet boom, and then the plethora of the problems associated with the free digital file sharing now threatening the industry’s profit-per-copy-based business models, will almost certainlycreate new business models based on new technology adoption that will, in turn, produce yet new economic opportunities.

 

For example, the emergence of the unsustainable first generation so-called “Tube Site” business, that has been rightfully decried by many, I believe will point the way to a sustainable business model that will usher in an era of “Legal Tube Sites” where the availability of free content, properly licensed and otherwise distributed in conformity with the law, will create numerous legal traffic magnets. Clever adult entrepreneurs will likely exploit such Legal Tube Sites to convert the traffic they generate to monetizable up-sells to live videoconferencing, adult toy sales, adult dating and other products that are not easily pirated. In fact, given the greater social acceptance of adult content, such Tube Site traffic now offer realistic new opportunities to market a whole host of non-adult goods and services. After all, as I have often said in the past, while it may not be true that every person who buys toothpaste watches porn, you can almost certainly depend on the fact that just about every person that watches porn, buys toothpaste.

 

Consequently, there is still a vast unexplored and untapped universe of traffic exploitation opportunities generated by providing free or nearly free adult content. And those that understand this reality, and effectively exploit it are likely to be among the big winners in the next phase of the adult business.

 

Moreover, there are already signs that the pattern of early technology adoption is repeating again. Evidence of this can be seen in the adult business exploitation of emerging “virtual worlds” technologies. An example of this trend is the virtual adult playground “Red Light Center” created by my good friend and adult Internet legend Brian Shuster.

 

I also expect that before too long, online virtual worlds will be populated by very realistic looking avatars. You may be surprised learn that the functionality provided by such technologies, the creative components of the avatars, and even the virtual worlds themselves, will all be subject to intellectual property rights protection and enforcement.

 

Also later this year we will likely see the adult industry’s introduction of the first true touch sensation teledildonic devices using what is called “haptic” technology where online participants can actually engage in remote tactile contact with one another. It seems, if you pardon then pun, a virtual certainty that the ongoing development of adult virtual worlds and the introduction of haptic devices will once again likely provide numerous new opportunities for enterprising adult business entrepreneurs.

 

Additionally, on the content production front, it is likely that more and more video products in the future will be generated as hybrid works combining digital recordings of live performances captured with hi-def cameras and CGI animation. It is a technological trend that Hollywood is already fast embracing after the success of the cult film “A Scanner Darkly” starring Keanu Reeves, Robert Downy Jr., Woody Harrelson and

Wynona Ryder. The adult production industry’s potential uses and business exploitation of this technology is, in my opinion, simply enormous.

 

Also, in the near future numerous additional opportunities for adult content producers and adult traffic exploitation experts are likely to develop in the area of the computer gaming. Here, avatars, live/CGI hybrids other kinds of animations based on live digitally captured content, what I have called since the early 90’s “synthespians” or digital actors, are likely to have an ever increasingly important role in the spectrum of adult content production. One big benefit of content created with synthespians is that the 2257 regulations simply do not apply to content that does not depict “actual persons”. One highly successful example of this emerging trend is the VirtuaGirl® desktop synthespian.

 

But even though many new technologies are right around the corner, to participate in the adult business of tomorrow, one has to survive the tough times today. And one of the best ways of doing that is to be as proactive as possible in the protection, exploitation and enforcement of copyrights and other intellectual property rights. It was my pleasure to assist the Free Speech Coalition, the Global Anti-Piracy Agency and the Phoenix Forum in their first presentation of the Anti-Piracy Roundtable. It will similarly be my pleasure to continue to provide instructive information regarding intellectual property law matters to our readers of this monthly column in the months ahead.

 

At the time of this writing there are 286 days, 5 hours and 49 minutes left in the Bush Administration.

 

Gregory A. Piccionelli, Esq. is an Internet and adult entertainment attorney. He can be reached at Piccionelli & Sarno at (310) 553-3375 or at greg@piccionellisarno.com.

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