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You've Got Porn!

Porn insiders say AOL execs have already begun to explore ways to profit from dirty pictures.

We have met America Online's perverts, and they are us.

Hungry for sex, we crowd into AOL's sweaty chat rooms, those thousands of niches in cyberspace with names that belie the company's apple-pie image. Picking our way across aol's servers, we huddle in dark corners like "Smack Smack Oooooo" and "Seeking WFSubs2Breed," where we swap fantasies, nudie "self pics," and recycled photos from hardcore newsgroups carried by AOL.

Lusty AOLiens may have made this friendly ISP the world's busiest on-ramp to e-rotica, yet of the $17.9 billion gross the service is expected to rake in this year, not one cent will come from the direct sale of porn to its 34 million American subscribers. Rather than pointing the way to online sex, AOL prefers to leave customers fending for themselves in a maze of virtual boudoirs, and in the process leaves behind millions in potential profits.

So when will all that money finally seduce AOL into stripping off its chastity belt? When will the company just sell its customers the smut they so obviously crave? The answer, say porn industry players and media analysts, is soon after AOL clears regulatory hurdles and completes its purchase of Time Warner.


AOL has worked hard to look as scrubbed and wholesome as its moon-faced chief executive officer, Steve Case, but the company has always had a bulge in its khakis.

The coming convergence of the Internet and television means subscribers to a joint AOL Time Warner service would be able to download hour-long shows, in a matter of minutes. AOL already takes pains to fence off its racier content from children's eyes. When it acquires Time Warner, it will be able to serve up mature fare like Sex and the City and The Sopranos, on demand, through a single Internet TV box. But some parents will demand that their kids not be able to view these shows, which means AOL Time Warner will have to build a firewall. Once that system is in place, the company could muscle its way into the fast-growing adult pay-per-view business, which last year generated $342 million and is projected to pull in nearly twice that annually by 2003. Porn insiders say AOL execs have already begun to explore ways to profit from dirty pictures—either by erecting its own virtual Sodom or by taking proceeds from traffic it directs to independent smut sites.

Flush with $245 billion in market value, the swelling empire of AOL Time Warner might feel confident enough to take what was once a too-risky plunge into porn. The tantalizing opportunities have sent purveyors of smut scrambling and strategizing.

"I'm not sure why more people haven't figured out what you've just described," says Bill Asher, president of Vivid Entertainment Group, a colossus in online, broadcast, film, and video erotica. "Virtually every search engine and ISP is looking at dealing with adult entertainment." Asher's insight applies to other media as well. The Village Voice itself has long trafficked in smut, both in print and online; just a hundred pages or a few clicks from the high-toned rhetoric of columnists like Nat Hentoff is a covey of she-males and single women and rippling men ready to lay hands on all well-heeled comers.

Though AOL, by contrast, has worked hard to look as scrubbed and wholesome as its moon-faced chief executive officer, Steve Case, the company has always had a bulge in its khakis. The job of spokespeople like the aptly named Tricia Primrose is to cover that bulge with the official corporate playbook. Primrose carefully phrased her denial of a company interest in erotica and refused follow-up questions. "We have made it really clear the kind of content we provide," she said. "The AOL brand Internet service is not going to offer adult channels."


A mock-envious Penthouse executive sees humor in the contortions AOL makes to hide its desire. "AOL is already the center of porn in America. AOL is built on porn," says Gerard Van der Leun, director of Penthouse.com. "AOL is a perfect symbol for the vast bipolar nature of sex in America."

For AOL to be outspoken about getting directly involved in sex would be a public relations disaster, according to sources in all corners of the industry. Porn producers are eager to profit from the taboo by doing the dirty work for the icon of electronic middle America; they'll provide the slapping flesh, while AOL provides the viewers. "AOL wants to be Caesar's wife in this business," says Van der Leun.

AOL has for years tried to leave few fingerprints on the dirty pictures it might vend. Not surprisingly, it came up empty when it bobbed for the fruits of porn without using its hands.  

A former AOL director of Internet programming, who agreed to be identified only as "Mulder," says he was given a confidential 90-day mission in 1996 to seek a place for the company in the porn gold rush. He says the Internet service was then hemorrhaging subscribers and desperate to find new sources of revenue—perhaps through peddling adult material on a separate site. "I sat there and my jaw dropped," recalls Mulder, who says AOL went as far as to fly him to a prostitution convention. "They asked if I'd have a problem with this assignment, and I told them the only problem is that if I get hit by a car the morgue will never be able to remove the smile from my face." Mulder remembers that while he was hunting for ways to heat up AOL, CEO Case was at the White House, talking about protecting children on the Internet. "They're all a bunch of hypocrites," he says. "Let's face it."

AOL wasn't going in for the rough stuff. "We were going to have no bestiality, no violence," Mulder says. "But did management think it could start an independent Web site funded by AOL and nobody would know about it? The Southern Baptists alone would follow the money trail right up Steve Case's behind." Besides, with so much member-created erotica sloshing around for free on AOL, "we found that our greatest competition for adult content was AOL itself."


"AOL is already the center of porn in America. AOL is built on porn."

Wall Street Journal reporter Kara Swisher reveals in her book AOL.com that internal company memos by other staffers were optimistic about the possibilities of an adult service. Swisher also writes that an outside consulting firm conducted two focus groups, with encouraging results.

Several prominent erotica leaders remember AOL's feelers. But "it never came close enough to reality to pursue," says Adult Video News publisher Paul Fishbein.

AOL's timing couldn't have been worse. The Communications Decency Act, which held Internet services responsible for porn that fell into children's hands, was heading for a quick signature from President Clinton. Even without selling X-rated wares, Case and company were having a difficult enough time getting legislators to understand the Web and how much policing AOL could and should reasonably do. The CDA and the successor Child Online Protection Act of 1998 were eventually gutted in court, but AOL couldn't have banked on that happening.

The AOL logo may no longer be making a teepee in its bedsheets, but Van der Leun of Penthouse says the monolith has again been considering hawking porn. He says Compuserve, an AOL subsidiary, inquired last year about setting up a miniature version of penthouse.com within CompuServe's domain. Samuel Agboola, marketing director for Danni's Hard Drive, adds that CompuServe more recently sought a similar arrangement for content from his softcore company, one of the largest woman-owned adult venture on the Net.

"AOL is probably using CompuServe as a test bed, or repurposing it for a different demographic," says Agboola. Van der Leun is more blunt, terming CompuServe a "stealth AOL." AOL and Time Warner both declined to comment on how video-on-demand content might be chosen and marketed. Each called such discussion "premature"—even though on-demand content is ostensibly the entire reason for the merger.

Nor is the adult entertainment industry pressing for greater openness. "Even I don't want to talk about it much because I don't want to scare anybody off," says Vivid's Asher. "Why bring attention in the press? It's only going to bring heat down on ourselves, and for what? For giving consumers what they want?"


Why all of the Victorian skulking and denials? Not only have AOL and Time Warner won every major court case that sought to severely limit adult content, their competitors are already making whoopee. Dowdy Ma Bell came out in nothing but a thong in July when AT&T struck a deal with Vivid's Hot Network to provide explicit adult entertainment over its cable and fiber optic systems. And what's that whiff of musk in your father's Oldsmobile? General Motors owns Hughes Electronics Corp., the parent company of DirecTV. DirecTV claimed early dominance in the satellite market in part by offering erotica when competitors wouldn't. Today, AOL owns a stake in Hughes, while Direct TV carries the Hot Network, the Hot Zone (another Vivid division), Vivid TV, the Pleasure Channel, and the Playboy Channel. Time Warner's cable systems also carry the relatively tame Playboy Channel, which loses out to raunchier flicks in competitive markets.

Partnering with porn publishers has led to minimal fallout. Families Online, a filterware company, switched from AT&T to MCI WorldCom for Internet "backbone" services after the Hot Networks deal. And the Family Research Council seems resigned to the likelihood of AOL providing wilder content. The group's senior director of legal studies, Janet M. LaRue, says she's concerned about mainstream corporations getting involved with smut, but a council spokeswoman expressed greater misgivings about AOL's "promotion of the gay agenda" through gay-pride sponsorships and the extension of domestic-partner benefits.  


"Did management think it could start an independent Web site funded by AOL and nobody would know about it? The Southern Baptists alone would follow the money trail right up Steve Case's behind."

The market has greeted the prospect of mainstream porn with a shrug. Forrester Research analyst Dan O'Brien predicts that with or without the Time Warner merger, "AOL will evolve in the cable model of basic, premium, and pay-per-view subscriptions. I think AOL has definitely fallen into that realm."

Washington, these days, is sanguine as well at the notion of a sexier AOL. "Yes, there's going to be a whole bunch of content they haven't been associated with," says an aide to "Internet senator" Patrick Leahy of Vermont, "but I haven't heard any grumbling about it yet."

So far, government questions about the merger have centered more on issues of access and monopoly than on the nature of content. If AOL turned aside the chance to make money from smut, the company would be nearly alone in its industry. "No one else is taking that high road," says 27-year-old porn tycoon Seth Warshavsky. "It would be sheer stupidity. They'll have to open themselves up to this business in order to stay competitive."

Warshavsky, CEO of the Internet Entertainment Group, gained cult status by posting the infamous Pamela Anderson-Tommy Lee session and private nude shots of conservative radio host Dr. Laura Schlessinger. He argues the time is coming for an everyday company like AOL to be up-front about offering porn. "People were afraid of the Internet," he says. "They saw it as a new frontier where dangerous things happen. As the Internet becomes accepted, people will see AOL is no different than Time Warner, Cablevision, or Viacom. The company is a distributor to users."

But unlike a cable system, America Online banks on its brand name—with all the connotations of down-home purity—and it has been understandably skittish about showing the world a bare ass tattooed with the AOL logo. Relying on astute G-rated moves, AOL recovered from early financial problems not by picking up the Mulder project, but by mailing out installation disks with abandon and by matching flat rates offered by barebones ISPs, even though it carries a wealth of proprietary content. Its offerings are so complete that some users are lulled into remaining on-site. AOL's Olympic news site got visitors comparable to those at the site belonging to the game's broadcaster, NBC, according to Nielsen's NetRatings analyst Jarvis Mak. Those Olympic numbers came almost entirely from within the AOL system, enabling the company to reap solid advertising revenues that might have otherwise gone to the network, Mak says.

No ad banner next to pole-vaulting coverage will bring in the cash AOL members would pay to view other forms of pole vaulting. Adult sites boast of profit margins of 30 to 50 percent, while a host of other online ventures struggle for any profits at all. In August, nearly 21 million home Internet users accessed adult sites, Mak says, and individual porn sites claim tallies of unique visitors that routinely outstrip those at Ask Jeeves and MTV.com. AOL is giving away money if members use the service simply as a gateway to cybersex, but by providing straight-up smut it risks scaring away middle-of-the-road users.


That dilemma hasn't kept other household names from pushing the limits already. Publicly traded Yahoo, for one, pays people to sift through and organize for consumption Web pages devoted to bestiality.

Though Attorney General Janet Reno and local authorities have concentrated on child porn and pedophiles rather than mere obscenity, some in the industry think a shakedown is imminent with a change in administrations. "How likely is it, would you say, that the adult Internet community is going to enjoy the same benevolent neglect that it has enjoyed under Janet Reno?" says Tom Hymes, an associate editor of Adult Video News Online. "Regardless of who is elected, its fortunes are probably going to change."

AOL, or AOL Time Warner, could benefit if a government crackdown prunes the kinkier fringe. The portal is unlikely ever to direct viewers to the world's largest gang bang. But it could build partnerships with high-end, relatively vanilla companies, like Penthouse.com, which plans to launch a streaming-video sitcom called Butch and Gigi, Transsexual Day Traders, and VoyeurDorm.com, which is sending some of its models on a NAFTA road trip in a luxury camper rigged with cameras. Hooking up with a big company would also offer economies of scale. Even homemade videos culled from Web trading could be sorted for easier browsing by a sophisticated operation. A large, steady company would also be more attractive to credit card companies like American Express, which now refuses all business with porn sites.  

An AOL Time Warner link with erotica would cap a maturation of the market. "The attitude of adult Web businesses has shifted," says Van der Leun of Penthouse.com. "You could say the old motto was 'Fuck the customer.' It's still not 'Hug the customer,' but maybe it's softened to 'Milk the customer.' "

The final barrier between AOL and porn profits is the question of whether the service can keep kids out of adult content, or more accurately, whether dishing out nude pics would inspire Congress to go after the company's entrails. AOL cites statistics showing that half of member households have kids between the ages of two and 17, the vast majority of whom are cloistered by parental controls.

AOL could adopt a more foolproof system, but Mulder defends the company's choices. "If your kid is stealing your credit card and password," he says, "you've got a family problem, not an AOL problem."

Market analyst O'Brien likewise thinks AOL keeps kids fairly safe. Though "a really aggressive user who's determined to get adult material can do it," he says, "AOL has already done a pretty good job of sequestering its content. They've segregated the steamier side, and I don't see why they wouldn't put more effort into that."

If AOL Time Warner can prevent "accidental browsing" of adult entertainment, the industry will become "less and less the Wild West and more the domain of aggregators," argues Mark Kreloff, CEO of adult cable programmer New Frontier Media. His company is now pioneering flat-rate, unlimited downloads and à la carte sales of adult videos. Kreloff dreams of a day when AOL Time Warner parents can come home and instantly download a History Channel special on the Phoenicians by hitting the appropriate menu bar. And when the kids are in bed, they can pull down from the adult button on that same bar a range of choices that might include something more "Greek."

But if AOL is serious about stepping out into the red light district of the Internet, it had better act fast. One squatter has already claimed a hot branded site. The proprietor of AOLwebmaster.com brags—in what could have been a company slogan—that his site is "so fucking sleazy, no wonder I'm number one."

Plus:

The Adventures of SkooterBobby by Erik Baard
Our Underage Test Probe Wheels Into the Lusty Wilds of AOL


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