While cyberporn has enriched some adventurous entrepreneurs, mainstream businesspeople have stayed away for a simple reason: It is difficult to run an enterprise in a perpetual climate of uncertainty. That hasn’t changed, though some have come to believe the potential rewards outweigh the risks.
Congress, which so far has been confounded in its efforts to come up with an anti-cyberporn law that will pass constitutional muster, can be expected to continue to try to rein in what Rep. Steve Largent, R-Okla., recently referred to as “illegal pornography” on the Internet.
In late July, for instance, the House approved legislation by Largent calling on the Justice Department to broaden its prosecutorial efforts beyond child pornography.
“Through the Internet, the family rooms and home offices of our nation have turned into the worst porn shop you can imagine,” Largent said during debate on the bill, which was approved in the House by a 412-4 vote.
Obscenity prosectuions possible
But Frederick S. Lane, an attorney and author of “Obscene Profits: The Entrepreneurs of Pornography in the Cyber Age,” said that while prosecutions of individual sites featuring extreme material are possible under existing obscenity laws, the Supreme Court’s decision overturning the Communications Decency Act and a federal court’s ruling striking down the Child Online Protection Act make it unlikely that a broad roll-back can be achieved legislatively.
“What mitigates against any kind of major shift in the legal landscape is the Supreme Court,” he said. “The Communications Decency Act vote was 9-0. Essentially they put the Internet on a par with standing in a city park and speaking or publishing a book. … And that is, I think, a very difficult burden for Congress to meet when it’s trying to regulate the Internet.”
The industry could, however, be vulnerable to political pressure.
Andrew Edmond, CEO of Seattle-based SexTracker.com, argues that the entrance of public companies providing online adult content gives politicians new leverage to control the industry.
“Unlike private companies, the marketplace allows for extreme political control,” he recently told AVNOnline.com.
“Those who think they’re going to make some money as individuals on the stock market should realize they’re just asking for a heap of trouble for themselves and the rest of this business,” Edmond said.
Boycotts are worrisome
Another scenario that worries some of the adult industry’s leaders are boycotts organized by anti-pornography and religious groups aimed at forcing their mainstream business partners to stop doing business with them. The fear was dramatized this spring when such groups brought pressure to bear on AT&T after it announced it intended to sign an agreement to carry Vivid Video’s Hot Network.
The industry also can be squeezed for purely business reasons.
American Express announced earlier this year that it would no longer allow its credit cards to be used to pay for access to online adult sites, citing the high percentage of disputed charges that result from such usage. MasterCard and Visa also have cracked down on “charge backs” - transactions that are canceled due to disputes or credit card fraud - levying substantial financial penalties against merchants who are unable to keep their rates below 1 percent.
A potentially explosive issue is access to adult material by minors. The big players currently abide by an informal code that requires a viewer to submit credit card information before viewing explicit sexual content.
“We are not interested in delivering our content to anyone who shouldn’t be getting it, for example children or someone else who doesn’t want to see this content,” said Mark Kreloff, president and CEO of New Frontier Media, one of the few publicly traded companies that deals in online pornography. “That said, we do believe that everyone has the right to access this programming.”
Bringing rogue sites into line
But those who want to project a mainstream image are bedeviled by site operators willing to generate traffic by making hard-core sexual content, fringe material like bestiality and, occasionally, child pornography available to anyone with a browser.
Kreloff said industry leaders can and do act to remove such operators from the traffic-sharing system that allows small operators to stay afloat.
“If you look at the total impact we have as a loosely formed cartel on traffic generation, if you are cut off from this cartel, you are effectively not in business,” he said.
“We are very diligent about making sure that these people adhere to these informal standards that we’ve developed.”
The industry also is coming under increasing scrutiny for use of fraudulent or deceptive business practices, which are used by roughly 10 percent of the online adult Web sites, according to Federal Trade Commission attorney Stephen Cohen.
“We continue to see problems with the use of the world ‘free,’ ” said Cohen. “A lot of these sites are advertising free content, but then when you get down into it, it turns out not to be free.”
The FTC took action in July to force X-pics, a nearly defunct adult Web site operator, to repay consumers whose credit cards were charged without authorization, the first time the agency has acted to stem the practice known as “slamming.”
The Washington Post reported in early July that Seth Warshavsky, whose Seattle-based cyberporn operation pioneered the use of interactive live video on adult Web sites, was under investigation by federal agencies. The newspaper said three former employees of Warshavsky’s company, Internet Entertainment Group Inc., had alleged in affidavits filed in connection with a lawsuit that Warshavsky had raised cash by double- and triple-billing customers’ credit cards.
Warshavsky told the Post, “there was no wrongdoing on our part.”
Spam use under fire
Finally, the industry also has come under fire from anti-spam groups, which say that porn sites are sending out vast amounts of unwanted email - including some that disguise the nature of their offerings until a computer user clicks on the link in the message.
“They’re getting more and more sophisticated as to how they send their messages to get through filters,” said Tony Phipps, a spokesman for the opt-in marketing company ChooseyourMail.com, who participated in a study last year by the Spam Recycling Center that attributed about a third of all spam to porn sites.
Many anti-spam groups are urging Congress to crack down by passing a law providing for punishment of spammers - an action that would make it harder for adult Web site operators to capture the “impulse” click-through by bombarding computer users with their pitches.