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Vivid's potential IPO, then, is the first reliable barometer of public acceptance of online-porn content companies and is being watched closely by the rest of the online porn industry. "You will not see an adult company blatantly flying above radar," says Lee Noga, who operates Ontheropes.com, a resource site for Webmasters of porn sites. "Vivid is such a huge name in so many different areas. [Its IPO] would make sense."
Asher concedes that a company like Vivid will be an extremely tough sell on the Street. "If I were the owner," he says, "I would consider [staying private] simply because it's a nice, easy way to go." But Asher's not Vivid's owner; he's the president. [See sidebar.] Steve Hirsch is Vivid's owner.
HIRSCH AND HIS TWO SIBLINGS grew up in Cleveland, steeped in the adult entertainment industry. His father, Fred, a former stockbroker, operated a business selling 8mm stag films in the 1970s. For several years, the children were shielded from the realities of dad's occupation, but that didn't last as the police repeatedly raided Fred's office and charged him with distributing obscene material.
The younger Hirsch joined the family business as a teenager. By 1985, he teamed with adult-industry colleague David James to form Vivid.
Like most porn companies, Vivid used to operate quietly. But in the last few years the company set out to build its brand and gain mainstream notice. The company began pushing its lineup of "Vivid girls" -- stars such as Janine, Taylor and Devon. Vivid girls Kobe Tai and Dyanna Lauren sang background vocals for Marilyn Manson's Mechanical Animals album. Blink-182 features Vivid's Janine in the video for their hit, "What's My Age Again." Publications such as the Economist, Rolling Stone, Time and the Wall Street Journal profiled Vivid and its campaign for public exposure.
"Most people in our industry just wanted to make money," says Hirsch. "We looked at it in a totally different way. We don't have a problem with what we do. We're proud of our movies. We actively went out ... and courted journalists from all over the world. ... That's how you build brand recognition." And that's how you build a business.
VIVID'S DECISION TO SEEK PUBLIC backing couldn't come at a worse time. Since April, Wall Street has turned its back on Net-based content plays, sending a company like Playboy.com back to the drawing board. The field, furthermore, is littered with the corpses of online media firms such as Digital Entertainment Network, Pseudo and Pop. com.
Also, broadband has not hit critical mass. While 41.5 percent of U.S. homes have Internet access, only 10.7 percent of homes have access to high-speed Internet services, according to an October U.S. Department of Commerce study. Only about 4 percent to 5 percent of homes actually subscribe to such services, however, reports the Yankee Group.
Complicating matters, online porn has attracted the eye of regulators and politicians, who are paying special attention in an election year. Federal lawmakers, including Senate Commerce Committee Chairman John McCain (R-Ariz.) are calling for mandatory porn filters in public schools and libraries as a condition of receiving federal funding.
The federal commission created by the Child Online Protection Act of 1998 has spent the past few months grilling members of the adult media industry in its search for methods to protect minors from accessing adult content on the Net. The commission submitted a list of recommendations to Congress two weeks ago, but stopped short of recommending a dedicated adult domain -- .xxx or .adult were both floated -- which would have let employers and schools essentially switch off access to these sites. That move would have dramatically reduced the amount of traffic to porn sites. The commission recommended that schools, libraries, Internet companies and technology companies voluntarily address the matter.
The FBI, IRS and credit-card companies also are clamping down. American Express decided earlier this year to decline charges made to porn Web sites. Porn sites regularly pay up to $100,000 in penalties because many customers dispute charges made to the sites.
The political, legal and financial threats aside, Vivid faces some of its harshest criticism within its own industry.
Going public "is the worst idea they can be thinking about right now," says Flying Crocodile CEO Andy Edmond, whose company operates a portal that plays host to hundreds of free sites and whose traffic analysis software Sextracker is used by more than half of the top 10 adult sites. A former RealNetworks executive, Edmond is one of the more vocal members of the online adult industry. "I know they think it's the greatest thing," he says, "but all it's going to take is a Pat Robertson, who controls media sources, financial markets, a lot of stuff, to take a great day for Vivid and turn it into a bad day."
"Porn is not mainstream' says Jonathan Silverstein, president of Cybererotica, one of the earliest and most successful online adult companies that sells subscriptions to its network of paid sites. But, he adds, "everyone will be watching them closely."
Vivid's Hirsch and Asher won't be dissuaded. Says Asher: "The owners of the company feel that we should either get out of the business at this point and sell it to somebody else, or you should expand. This is an industry that's exploding."
Pornography's New Breed
Pornographers, the cliche goes, look a lot like Burt Reynolds in Boogie Nights -- slimy guys in neck chains and skin-tight pants. But as porn companies clean up their image to attract mainstream support from the Fortune 500 companies (think cable operators) and potentially from the public markets, their executives are starting to look corporate.
Consider Bill Asher, the 38-year-old president and COO of Vivid Entertainment Group. A graduate of Dartmouth College and the University of Southern California business school, Asher didn't set out to produce hard-core porn.
Growing up in the small farming community of Paris, Ill., Asher planned to follow his parents' footsteps and become a lawyer. That plan evaporated in college when he took a couple of law classes. "There was too much reading, too much writing," he explains. "I lost interest after I found out what I had to do."
After graduation, Asher intended to pursue a career in the entertainment industry and earned his MBA in 1988. But then the Writers Guild went on strike, flooding the market with unemployed professionals. "There was no need for me," he recalls.
So Asher took a temporary job in finance at a restaurant chain and stayed there five years. That's when he got calls from Sony and from Playboy Enterprises. He accepted the Playboy job -- in strategic planning and finance -- on the spot.
At the time in 1993, Playboy was bleeding money from its expanding cable and non-magazine-related operations. Its stock, which currently trades at $13 a share, went for less than half that at $6 a share.
It took less than five years for his department to turn around the entertainment group, according to Asher. The key was cutting spending for Playboy's growing cable operation, he notes, by negotiating a deal with hard-core film producer Vivid. Vivid would provide softer versions of its explicit offerings for Playboy's cable channels, a deal that's still in place.
Asher came in contact with Vivid CEO Steve Hirsch, who dazzled the young Playboy exec with talk of expanding into the Internet and competing against the Bunny on cable. Asher joined Vivid in 1998. "Bill was quite a good negotiator and understood how the business really worked," says Hirsch. "As we began our TV business, we wanted to bring in someone who really understood it."
"It didn't seem to me print side could translate well on the Internet," add Asher. "A video company was going to have a greater advantage."
So what do his parents think of Asher's career? "They're the most supportive people in the world," he says. But, he admits, "I'm sure it's difficult for them to tell their friends what their baby does." -- K.L.
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COPYRIGHT 2001 Gale Group
