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Summary:

Porn company Private Media plans to give away a lot of its X-rated content. The move is meant to offer alternatives to unlicensed video sites. So how does Private intend to make money? By running ads for major brands as part of a Groupon-like voucher scheme.

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Sex sells: The Barcelona-based adult movie company Private Media is taking a unique twist on an old mantra, preparing an ambitious effort to compete with free and unlicensed content online. Private’s goal is to completely revamp its entire business, generate revenue from advertising with a Groupon-like voucher twist and give away the majority of its content for free. “There is no reason to continue to charge people,” said Private CEO Berth Milton during a phone conversation last Friday.

Like everyone in the porn business, Private has seen its revenues erode in recent years as consumers flock to file sharing networks and sites like YouPorn for free and unlicensed copies of their movies. A few competitors have started to sue end users for file sharing, but Milton doesn’t think this is the right way to go. “We don’t mind P2P, that’s absolutely okay”, he told me, reiterating that noncommercial piracy can actually serve as promotion.

What he doesn’t like are adult YouTube clones, oftentimes called tube sites within the industry, that try to make money with his company’s content. Private has sued a number of these sites in the past, but now it wants to confront them head-on by opening up its own free and ad-supported porn sites.

The problem with this approach is that major brands usually don’t like to see their goods advertised next to movies like On Vacation With My Slut Sister. Tube and torrent sites tend to run ads for a few online dating services, and the CPMs for these ads bring in a fraction of the money major media outlets make online. Other sites try to get affiliate fees by redirecting users to paid porn, but Milton calls this a “stupid business model.”

Private’s solution to this problem is pretty daring. The company is about to team up with a major Italian ad agency to get access to major brand advertising without any actual involvement of the companies that make these products. “We don’t need approval for any of the luxury brands,” said Milton.

How will this work in detail? Let’s say fashion brand buys ad space on a traditional TV outlet through the agency. The brand pays the agency not in cash, but with its products valued at wholesale price. These products then get offered via Private’s sites for a outlet-like discount, and Private only gets paid for any actual sales.

Milton told me that this setup is inspired by Groupon’s voucher system. Some of the first items sold through this unique relationship will be clothing from major fashion brands and gym equipment. These sales will initially be restricted to Europe, but Milton hopes to quickly expand to the U.S. as well, and he firmly believes that he’ll be able to cater to millions and millions of customers. “It will explode,” he said.

Private wants to supplement its ad income with other new revenue streams, ranging from an online casino it is going to launch in mid-February to a swingers hotel that is scheduled to open its doors in Barcelona in July. The hotel is a first test case, but Milton believes that he can quickly expand to 100 similar hotels operated on a franchise basis that specifically cater to swingers. And he isn’t ready to give up on selling content entirely; part of the hotel will be an offer for a free stay if guests are willing to have their escapades live-streamed on one of Private’s pay sites.

All of these plans are overshadowed by an ongoing legal struggle with some of Private’s investors over control of the company involving former CEO Ivan Buminovitz, who was ousted in July. Milton tried to assure me that the conflict won’t have any impact on his company’s move towards new business models, and recent regulatory filings seem to suggest that he does have the backing of a majority of stock holders. However, NASDAQ has threatened to delist Private as a result of the prolonged power struggle.

Still, Milton seems optimistic about Private’s future. He lamented that the porn biz spent too long holding onto old business models, thus effectively digging their own holes, all the while porn online is exploding. “(Adult) companies are getting smaller, but the market is getting bigger,” he remarked. Milton believes that it’s overdue for companies like Private to profit from this trend. “When I started, we could sell in a few select porn shops,” he said, adding: “Now we can sell to a billion consumers.”

Check out our previous interview with Private CEO Berth Milton, in which he praises P2P piracy as promotion, below:

Image courtesy of Flickr user James Bowe.

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