The Provo video-store chain that Larry
Peterman owned in this Utah valley of wide streets and ubiquitous churches carried the
kind of rentals found anywhere in the country: from Disney classics to films about the
sexual adventures of nurses. Mr. Peterman built a thriving business until he was charged
last year with selling obscene material and faced the prospect of bankruptcy and jail.
Just before the trial, Mr. Peterman's lawyer, Randy Spencer, came up with an idea while
looking out the window of the courtroom at the Provo Marriott. He sent an investigator to
the hotel to make a record of all the sex films that a guest could obtain through the
hotel's pay-per-view channels. He then obtained records on how much erotic fare people
here were buying from their cable and satellite television providers.
As it turned out, people in Utah County, a place that often boasts of being the most
conservative area in the nation, were disproportionately large consumers of the very
videos that prosecutors had labeled obscene and illegal. And far more Utah County
residents were getting their adult movies from the sky or cable than were getting them
from the stores owned by Larry Peterman.
Why file criminal charges against a lone video retailer, Mr. Spencer argued,
when some of the biggest corporations in America - including a hotel chain whose board
of directors includes W. Mitt Romney, president of the Salt Lake City Olympic Committee,
and a satellite broadcaster heavily backed by Rupert Murdoch, chairman of News Corp. -
were selling the same product?
''I despise this stuff - some of it is really raunchy,'' said Mr. Spencer, a public
defender who described himself as a devout Mormon. ''But the fact is that an awful lot of
people here in Utah County are paying to look at porn. What that says to me is that we're
normal.''
It took only a few minutes for the jury to find Mr. Peterman not guilty on all charges.
His case illustrates what has happened to an industry that used to be confined to the
margins of commerce, in the seedy parts of most towns, run by people who never dreamed of
taking their companies to Wall Street.
Spurred by changes in technology that make pornography easier to order into the home
than pizza, and court decisions that offer broad legal protection, the business of selling
sexual desire through images has become a $10 billion-a-year industry in the United
States, according to Forrester Research of Cambridge, Massachusetts, and the industry's
own Securities and Exchange Commission filings.
The financial rewards are so great that some of the biggest distributors of explicit
sex on film and online include the country's most recognizable corporate names.
General Motors Corp., the world's largest company, now sells more graphic sex films
every year than does Larry Flynt, owner of the Hustler empire. The 8.7 million Americans
who subscribe to DirecTV, a GM subsidiary, buy nearly $200 million a year in pay-per-view
sex films from satellite, according to estimates provided by distributors of the films,
estimates the company did not dispute.
EchoStar Communications Corp., the No. 2 satellite provider, whose chief financial
backers include Mr. Murdoch, makes more money selling graphic adult films through its
satellite subsidiary than Playboy, the oldest and best-known company in the sex business,
does with its magazine, cable and Internet businesses combined, according to public and
private revenue accounts by the companies.
AT&T Corp., the biggest communications company in the United States, offers a
hard-core sex channel called the Hot Network to subscribers to its broadband cable
service. It also owns a company that sells sex videos to nearly a million hotel rooms.
Nearly one in five of AT&T's broadband cable customers pays an average of $10 a film
to see what the distributor calls ''real, live all-American sex - not simulated by
actors.''
For all the money being made on sex - legally - by mainstream corporations, the topic
remains taboo outside the boardroom. The major satellite and cable companies do very
little marketing of their X-rated products, and they are not mentioned in annual reports
except in the vaguest of euphemisms.
None of the corporate leaders of AT&T, Time Warner Inc., General Motors, EchoStar,
Liberty Media Corp., Marriott International Inc., Hilton Hotels Corp., On Command Corp.,
LodgeNet Entertainment Corp. or News Corp. - all companies that have a big financial stake
in adult films and are held by millions of shareholders - were willing to speak publicly
about the sex side of their businesses.
''How can we?'' said an official at AT&T. ''It's the crazy aunt in the attic.
Everyone knows she's there, but you can't say anything about it.''
For hotels, the sex that can be piped through television generates far more money than
the beer, wine and snacks sold from the rooms' minibars. Just under 1.5 million hotel
rooms, or about 40 percent of all rooms in the nation, are equipped with television boxes
that sell the kind of films that used to be seen mostly in adults-only theaters, according
to the two leading companies in the business. Based on estimates provided by the hotel
industry, at least half of all guests buy these adult movies, which means that
pay-per-view sex from hotel room televisions may generate about $190 million a year in
sales
At home, Americans buy or rent more than $4 billion a year worth of graphic sex videos
from retail outlets and spend an additional $800 million on less explicit sexual films.
On the Internet, sex is one of the few things that prompts large numbers of people to
give up their credit card numbers. According to two Web ratings services, about one in
four regular Internet users, or 21 million Americans, visits one of the more than 60,000
sex sites on the Web at least once a month - more people than go to sports or government
sites.
Some of the most popular Web properties - which feature quick links to sites labeled
''Virgin Sluts'' and ''See Teens Have Sex'' - are owned by a publicly held company in
Boulder, Colorado.
That company, New Frontier Media Inc., has stock traded like any other, and it expects
its video network to be in 25 million homes within a few years. It does business with
several major companies, including EchoStar and In Demand LLC, the nation's leading
pay-per-view distributor, which is owned in part by AT&T, Time Warner,
Advance/Newhouse, Cox Communications Inc. and Comcast Corp.
To the astonishment of Mr. Flynt, who began in the pornography business by selling
poor-quality pictures of naked girls as a way to build interest in his strip clubs, his
competitors in the $10 billion annual adult market are mainstream corporations whose board
members are among the American business elite.
''We're in the small leagues compared to some of those companies like General Motors or
AT&T,'' Mr. Flynt said.
''But it doesn't surprise me that they got into it. I've always said that other than
the desire for survival, the strongest desire we have is sex.''
