Steven Hirsch, the head of the adult film studio Vivid Entertainment speaks
passionately about his closely held company, its growth prospects and the
potential for an initial public offering in the coming months. With all
of the new technologies and the excitement surrounding them, this is the
right time for us.
As one of adult entertainment's largest film studios, Vivid already
generates an estimated $100 million a year in revenue, cranking out 60 films
per year and selling them in video stores, hotel rooms, on cable systems and
on the Internet. The company sells Vivid-branded merchandise, such as
condoms, snowboards, apparel and sexually explicit comic books.
Vivid is already a sex industry power. All of the more than 1,500 films in
Vivid's library can be accessed on the Internet, at a cost of $25 per month.
About 30% of the titles found in the adult video section of stores in the
U.S. are Vivid productions. And Hirsch's stable of so-called "Vivid Girls,"
with names like Sunrise Adams and Tawny Roberts, work under exclusive
long-term deals, much like those used decades ago by the Hollywood studios
to keep stars securely in-house and off-limits to competitors. Vivid also
has an exclusive distribution deal with one of the biggest stars in the
business, Jenna Jameson, who co-produces some of her own films in
conjunction with the company.
There are plenty of successful people in adult video business, says
Paul Fishbein, president of Adult Video News. But in terms of the video
market and the mainstreaming of the industry, Vivid is the top. They have
really led the industry into the mainstream.
Now Hirsch is poised to reign over the adult entertainment business. When
the young Hirsch and a partner, David James, launched their own studio in
1984, they redefined the business by introducing the contract sex performers
(they've had only a few men under contract over the years) and designing
glossy, tasteful video packaging that was tame enough to get big retailers
like Virgin and Tower to stock the tapes on their shelves.
Hirsch already pocketed $30 million in 2001 when he sold his (semi) hardcore
cable channels The Hot Network, Vivid TV and The Hot Zone to Playboy
Enterprises for about $90 million. Vivid had purchased The Hot Network just
two years earlier for $10 million, turned it into the three channels and
built distribution by convincing mainstream carriers such as News
Corporation's Direct TV and the former AT&T Broadband, to begin carrying
movies depicting explicit sex. Before then, hotels and cable and satellite
distributors showed only nudity and simulated sex in their video offerings.
Hirsch, who controls 33% of Vivid's equity, split the proceeds of the sale
with two partners.
Vivid films cost between $40,000 and $200,000 each and take anywhere from
three days to two weeks to shoot. Most of them are done at the company's
headquarters and studio, located in the so-called capital of porn, the San
Fernando Valley. Vivid employs about 100 people, and on-screen talent is by
far the biggest cost. Each film uses one of the 10 Vivid Girls currently
under contract. They each earn between $80,000 and $750,000 annually.
Additionally four or five non-contract actors and actresses are also needed
for each film.
Hirsh projects that the growth of video on demand, high definition and
wireless devices will be a boon to his business. Currently, about $25
million comes from online sales annually, but Hirsch says that number will
more than triple over the next several years. The company is already
providing erotic games and video clips to wireless phone users, but so far
that business provides just $10 million in annual revenue. However, once age
and access issues are worked out in the U.S. and other countries, Hirsch
predicts that wireless "will be a big business.''
This all has Hirsch considering taking Vivid public, joining other adult
entertainment companies such as Playboy Enterprises and New Frontier, which
have already enticed public investors into the erotica industry. Vivid
considered an IPO in 2001 but backed out after the market stalled. Although
Hirsch now says "the time may be right," he has yet to retain a banker and
officially begin the process.
Vivid's two largest U.S. competitors are Wicked Pictures and Digital
Playground, but Private Media Group, a worldwide distributor of films based
in Spain, is the only adult video company traded publicly. Since its Nasdaq
debut in December 1997, shares in the company have soared a split-adjusted
268%.
Fishbein, of Adult Video News, notes that other competitors have attempted
to go public but failed. But, he says, If anybody can do it, Vivid can do
it. They are the one company that has branded itself to the consumer world.
People who have not even seen an adult video have heard of Vivid and Jenna
Jameson.
|
