Selling sex on cells

(Business 2.0 Magazine) -- Last month Telus, Canada's second-largest wireless operator, quietly tried to do something that no other North American rival has done: sell pornography. But when The New York Times detailed the new service Monday, the backlash from religious groups and Telus subscribers was swift.

By Wednesday, Telus (Charts) pulled the plug on its incipient porn play. In press reports, company executives seemed nonplussed by the public outrage, noting that the company's television unit carries adult channels with no fuss.

"There was certainly a fairly significant amount of surprise and a lack of awareness that the Internet had arrived on cellphones," spokesman Jim Johannsson told the Edmonton Sun.

For Telus, its venture into adult content came to an end almost as quickly as it began. Notably, though, company officials left open the possibility that the carrier would sell smut in the future.

Let's cut to the chase, shall we? Sex sells. Whatever the format - DVDs, pay-per-view movies or websites - pornography has long been a hot ticket to riches. Consumers pour so much money into porn that the adult entertainment industry pulls in a whopping $57 billion annually.

Naturally, porn kings are setting their sights on mobile phones. Handsets are more private than PCs, increasingly ubiquitous and, thanks to high-speed 3G networks, now capable of streaming video. Juniper Research estimates that the adult mobile content market will more than double by 2011, to more than $3 billion.

Feeling steamed - or just steamed up? Well, know that most of the explosive growth is happening right now in laissez-faire Europe and in other places with more relaxed social mores than in the United States and its neighbor to the north.

Still, sex is available on wireless devices near you. In 2005, Jenna Jameson, the porn princess-turned-media mogul, began selling "moan tones," wallpapers and videos. Playboy, which acquired Jameson's mini-empire last year, lets cell phone users download pictures of their favorite Playmates for $2 a pop.

At least one adult content company, Los Angeles-based Vivid Entertainment, claims it's in talks with a major U.S. cell phone operator about making content available this year.

Steven Hirsch, the co-CEO of Vivid, estimates that a scant three percent of his company's approximately $100 million in annual revenues comes from wireless - and that most of the buyers are in Europe. But expects mobile to become a much bigger piece of his business, with U.S. consumers contributing to the growth.

"It will happen," says Hirsch, who notes that Vivid producers now take into account the limitations of smaller screens by using wider angles "so close-ups don't feel claustrophobic." Eventually, Hirsch expects mobile to be an "integral part" of Vivid's business.

Getting smut into the hands of U.S. consumers won't be easy. Carriers so far have shied away from selling hard-core videos, games or pictures directly through their networks. This means that wireless users with browser-enabled phones have to get their porn searching adult sites - a cumbersome process made worse by the poor quality of the mobile Web and the ability of carriers to block sites they don't want subscribers accessing.

The Telus example speaks perfectly to why U.S. carriers have so far taken a pass on porn - ironically, even as other divisions of their parent companies broadcast adult content through cable and satellite television.

For all the revenue potential in an increasingly cutthroat business, major operators risk tainting their family-friendly images by selling porn, says David Chamberlain, an analyst with research firm In-Stat. Parents would be angry and so undoubtedly would lawmakers.

"I'm just not sure U.S. carriers have a stomach for [porn]," says Chamberlain. "I doubt Verizon would want to have their iconic network guy with the horn-rimmed glasses associated with Playboy."

Sure enough, spokespeople for two mobile operators, Verizon (Charts) and AT&T (Charts), said their companies have no plans to touch pornography with a 150-foot cellular tower. "We don't offer or have any plans to offer adult content," says Mark Siegel, a spokesman for AT&T (formerly Cingular Wireless).

Siegel says that porn doesn't have a place in the AT&T brand.

But it could be that U.S. carriers are watching closely what happened with Telus. And while Telus back pedaled fast, remember that it didn't rule out trying a similar service again.

That never-say-never vow is significant. Chamberlain, the In-Stat analyst, doesn't think major U.S. carriers are going to jump on the porn bandwagon anytime soon, but he knows someone will - and that that someone will make a ton of money.

Hirsch, the Los Angeles porn publisher, couldn't agree more and says he's prepared to tough it out. "This is just the beginning," he says.