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Global Recession Blamed for Decline in Porn Sales

"Negative global economic conditions" are causing a decline in sales of porn, internet dating sites for "adults," swingers (and religious minorities), according to FriendFinder Networks' (FFN) Q2 2011 earnings. FFN owns Penthouse and a raft of adult entertainment brands such as AdultFriendFinder.com and Bondage.com.

When you've finished laughing, consider that FFN cited a downturn in global macro-economics in its first quarter earnings as well, making it a predictor of the reduction in economic growth forecasts recently confirmed by the Bureau of Economic Analysis. The major difference between this quarter and last was that FFN specifically cited wilting interest in debt-strapped Europe in Q2, when it did not in Q1.

The company's second quarter saw revenues fall slightly to $84 million, which the company blamed in part on a 6.4 percent decrease in sales to people seeking sex and other meaningful relationships through its social networking web sites.

The economics of one-handed typing
The loss would have been worse, the company said, had it not dinged its consumers an extra $1.9 million in fees for "non-use" of the accounts they bought to watch models perform live on web cams. That fee was the majority of a 12.3 percent increase in live interactive video sales FFN made in Q2. That's how pornographers make money: by dunning their customers whether they're coming or going. Strip away the "non-use" fee and you can conclude that the recession is not only reducing consumers' dollar spending on porn, it's curtailing the time they spend "consuming" it, too. One interpretation of that is that consumers are working longer hours and no longer have the time or the energy for one-handed typing.

For those of you interested in fundamentals, FFN made a loss of $12 million, one of a string of losses since the company incurred $500 million in debt in a pointless, value-destroying transaction that breathed temporary life into the dying Penthouse brand at the price of crippling the rudely healthy FFN empire with debt payments of $22 million per quarter. Absent the debt, FFN would have made a $10 million profit.

Nonetheless, the broad reduction in FFN revenues says that consumers' pockets are stretched, and not just in the usual way. FFN is competing against a commodity product that is available free almost anywhere else on the web (or at the local bar). While it's common wisdom that even in recessions vice businesses find a way to survive, that doesn't mean they are totally immune from cutbacks in discretionary spending. Now that Playboy has become privately owned again, there are very few reliable economic measures of what's going on in the adult world. FFN -- as a proxy for porn as a whole -- may be a sensitive indicator of consumer behavior.

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