A Consideration of One Conclusion in
the National Research Council Study on
the Attempts to Legislate Cyberspace Pornography

Michael Nellis
05 May 2002

[Addendum (18 Nov 2003): Since I wrote this essay the predictions in the report seem to be coming to fruition. The factor I had not taken into account was: money. Due to increased costs for initial outlay, fewer people are able to establish their own porn sites as small businesses. Moreover, bigger businesses are essentially monopolizing the market by dint of being able to afford the start up costs and much more advertizing. There was an essay about this issue at Gay/Lesbian Finance Network. I do not have the URL for that essay, however. --MN]

On 02 May 2002 the National Research Council[1] released a prepublication edition of their report of a study on pornography on the internet and how to protect children from this influence[2]. This report was edited by Dick Thornburgh and Herbert S. Lin. You can read that report for yourself at http://bob.nap.edu/html/youth_internet.

I am going to examine one issue they touched upon that is related to pornography only obliquely because I disagree with that particular conclusion. (Although I have yet to finish studying the entire report.)

In chapter three of the report, section 4, subsection 1, subheaded: The Structural Evolution of the Industry, the authors wrote:

A commonly occurring development path in many industries is one of innovation, followed by imitation, and then by shakeout. In the innovation phase, one or a few parties find new ways to profit from innovation -- they provide a previously unavailable product or service for which there is demand at prices that are sufficient to earn a profit. In the imitation phase, a host of other parties copy (perhaps with small variants) the ideas that enabled the first innovators to succeed. Imitation and t he creation of "copycat" enterprises continue until the market is saturated and cannot support additional entries into the market. Shakeout is the result, in which a large number of firms (which may be the first innovators or the copycats) give up the business and others consolidate, resulting in a much smaller number of firms each with larger shares of the market. These larger firms are seriously in the business and are likely to adapt to new business circumstances (e.g., markets, regulatory environment) rather than to leave the business.

Since perhaps the mid-1990s (when the World Wide Web began to grow at a rapid rate), the proliferation of adult Web sites suggests that the adult online industry has been in an imitation phase. If the industry continues on the trajectory described above, a shakeout in the industry is likely to occur in the future. If so, the remaining firms are likely to demonstrate a higher degree of corporate responsibility -- and that responsibility may well include more serious attempts at differentiating children from adults in giving access to their products and services.

Now, in chapter one, the committee concluded that the U.S. government was essentially mishandling attempts to regulate the web because it comprises a whole different paradigm from any previously seen and the government was attempting to jam the square pegs of its thinking into this unusual round hole. The authors stated that any regulatory attempt must take the new paradigm into account with a new way of addressing the problems that stem from it. However, above, they clearly made the same error U.S. con gresscritters are making.

The error I perceive lies in the conclusion that the adult online industry will go through the same shakeout that the ISP entrepeneurs went through in the early '90s.

Surely you remember the inception of the internet and all the high flown talk about how it was a wide open frontier and often likened to the romanticized American West. How ISPs beyond numbering sprang up like mushrooms and cyberspace freedom advocates were touting it as a cultural revolution; harbinger of a new society with even greater liberties and freedoms for all.

And then the independents disappeared as fast as they had sprung up as they were bought out by the megacorps.

That was the shakeout, of course.

I think that's not going to happen with porn sites.

I believe it won't happen because the economics of the two businesses are not the same. The ISP independents crashed and burned because all the hype and hoopla, the excitement, did not extend to the banks; the loan officers did not understand any better than the congresscritters that a new paradigm had arrived that could not be treated by the same old, conservative thinking. And banks and loan officers live by conservativism. Their profit margins and corporate lives depend on it. If people lose faith in a bank, it is gone the same way as the S&Ls during that collapse. The independent ISPs couldn't expand the way they wanted to because they were underfunded and couldn't secure the credit or loans they needed to keep up with the fulminating growth the internet was experiencing. So the mega-corps, with cash to burn, picked up the pieces.

Home business porn doesn't live by those rules any more than the transglobal entity of the internet will be subjected to U.S. censorship.

Consider the case of Kathryn Dible[3]. I became aware of this case through my studies of censorship. This housewife is married to a cop who was suspended by his superiors; essentially for having a second job without their permission, but also because his wife owned and operated a porn web site and this was an embarassment to his department. Officer Dible did some of the work involved, behind the camera, taking shots of his wife. He contended that it was more of a hobby. Setting aside such philosophical arguments, their income, according to a note by Ms. Dible that was posted on her site before it was shut while they fought the suspension, was something like a thousand U.S. dollars a month; or twelve thousand per annum. Tossing out round numbers off the top of my head and ignoring taxation, let's say they netted nine grand at the end of the first year. The next year, assuming no growth of their client base or inflation, they'd net eleven grand. Why the difference? Start up costs. Knock off the two grand for a reasonably high end system, the cost of the digital camera, and maybe a DSL or cable connection and the fees for a commecial web site.

However, for the second year, the only costs would be for the connection and the web site. Nor would they require a loan for upgrades to soft- or hardware when it became necessary because they'd be making sufficient income to be self-sustaining, and even if their client base grew by leaps and bounds -- which it won't according to the NRC report[4] -- any extra costs would derive from administration of their home business.

Keeping in mind that one datum does not make a statistical universe, I cannot see how conditions would be markedly different for other home-based pornography sites, or even for larger commercial sites. Even though they would have higher costs, they are also better oriented to make advertising dollars through mousetrapping[5], as well as having a wider client base.

The upshot of it is that the internet pornography industry is not the high investment, high risk industry that dot-com entrepeneurship was. It is a low investment, relatively high return business with a promise of a steady flow of income. A cottage industry. So, I do not agree that there will be a shakeout in the internet adult entertainment industry.

This, of course, is a non-opinion off the top of this layman's head.

FOOTNOTES:

[1] Specifically, National Research Council, Computer Science and Telecommunications Board, Committee to Study Tools and Strategies for Protecting Kids from Pornography and Their Applicability to Other Inappropriate Internet Content
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[2] To be specific, Prepublication Copy: Youth, Pornography, and the Internet
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[3] Her cyberspace pseudonym.
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[4] The report states in one section that many habituees of the online pornography industry stay with a site for only one month, with most remaining at one site no more than three months. This rollover is not due to these people giving up on porn, but moving on to other sites. So it seems a reasonable surmise that a porn site will have a fairly stable volume of paying traffic.
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[5] Mousetrapping: From subsection 3.2 A mousetrapped user is one who tries to leave a sexually explicit site only to be automatically forwarded to another such site. The other sites might be operated by a different operator, but that is irrelevant to the user. This practice is used to boost consumer fees which are paid to a site making a referral by the operator of the site being referred to. The process is enabled by JavaScript. One can avoid it by turning off javascript in the Internet options menu.
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