Porn Monopoly

BROOKE: Video services consumer most of the bandwidth on the web. Some you've probably heard of: YouTube, Netflix, Twitch. But there's one bandwidth behemoth you might not know, at least by name: MindGeek. Despite it's low profile, MindGeek has over a hundred million daily visitors. It operates nearly a hundred websites, and consumes more bandwidth than Facebook, Twitter and Amazon. How has MindGeek achieved such success so anonymously? The answer has to do with MindGeek's line of business: pornography. And it's path to success offers a cautionary tale, even to those disinclined to its content. In a piece titled "Vampire Porn," Slate writer David Auerbach explains how MindGeek gained a virtual stranglehold on porn by snapping up something called tube sites.

 

AUERBACH: That's sort of the term of art as they might say, for a YouTube-like service that is dedicated to pornography.

 

BROOKE: And supported by ads.

 

A: Yeah, they don't make money through subscriptions or log-ons, they're purely supported through ad revenue.

 

BROOKE: And MindGeek controls eight out of the top ten of these tube sites?

 

A: Yes, they started off with one, and sort of from the revenue from that they were able to acquire others, and apparently they're in talks to acquire possibly one of the remaining two of the top ten.

 

BROOKE: Wow. And a lot of this stuff is pirated.

 

A: Yes, that's the really fascinating ouroboros like aspect of this story. Once MindGeek obtained a fair amount of revenue, mostly off of this pirated content from their tube sites, they then began purchasing pornography content producers. Including companies like Brazzers and Vivid. And these were upscale mainstream pornography production companies. And their content had already been being pirated on tube sites for years. After the purchase of these companies, rather than cracking down on piracy, its being used as a way to sort of way to divert funds away from the content producers, and just have the revenues come in through ads and go directly to MindGeek, so that wages and revenues for the content producers remain low, even though the same parent company is profiting off of it.

 

BROOKE: And, as we've seen in a lot of creative areas, the people who are suffering are the people who create the material, and I know a lot of people, including government regulators, don't have a lot of sympathy for people in the porn industry. But as you note in your piece, in the last decade or so, almost every porn star has to freelance as an escort and that didn't use to be the case.

 

A: Yes. Several people remark that maybe 15 years ago it was uncommon for porn stars to moonlight or support themselves through prostitution escort work. And now it is very very common. Simply because wages have fallen, production has fallen by something on the order of 75 percent. And while you still have other producers like Hustler, that are still around, because so many of these sites even if they're not owned, they still depend on advertising purchased by MindGeek companies. So basically, they have the power to sort of blacklist or shut out people to the extent that it can really threaten people's profits and livelihoods if they decide they don't like you.

 

BROOKE: So, creativity in the industry is being squashed, I think it's fair to say.

 

A: Yes.

 

BROOKE: And at the same time, MindGeek has over a hundred million daily visitors, and is certainly in the top ten of bandwidth users, and possibly in the top three alongside YouTube and Netflix? That's huge. It's hiding in plain sight.

 

A: I suppose much like pornography in general, it is hiding in plain sight. You know, MindGeek the brand itself is unknown to most people. This manifests also itself in terms of their business dealings which is that in 2011, MindGeek, which was then known as ManWin, was able to get a $350 million loan from Wall St. And the way that loan was secured to avoid the appearance of Wall St. investing in pornography was that it was tranched on Wall St. in something like half a dozen or even a dozen individual loans that were then moved through a very small capital firm so that it was not at all obvious that anyone who invested in these loans was investing in a pornography company.

 

BROOKE: But, you know, all that said, that this is a huge rampaging monopoly that's consuming astonishing amounts of bandwidth, and is funded by money hidden in a lot of little tranches which is hiding in plain sight. Why should we care? And I think you begin to provide the answer in your piece when you write, "MindGeek's dominance should serve as a cautionary tale of the dangers of consolidating production and distribution in a single monopolistic owner."

 

A: Yes, well, look at it this way. Right now there's a lot of television and movies that Netflix doesn't make available streaming, because the people who own that content, even if the additionally own cable companies, or channels, or even internet service providers, want to make the most money off of that content, before they allow it to be streamed. And so they're negotiating. Now, imagine if Netflix then just owns the content providers. That negotiation doesn't happen. And so there's less money that then flows to the content provider owner and then back to the content producer. There's more incentive to collect perhaps less revenue if it results in more revenue that's going directly to the company itself, rather than revenue negotiated through contracts between the content producers and the people working for the content producers, like actors and writers and directors.

 

BROOKE: Maybe one day MindGeek will buy YouTube.

 

A: As I understand it, MindGeek is not the most well-run company. They've had some corruption issues, the secret services seized their bank accounts in 2009, the ex-CEO was arrested for tax evasion in 2012, so... it may be sort of a dying vampire that sort of takes a lot of other companies with it and then dies out having sort of sucked the industry dry.

 

BROOKE: The porn industry dry?

 

A: I didn't say that.

 

[laughing]

 

BROOKE: David Auerbach is a writer and software engineer based in New York. He wrote the article, "Vampire Porn" for Slate.