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In Part II of an XBiz Exclusive interview with Greg Clayman and partner Chuck Tsiamis from Video Secrets, XBizLori gets the lowdown on the welfare of the live video market, how the Internet has changed the industry, and how Video Secrets keeps its chargeback ratios so low.
XBizLori:
Why isn’t video chat a competitive market yet, or is it?
Greg:
Let's just use Lensman for example. If you ask him if he has a lot of competition with websites, I’m sure he’d say there is a lot. I know there are so many websites and so many different programs, but are there that many live affiliate programs? No. Is the market competitive enough to make sure you stay on top? End users are very conscious of quality, cost, and all those factors.
Chuck:
They have a choice.
Greg:
They will go where the best quality is. I think that’s what Chuck was referring to. If someone comes out and has a lower price, one of our customers or a bunch of them might deviate for a little while, but usually that company doesn’t stay around too long. If we stick to the core competencies of being ethical and making sure we have the best quality and the best looking models, they’ll keep coming back.
Chuck:
The live video market is very fragmented. The problem with this market, which I believe is the problem with the entire adult industry, is that the barrier of entry is very, very low. Anybody can just plop up a cam and throw on a thousand people who look like they just rolled out of bed. They are smoking cigarettes or even eating a Snickers bar while they chat live. But what those companies are doing is diluting the traffic that we are all buying in the live arena.
Now, there might be a handful of big companies that are still left. Some are affiliate- based, others may have their own traffic through other avenues. I believe that there is a tremendous amount of competition, not so fierce, but in terms of there being too many choices. There is too much dilution in the webcam market. So the only thing that really keeps us alive and thriving is that we built this reputation and this name brand. We have recurring customers for more than eight years. They know that when they come to our site, they aren’t going to get a pop-up. They aren’t going to get force fed something they don’t want to see. You want to talk to live girls or guys? That’s what you get. It’s easy as it is possible. You pay. You get what you ask for. They are fulfilled when they leave.
XBizLori:
So would you consider Video Secrets the pioneer of this sector?
Chuck:
I would say we are one of them.
Greg:
I would definitely say we are the surviving pioneers.
Chuck:
Here’s a good one -- I would say that we are not Columbus, but we are Lewis and Clarke.
XBizLori:
With all the free content out there, does that in turn end up really hurting the websites and what have you?
Chuck:
I don’t really view our free chat as pure content. It’s really communication. People who buy live video chat, that’s what they are looking for. They don’t want a website. They don’t want a movie. They want to interact. So I don’t think we are hurting anything as long as we aren’t doing something illegal. If anything, we enhance websites. I think we give a website an intimate feeling, which is a one-way kind of communication between the user interacting with the site. You can download movies. You can take a look at pictures. The minute that model engages you and she or he gets in your head and you are chatting, we’ve added a totally different dimension to the entire experience to that user. And the beauty of our system is the analogy we always use: We make ketchup. We don’t care if you put Heinz on it or Hunt.
We let people "private label" the front end of our service, so if you have TripleXGirls.com and you want a link to Flirt4Free. Then you click on Flirt4Free and the graphics look just like TripleXGirls live and it looks like it’s your service. We don’t care. That’s the beauty of our system. If people aren’t afraid to put it on, as kind of an appendix onto their site, that's fine.
Greg:
Yeah and that’s why we allow people to customize, or I should say private label. We call it "No Logo Ego." So if people want to put their labels up there, they are more than welcome to.
Getting back to the free content question again, I think that free content, when you're talking about TGPs and so forth, is great. I don’t think that it deters or hurts the market in any way as long as the content is somehow not explicit. When it is explicit and it leads back to a site that is asking you to put in your information to make sure you are eighteen, then I feel that you are crossing a few different boundaries because you are showing somebody something that is either explicit or hardcore and then trying to move them over as a consumer. What we do is a little bit different. We show these previews and you can flirt free. However, as Chuck mentioned, only while you are in the free environment is it not explicit at all. All the models will do is talk to you and you can talk back to them, but there is no nudity, and we’ve made sure of that. The only nudity that comes into play is when it’s a private one-on-one and those people are out of the free environment. So I think non-explicit, tempting content to lead a consumer to purchase a membership is great. I just don’t think that explicit content leading to more explicit content is necessarily good for the industry as a whole.
XBizLori:
Do you shoot all original content or do you have anything dealing with acquisitions?
Chuck:
Our premium feed packages are all packaged from original content, the stuff we have the exclusive rights to for perpetuity. As for the structure of the studio, the relationship with us is a pure third-party independent contract. These people are not employed by us. We do not control them. I can’t tell them what they can and can’t do. I just can’t. It’s up to them and they are the ones who are on the fence for what they do whether it’s illegal or not. However, we have made some deals with some of these studios where we can keep certain streams on a perpetual basis and that’s just part of the agreement. All of our feature shows are exclusive. You've never seen them anywhere else and we will continue to do that. We will continue to forge our own content because it is one-of-a-kind type of stuff. It’s amateur.
XBizLori:
You’ve won a number of industry awards for your content, what do you think sets you apart from the others to scoop the competition?
Greg:
I think it’s our tenacity. It goes right back to being a quality-oriented company trying and providing the best quality whether for the end user, whether the end user is the webmaster, or the end user is the surfer. We always try to provide the best quality we can to the end user, and if you do that properly it will show.
Chuck:
And working with the right companies.
XBizLori:
How has the Internet changed the industry in general?
Greg:
Some people joke with me and say that the Internet was made for three particular things: It was meant to check your email, to check your stocks and investments, and to check your adult content. I laugh at that. To some extent it’s quite true. You don’t necessarily have to sneak into a video store anymore. You don’t have to do pay-per-view so it shows up on your DirectTV statement. You can very quietly and very privately go to a website that revolves around your particular niche, whether it is live, or whatever your particular niche might possibly be. You can enjoy it in the comfort of your home in privacy. So that’s how I think it has changed the industry. But if I can watch something in the privacy of my own home on my computer rather than go out to a store and hope my neighbors aren’t behind me in line, then I’ll do it that way. I think that’s how it has definitely made a dent in the entire adult industry. Will it eventually make an extremely radical change in how people view adult content in the future? Yes I think so. If you go around talking to not just companies like us that are strictly Internet, but video companies that are in the Internet field, they are all gearing up to make sure their movies are on-demand over the Internet on a pay-per-view basis. So like five or 10 years down the road, there may be fewer stores out there because people can just go and buy it on the Internet. And when the infrastructure of the Internet is strongest enough, bandwidth-wise, and the integration of the television and computer come together, you may be hard pressed to go out and rent the video.
XBizLori:
Let’s talk about billing, the new regulations, and the effects in general on the industry as well as on Video Secrets.
Greg:
As far as billing goes, one of the strong advantages that I feel we have and we have always maintained since the inception of the company is that we primarily do not do recurring billing. So if a consumer came on and bought 20 minutes worth of time, they can use that 20 minutes anytime they want. Ten minutes today. Ten minutes a month from now. When those 20 minutes are actually up, they will never be billed again. They actually have to come back to our site to buy more time. They are never re-billed again. We are not waiting for subscriptions to renew. Everyday it’s a whole new group of people. We have a lot of repeat business but almost no recurring business. I think Visa likes that and MasterCard likes that because we are not there every month hitting your credit card. If you want to buy more time, you have to come back to the site you originated your session from and purchase more time. Given that type of business model, we have been able to keep our chargeback levels very low.
Chuck:
The reason why we make more money is because we share the revenue all the way through until the day that person no longer comes to the service. On a regular one-time sign-up you may get $30, or you may get $35 or $40. That means that the company that is taking that money is making a hell of a lot more than $40. What we say is that we are not going to give you just one piece, one shot. We are going to give you this piece all the way through. We are going to share the revenue with you all the way through. If you think about the dynamics of what a monthly subscription is, even your best customers are only going to get $360 a year on a subscriber at $30 a month, or $12 a month for a paysite. Our best customers spend more than $125,000 a year chatting with live models. So if you are a webmaster, would you rather make $40 on a sign-up on that one guy, or would you rather make $35,000 on that guy with us in one year?
Greg:
I think the webmasters like it too. It allows them to diversify their income if they have another revenue model built in that is not recurring-based but has the ability to keep making money for them.
Chuck:
Residually-based.
Greg:
They like both models and I think they come together nicely.
XBizLori:
What do you think of the international adult industry and what companies do you work closely with?
Greg:
To answer your first question, we think highly of the international market. We definitely feel that Europe is in a lot of ways ahead of United States. We do maintain a very bureaucratic society here. If you look at Europe and Asia on their cell phones especially with adult in mainstream applications and so forth, they have no problem putting adult entertainment as an option to download on a cell phone. Here in the United States, that it will never happen. I don’t think that AT&T is going to put the options: ESPN, CNN and ADULT. I may be wrong on that, and I hope I’m wrong. In Europe you have companies like Vodaphone that are already doing it. People are spending a lot of money with adult in foreign countries. You can see Adult TV after 10 o’clock at night and in the states you would have to pay. So the bottom line on that discussion is that they are much more liberal as far as society goes. Much more of their mindset is "if you are not hurting me and you are not affecting me then I’m not bothered by it, and if I don’t like it then I just won’t go out and buy it."
In the United States it’s a little bit different. People want to get into other people’s business. They want to start to set up rules and boundaries on how things should be done. The company that we work the closest with in Europe is the Private Media Group. We have a 6-year relationship going with Private. They are a 34- year-old company. They are now located out of Barcelona, Spain. We have a very, very tight relationship with them over the years. Not only is Private Channels one of our most successful content products, which is a complication of all the private movies, they’ve also had some of the stars on live a few times. Our general relationship has been very, very solid over the years. We wanted someone over in Europe who we could trust. Who we know has to answer to a higher authority such as the Nasdaq and the stock exchange.
Chuck:
Whose content we like.
Greg:
Whose content we appreciate.
See Part I here, and be sure to stay tuned for part three coming soon...
