Staying Focused

If there is one thing that Steven Hirsch never wants to have happen to Vivid Entertainment Group is to be described as old. Since its founding a quarter-century ago, Hirsch has guided Vivid through technological and cultural changes. A company that began releasing its adult movies on videotape has moved into digital. While never a niche producer, Vivid managed to corner certain market segments with its contract performers and celebrity sex tapes. “It is an ongoing challenge to stay current,” Hirsch said. Considering that Vivid is a global brand based on female nudity, the corporate offices in the Cahuenga Pass are extremely business-like, almost chaste. No posters for Vivid films hang in Hirsch’s office but like any good producer he does display the awards his films have won. A Midwestern native who moved West with his family as a teenager, Hirsch got his start in the adult industry working for his father. After a stint as a national sales manager for another company, Hirsch (and a business partner) started Vivid and continues to operate the company under the strategy of quality films with beautiful performers. In the digital age, those films are transitioning away from a physical product to distribution via online. This is why Vivid scaled back its DVS business and focuses on the Internet. “We have hired probably 10 people in he last two months as we get focused in that direction,” Hirsch said, “We see that as where the dollars are coming from and we want to be positioned for that.” Question: Is the adult industry as recession proof as some people would claim? Answer: No, I don’t think so. What the adult industry is going through is the perfect storm. We are dealing with an immense amount of free content available on the Internet as well as pirated content on the Internet. Those two things have taken their toll on the business. As a result DVD sales are down as well. On top of all of that we have the economic downturn. Certainly we are not recession proof. This company has been around for 25 years. We have been fortunate enough to build a brand. People know who we are and know they are going to get a certain level of quality when they view a Vivid film. I feel there will be a thinning out in the industry. But those that are left will be that much stronger. Q: Do you think that thinning out is necessary? A: I think it’s inevitable there is going to be some contraction. There are way too many producers out there who are producing basically the same kind of content. There is an overlap there that is just not necessary. When you don’t have the DVD sales and you’re becoming more dependent on VOD (video-on-demand) and the Internet there needs to be some differentiation. Those who are able to be the most clever are going to be ones that ultimately survive. Q: Having run the company for 25 years, if you could give business advice to yourself when you were just starting out what would it be? A: I think ultimately it’s important to stay focused and understand your mission and don’t deviate from the normal ups and downs of every business; and not be so reactionary that you lose focus on what it is you are trying to accomplish. Q: Do you feel that you have done that? A: I do feel that we have done a good job of staying focused of continuing to produce the highest quality movies. We have never deviated from that. We have always tried to stay on top of new technologies and we’ve looked for ways to set ourselves apart. Q: Is the Vivid merchandise part of that strategy? A: The merchandising and licensing of the brand is basically for brand identification. It is not a huge revenue generator for us. Our business is pretty much broken down between DVD, TV/VOD, and the Internet. There are other income that comes from international sales, licensing, wireless, things like that. Q: How are the TV and Internet sides doing? A: Our TV sales are strong and we haven’t seen a decline at all. In fact we’ve seen a slight increase; not as much as we’d like but a slight increase. The VOD TV continues to grow as people become more accustomed to buying video-on-demand as opposed to just watching a channel. That business continues to improve. Video-on-demand on the Internet I think at one point the industry looked to bridge the gap between the decrease in DVD sales and it hasn’t really done that. That business is steady but not anywhere near where we would like it to be. Our Internet business is growing and continues to grow but certainly not at the pace we would like it to. But we understand there are certain things that are out of our control. Once the economy turns around and we are able to deal with some of these other issues we will be right back to double digit growth quickly. Q: Has there been an evolution of your business approach. A: There have been huge changes in the industry for sure. Twenty-five years ago we were just starting to get movies into neighborhood stores. Access was starting to increase. We have also seen changes in the types of girls who are coming into the business. Years ago the thought was these girls are down and out and this is the last stop for them. Now what we are seeing is girls coming into the business for a completely different reason, and that is it’s a career choice. I think Jenna Jameson had a lot to do with that. She was the first adult icon to transcend our industry. I think that we’ve been out there talking to the mainstream press for so many years certainly had an impact. Now we see girls coming in who are just beautiful but looking at it as a career choice; going out there promoting and marketing themselves as well as getting a push from the companies behind them. Q: Are the girls more business savvy? A: There’s no question these girls know what’s up. They come in with managers who know what they are doing; they negotiate their contracts in a much different way than they would have 25 years ago. That is a good thing because ultimately what you get is a girl who really wants to be here and really wants to work with you and really wants to market and promote. As opposed to a girl who wants to make a movie, get a paycheck and then do something else. Q: The Vivid Girl is that still a viable business model? A: Absolutely. I think the Vivid Girl concept defines us. People know that when you look at our movie you are going to get a certain level of quality and get a certain level of girl. You are going to get a beautiful star. We’ve held steady on that. We continue to sign girls all the time. It is a core part of our strategy. Q: How many films do you make a year. A: We do 60 films a year. As part of that we have our offshoots. We have our Vivid Alt line, which is not with Vivid girls. We have our Vivid Ed line, which is an educational line. We have our Vivid Celeb line, which are our celebrity tapes. Then we have a whole other brand called Brand New Faces, where we make movies with girls showing their first time ever on camera. So we have diversified our offerings but still hold true to a certain level of quality. Q: Speaking of celebrities, Vivid has made a name for itself in releasing celebrity sex tapes. Do you get offered these a lot? A: Not a day goes by that we don’t get a call from somebody who has some connection to some celebrity tape. While the majority of those people have nothing and know somebody and are just checking it out, we take every one of those calls because you never know. We think it’s very important that we are the distributors of these tapes. It’s good for the brand; it really gets our name out there. These things work on every level, in every format. They work on DVD, they work on TV, and they certainly work on the Internet. Q: Did you expect serious replies to the offers made to both Miss California Carrie Prejean and Nadya Suleman? A: We got replies from them. I thought it would be interesting to work with either one of those two. Did I ultimately think they would come to the table? Not sure, but I thought it was worth a try. Q: Where do you see Vivid going in the next five years? A: we are going to push on the Internet. That is where the action is. I think IPTV is coming and coming soon where you have Internet-enabled TV. That is going to be important for us to act as an aggregator and work with the TV manufacturers or some of the people who own some of the real estate on the TV so we’re sure our content is out there and up front. That is a major focus for us. When you boil it down it is still about making good, interesting movies. We can’t ever forget that. SNAPSHOT: Steven Hirsch Title: Co-chairman, Vivid Entertainment Group Age: 48 Birthplace: Cleveland Education: Attended UCLA Career Turning Point: The 1984 release of the company’s first video, “Ginger,” starring Ginger Lynn which was the biggest selling video at that time. Most Admired: David Geffen, Jeffrey Katzenberg, Steven Spielberg, Barack Obama, Warren Buffet, Howard Stern and LeBron James. Personal: Married with one daughter and one son.