Adult Consumer Watching More Cable, Pay-Per-View; Moving Online; Sales of Sex Toys Surge.

Blue Entertainment Market Approaching $13 Billion in Sales in U.S. Alone

CHATSWORTH, Calif. -- Consumers are watching more adult content on cable and pay-per-view, buying more sex toys and moving online, according to AVN Media Network, operator of AVN.com, the most frequently visited news site for the adult market.

Dynamic shifts have occurred in key segments of the market, which AVN estimates at $12.922 billion in the United States, or just under $13 billion in 2006. Adult Movies remain the largest sector at more than $3.6 billion or 28 percent of the adult entertainment market. Falling prices for adult DVDs caused a drop of 15 percent in revenue in that segment, but unit sales were up, indicating a continuing market for adult films.

Distribution over cable channels showed the strongest growth in 2006 at 34 percent. AVN estimates the Adult Cable/PayPerView segment (home and hotel TV movies) now represents $1.75 billion in revenue, annually.

Internet sales of adult content, which includes images, live-chat and live-streaming video, was also a strong growth area. In fact, AVN reports that in 2006, Internet Sales became the second largest adult entertainment segment, with 22 percent of the market or $2.8 billion in sales.

"The adult customer today has more delivery options," said Paul Fishbein, president, AVN Media Network. "They can watch content on the Internet, a DVD or order Pay-Per-View on cable. The market is robust and widening as adult entertainment is embraced more and more by the mainstream consumer."

AVN found Sex Toys or "Novelties," was the second fastest growing segment of the adult market, growing 15 percent in 2006 to $1.73 billion. Exotic Dance Clubs held their own, generating $2 billion in revenue in 2006. Adult Magazines, once a market staple, now represents only 7.4 percent of revenue. Mobile delivered adult content, once touted as the hot new growth area, is barely on the chart, due to a lagging infrastructure in the United States, compared to foreign markets.

2006                       % of Retail Sales  $ Retail Sales
Video Sales & Rentals  28.0%              $               3,622,000,000
Magazine                   7.4%               $               950,000,000
Cable/PPV (TV)             13.5%              $               1,745,000,000
Internet                   22.0%              $               2,841,000,000
Exotic Dance Clubs         15.5%              $               2,000,000,000
Mobile                     0.3%               $               39,000,000
Novelties                  13.3%              $               1,725,000,000
Total                      100%               $               12,922,000,000

Internet sales were up more than $300 million or nearly 14 percent as more studios and distributors offered adult films and other adult content online. Adult Cable/Pay-Per-View sales increased more than $400 million to claim 13.5 percent of the market.

"The Internet has become a more user-friendly environment and it allows the consumer to have a more intimate setting than the middle of the living room," said Fishbein. "Consumers who want to purchase or view adult images can do it one-on-one. Again, it's the case of the adult entertainment market being first to embrace new technology."

The Adult Novelty market jumped $225 million in 2006, including sales through traditional retail, Internet channels and direct-to-consumer outlets.

"U.S. consumers, especially women, appear to be showing more interest in sex tech. Devices that enhance the experience are one of the hot growth areas," said Fishbein.

Note to editors: Copies of the complete report are available by contacting 310-785-5200 or [e-mail].