When Tim Valenti and Greg Lindberg – two former advertising men –started their own Web design company, Cubik Media, in the mid-1990s streaming video was wasn’t ready for prime time.
Hardly any one had the high-speed connections necessary to view the content.
But the duo saw its potential.
On a whim, they started Nakedsword.com, an adult site for gay men, figuring that online video would save a potentially embarrassing trip to the video store.
“We built some password-protected areas and threw up some videos, mainly as an experiment,” says Lindberg, Cubik’s CTO. Then something unexpected happened: “People started buying it left and right.”
Almost overnight, Nakedsword.com became 90 per cent of Cubik’s business. In the years since, Cubik has continued to innovate with online video. It was among the first to use Flash for streaming video, build digital rights management capability into its movies and use peer-to-peer networks for distribution.
Most recently, Cubik is integrating a high-tech digital fingerprinting system that can spot copyrighted material posted by users on one of its sites, an adult version of YouTube.
The system works by turning the sound waves from a movie’s audio track into an image. Every time a user uploads a clip, the system makes a graph of the new audio and compares it to the graphs in its database. If the clip a user is trying to post matches a copyrighted one, Cubik takes it down.
“It’s pretty amazing,” says Lindberg. “There are lots of companies out there trying to solve this problem, but we actually have something that works.”
New 3G network – girls, gambling, gaming
Red light sites probably aren’t places CIOs normally would look to find innovative IT. But the sex and gambling industries have always been at the forefront of tech innovation.
During World War II, the illegal telephone network that bookies developed was more reliable than the one the War Department used, says Harold Layer, professor emeritus at San Francisco State University.
And the porn industry has helped select technology winners and losers for ages. In the 1980s, for example, demand for adult material gave VCR makers the economies of scale they needed to make their devices affordable, says Jonathan Coopersmith, a professor of technology history at Texas A&M University.
But past innovations pale in comparison to the rate at which the gambling and adult industries are blazing new ground on the Internet.
Over and over again, the Web’s red light district has either pioneered or adopted a technology before the mainstream. The first customers of Duocash, a now-defunct anonymous payment system that allowed customers to pay for online services with prepaid phone cards, were gambling sites.
Thank you for the porn … and music
A random sampling of 400,000 queries on the early peer-to-peer file sharing network Gnutella in 2003, found that 42 per cent were looking for porn (compared to only 38 per cent looking for music).
And content delivery for mobile devices is now dominated by the adult and casino industries to such an extent that 3G, the high-speed mobile communication network, ought to stand for girls, games and gambling.
Today, adult Web sites make up 12 per cent of the Internet, according to Top Ten Reviews.
These sites attract 72 million unique visitors a month (more than 28,000 people are viewing Internet pornography at any given second) and the sex sites’ annual sales are higher than the combined revenues of the ABC, CBS and NBC television networks.
(Coopersmith warns that people should take numbers measuring the size of the adult industry with a grain of salt. “It’s like sex in general,” he says. “People exaggerate.”)
Why red light Web embraces innovation
Meanwhile, the online gambling industry has made its sites incredibly sticky. According to Nielsen/NetRatings, visitors to the top gambling sites spend an average of 13 hours a month at the sites. The worldwide average for all sites is just 28 minutes.
There are several reasons why the red light Web embraces innovation. Its target audience – males, 18 to 50 – is a demographic that gravitates to new technology. Good technology is also a business necessity.
“Gambling and adult companies have been forced to be innovative by constant attempts to legislate them away,” say Lawrence Walters, a First Amendment lawyer at the firm Weston, Garrou, DeWitt & Walters.
In fact, the U.S. government passed a law, late last year that makes it illegal for Americans to spend money at online casinos, a move that devastated the industry. The risk of prosecution has also kept gambling and adult sites from growing into large corporate entities. (See ‘Red Lights, Big Names’) “As a result they’ve tended to remain small and entrepreneurial,” Walters says.
Technology is also one of the few ways that sites can differentiate themselves.
“We have to compete with free porn,” says James Cybert, director of IT for Hotmovies. com. “What makes us competitive is being virus-free and the consumer experience. If you aren’t able to keep up with the technology you’ll be beat over the head.”
Or as Calvin Ayre, founder of the online gambling site Bodog.com, says, “Technology is our lifeblood.”
Red Light technologies
So, what are the latest technologies developed or perfected on the red light Web that will eventually make their way into the mainstream? These are some of the technologies that they are looking at.
IPTV; MPEG-4; Smart Search
Scott Piper, CIO of New Frontier Media (one of the few publicly traded adult companies), is keeping an eye on IPTV – television delivered over the Internet. Over the next five years, he predicts that the distinction between televisions and computers will disappear.
There are three models for how this could happen: set-top boxes that connect to the Internet (with the user experience controlled by a cable company); computer monitors in the living room that run media software (Piper says that Vista may finally make this viable); and appliances that forward computer content to a television, like the new Apple TV.
Of course, IPTV content won’t appear on the Internet by itself. That will put CIOs in the TV business. “IPTV will blur the line between the data center and the broadcast center,” says Piper.
To make your data available to these new IPTV consumers, CIOs will have to digitally encode everything. Most of the major film studios are just beginning that process; New Frontier began digitizing its movies five years ago. One of the technologies New Frontier is using for this is MPEG-4, an emerging compression standard. Videos compressed with MPEG-4 take less space to store and less bandwidth to deliver. MPEG-4 also has built-in digital rights management capability.
But compressing and posting content is the easy part. With every program available at any moment, how will users find programs? Piper believes that search will be the killer app of IPTV.
To that end, New Frontier is obsessive about metadata, watching every frame of every video it digitizes and recording as many attributes as it can. Customers can use these metadata tags to refine their searches until they find precisely what they’re looking for.
(For example, if you have a thing for blondes on the beach, a search on New Frontier’s adult website Ten.com for ‘clothingaccessories- sunglasses’, combined with ‘setting-outdoors-beach’, and ‘physicalhair- blonde’, returns two 15-minute clips, the fourth scene from Lock, Stock and Two Smoking Bimbos 2, and the first scene from Pick Up Lines 82.)
IPTV will require this kind of search on steroids. “There will be so much choice that the average consumer will be frustrated without concise recommendations,” says Piper.
New Frontier is experimenting with a search that combines what people are looking for with information about past preferences.
“This will not only be a great up-sell vehicle but also an avenue by which we can broaden people’s tastes,” Piper says.