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Wantedlist or NetflixXX

Filed in archive Entrepreneurship by tj on November 27, 2005

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Wired.com analyzes XXX Netflix competitor WantedList:

'Ting has never been inside a Netflix distribution center. He has never directly observed the clockwork precision of its fulfillment system. But he has spent hundreds of hours trying to figure out how the company works. He's actually a bit obsessed with the movies-by-mail innovator, and he's determined to reverse engineer its success. Ting, 30, is cofounder of WantedList, which he is trying to turn into the Netflix of the porn industry. For $22.95 per month, WantedList sends its customers an unlimited number of X-rated DVDs (they can have three out at a time). Four years after launch, WantedList has purchased or outpaced all of its couple of dozen competitors, making it the largest player in the rental porn-by-mail niche - a growing chunk of an industry estimated unreliably to be worth $10 billion a year. With 25,000 customers and a widely hailed interface, WantedList was Adult Video News' Best Online Retailer for 2005.

Now the company is in a race against technology. Within five years, Tran says, video-on-demand will likely render the DVD-by-mail model obsolete. And though Ting and Tran together own more than 90 percent of the company, they're hardly cashing in: They pay themselves about $50,000 a year, less than several of their employees earn and far less than the $120,000 and $70,000 they made, respectively, at Andersen.

In fact, the market for unlimited porn appears far smaller than they envisioned. At XRentDVD, a rival of WantedList, more customers choose to pay $2.95 per movie instead of a monthly all-you-can-watch fee. "The majority of people out there are casual viewers - they only need a movie or two every so often," says general manager Vincent Sorvino.

That steady flow of newbies is essential because WantedList loses clients fast. Five percent of Netflix customers cancel each year; WantedList's "churn" is twice that - such burnout is common in the industry. "Most people can view only so much porn until they sort of reach their limit," says Jax, who runs a rival service called Sugar DVD (and who, like many industry players, uses a one-name pseudonym). "There's the guilt factor, which can't be overrated. You see customers struggle with that - they leave, come back, leave, come back." While the average American probably consumes a steady diet of Hollywood movies, WantedList's experience suggests demand for porn cycles up and down. It's only natural, for instance, that a single person's urge to rent explicit fare might ebb at the start of a relationship, either because the new partner disapproves or because sex has become a two-person sport.

To keep subscribers hooked, the guys are trying to turn WantedList into a sort of porn portal, a site that goes well beyond simple rentals. They run interviews with stars (most frequent question: "Do you prefer sex with men or women?") and feature a recommendation engine called the Pornotron 6900. A tall, pigtailed woman named Maria Menendez provides capsulelinks reviews. Of Barely Legal #50, she writes: "Make sure to get a fresh box of Kleenex and some serious lube when enjoying this slice of nasty pie.""
I would have expected such a niche player to be higely profitable






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Tags: netflix  blockbuster  wantedlist  entrepreneurship  technology  wantedlist+netflixxx  venture+capital  germ 

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