The Economics of Porn

As a content producer, it can be hard to understand exactly how much money you’re going to earn. In this article, I’m going to describe the various business models in the industry and show the mathematics behind how much you get paid.

Image from 401kcalculator.org, licensed under CC BY-SA 2.0

In the porn industry, a large number of services operate using “revenue share” business models. This is where you as a content producer will earn a certain percentage of the revenue your content generates. This article will show the mathematics behind your payout percentage, and how subtle changes can result in different earnings.

Often services will advertise to you a particular number representing your revenue share percentage, but this can be misleading and confusing. There are two key opposing factors that influence the revenue share percentage:

1. Content producers, like yourself, are understandably drawn towards a larger number for your share — you want to earn the most you possibly can.
2. Service providers, have a desire to maximize their profits.

These two opposing factors lead to some rather interesting marketing tactics and mathematics behind them. In this article I’ll attempt to examine and reveal how this works.

The Payment Processors

For the purposes of this article, I’ll assume that all services are using SecurionPay for payment processing, whilst they aren’t the only payment processor in the adult industry, their processing fees are fairly standard. SecurionPay charge 4.6% plus 35 cents per transaction and in order to cover chargebacks, they withhold 10% of each transaction's value for six months (this can drop to 5%, but we’ll be using 10% in the workings below).

If you’ve dealt with payment processors outside of the adult industry, you may find these fees outrageous or extortionate, however, the reason that we’re charged these higher fees is due to being classified as “high risk” by banks and payment processing companies. Additionally, due to this “high risk”, we’re required to pay €500 or $1000 yearly to the card networks for the privilege of being able to accept card payments.

So, let’s begin our tour of the economics of porn.

The Utterly Horrific

At the absolute worst of the payout rates for producers are a select few cam sites who use a revenue share model, where 60% goes to the service, and the content producer receives 40% — sure, you could argue that they bring amazing sales or audiences, but at the end of the day is it really worth it? Wouldn’t you rather generate $100 in sales and walk away with $60 than $200 and walk away with $80?

On a recent thread by Sex Workers Everywhere, a person who isn’t a sex worker (often called a civilian) exclaimed disbelief when reading the revenue share payout percentages, thinking most services paid out less than 50% of revenue to producers. This isn’t actually the case, but as the above goes to show, there are some companies who try to do exactly that.

The Misleading and Confusing

Perhaps the most common practice in the adult industry is to offer what appears to be a decent payout percentage, but with a little small asterisks next to it. That little asterisks is that the payout percentage is calculated post fees.

One company I’ve previously spoken about before that’s known for this is ModelCentro, who advertise boldly that they payout 75%, but actually pay out 67.5% — how? Because they initially take 10% of every sale for “fees”, and then calculate your payout from that remaining 90%. They even go as far as showing misleading graphs representing the amount you’ll get paid:

Screenshot of a chart located on the ModelCentro pricing page. What’s that little green dot?

Let’s actually show this pie chart as an proper pie chart, instead of something that we’d find on Fox news:

This is using the same figures, but just accurately representing the figures in chart form.

Obviously, tactics such as these can be quite confusing for producers. Are you to really believe the numbers you see on the marketing websites for services, or do you actually have to do a bunch of mathematics to work out how much you’ll earn from each sale?

More Marketing Trickery

As a content producer looking to compare services for publishing your adult content, you’ll come across marketing talking about how the company believes “all models should receive the highest amount possible” whilst not actually paying a very high percentage at all.

You’ll often also come across statements about the fact that the service is “free” or provides loads of free value, but as we’ve seen from the above, you actually end up paying for this from your earnings per-sale by being given lower revenue share rates.

Tricky Maths or Mathy Tricks?

For companies, they need to ensure that they make enough money on each sale, to pay for hosting, sales, salaries, etc. Some of the costs that service providers incur can be relative to number of users, others relative to number of sales. For instance, you don’t necessarily need more or bigger computers to power sites that do clipsales, but you do need more bandwidth and things like content distribution networks (CDNs) to distribute the content around the world to ensure every viewer gets a speedy download. Bandwidth is one of the costs which is relative to the number of sales.

Let’s take a look at a hypothetical service provider who gives an 80% revenue share to content producers, let’s also add a little asterisks to that payout percentage and say that this is after payment processing fees.

The maths looks a little like this for a $10 sale, the workings are all calculated in a smart little program called Soulver, which makes doing the mathematics really easy.

I’ll also include a link to the workings in plain text later on, in case you wish to play with the numbers yourself or are visually impaired and cannot read the images below.

First we take the sale price, and remove the payment processing fees (that’s 4.6% and 35 cents:

Now let’s look at the money that is immediately available to the service provider. This is the money that the service provider will receive within 2 weeks to be able to pay you, the content producer:

This is because the payment processor withholds 10% each transaction’s value to cover chargebacks, as mentioned earlier.

As a service provider, you have to be able to pay your producers out of this amount of money, otherwise you’re going to have to be borrowing money to operate day-to-day. Let’s now calculate your payout as producer (remember, in our hypothetical model, we’re paying out 80% to producers)

This means that the amount of money the service provider makes the following amounts on the sale, first is the amount they receive more-or-less immediately, second is the amount after six months, when that 10% that was held becomes available:

So for your $10 sale, the business has made $0.92 which it can spend in the near-term, which, if lucky, will cover the bandwidth costs for that individual sale. Here’s the workings in full:

In plaintext: https://gist.github.com/ThisIsMissEm/30626179d67e4439c47bf6b4121ee5df

As an astute reader, you may have noticed that the payout amount of $7.35 is definitely not 80% of $10, so where’s the other $0.65 disappearing to?

Well, this is due to our little asterisks from before, as your payout is after payment processing fees you actually get paid out 73.5%. This is what I’ve recently started referring to as the “Effective Payout Rate” or EPR.

Just for illustrative purposes, let’s see what the maths would’ve been if we’d actually not had that asterisks on our payout percentage:

In plaintext: https://gist.github.com/ThisIsMissEm/48d2114986453698739b3758b1828385

Given that the immediately available cash is now just 27 cents, you can see why service providers often have that little asterisks of “payout percentage calculated after processing fees”. Without it or some other solution, they’d simply not earn enough per sale to be able to operate.

So what can we do to try and payout exactly the amount that we claim to?Let’s repeat the maths, but this time we’ll add on a transaction fee of $0.85 to every transaction.

In plaintext: https://gist.github.com/ThisIsMissEm/342ee6c681181e8158e87323b0f14011

Notice the difference? No longer are the payment processing fees eating into our earnings, instead, they’re covered by the transaction fee. This also gives higher earnings to the service provider.

In the above example, I used a transaction fee of 85 cents, as I know this covers the all of payment processing fees for a $10 sale. However, if the most sales are $15, then you’d actually need to charge a transaction fee of $1.09 to cover all the payment processing fees.

The best part about the transaction fee is that it’s an entirely arbitrary number: we could actually increase it to cover more than just the payment processor fees, without changing the payout percentage for the content producer. For example, if we charged a $1 transaction fee, this is what our $10 sale would look like:

In plaintext: https://gist.github.com/ThisIsMissEm/882576c19a56598aca9e93f5ca2a4f7a

Tiered Payout Business Models

A slightly different twist used by some services is a tiered model; these are significantly more complicated, but essentially say from sales $0–1000, you earn 60%, on sales $1000–2000, 70%, etc. However, this is all based on monthly total sales, so to get the higher payout brackets, you really need to be processing more than $1000 in sales per month.

In other words, you’d need to be selling at least 100 clips for $10 each.

However, you can guarantee the first thing you’ll see about payouts on these services is a big claim like “Earn up to 90% per sale”. Truth be told, most sellers will likely never earn 90% per sale.

Notes on Service Providers

Let’s jump back to the service providers using the revenue-share model for a moment: if we’re only earning $1.13 per sale in the straight away, and then a further $1.01 per sale in six months time, then as a business, can the service provider cover their business operating expenses?

Out of that $2.14 total per sale, service providers need to cover payout fees (because industry standard says that we don’t charge you to get paid), hosting and tech costs (this varies, but for a typical tech startup, you’re probably looking at something like $500 per month at minimum, but for the ideal setup to ensure we deliver quality software, you should at least double that).

Also, let’s not forget that you also have to pay $1000/€500 per year to the payment networks, and salaries, taxes (both for business and VAT), accounting and legal fees, and you also need to try to earn profits to invest in the future of the company or to pay dividends.

In Conclusion

Hopefully now you’ve a fairly good understanding of how the economics of porn services work. Given this knowledge, now you’ll know what to look out for when trying to figure out the payout rates for different service providers.

One day I might write an article that covers where the amount that the producer earns goes to (hint: it’s not necessarily all going into their pocket to spend — they have expenses too in order to produce high quality content).

I’ve also done up a tweet series about the economics of tips/tributes, and how these affect earnings as a business, which you can read on Twitter.

This article was written by Emelia Smith, the Founder of Unobvious Technology— we’re working to provide new products and services to the adult industry. It was kindly reviewed and read through by Sex Workers Everywhere and several other reviewers.

Disclaimer: Only the figures relating to ModelCentro are taken directly from a specific service, the rest are either fictional and based on reversing the publicly available figures used by various adult content services to come up with algorithms.