How Credit Card Companies are Ruining Porn

This morning I woke up to this rather disturbing email from Verotel, the credit card processor for MeetTheMayhems.com. The email informs me that all of their accounts that bring in less than €100 per week are now subject to a €500 fee. It goes on to inform me that because our Verotel account makes less than €100 per week, they understand that we cannot afford this fee (they assume), and they have been kind enough to terminate our account for us (without asking). There has been no prior notice of this change. Even if we pay the fee, our account is inactive for the immediate future. The Verotel office is based in the Netherhands and is therefore conveniently open for customer support between the hours of 12AM and 8AM PST, though the majority of their client base is located on the west coast of the USA.

The timing couldn’t be worse. The 2012 Feminist Porn Awards are just kicking off in Toronto, and as a new startup we are very proud to have two nominations in the mix less than a year from our launch. The Feminist Porn Awards, run by the awesome sexy shopping center Good For Her, are the premier showcase for alternative, queer, progressive work in the adult industry. Since they began in 2006, the awards have featured the work of many of our role models including Shine Louise HoustonJiz LeeTina Horn, Courtney Trouble, and Tristan Taormino. We are honored to be acknowledged alongside these awesome folks and many others, and we were counting on the publicity to promote some really hot new content we’ve been working (and screwing) hard to produce. To have our credit card processing yanked without warning only a few days before the award ceremony is a serious and unexpected challenge.

Where the Credit Card Companies Fit In

Verotel should be held accountable for the abrupt and unfair implementation of these new fees, but the responsibility for the fees themselves lies with Visa and Mastercard. Verotel, and all other credit card processors, must continually negotiate with these few powerful corporations to keep their business going. Large credit card companies are notoriously unfriendly to the adult industry, especially as porn makes up a smaller and smaller percentage of online commerce. Every adult merchant account is automatically classified as “high risk,” and is therefore subject to rates per transaction at least five times higher than online merchants outside of the porn world enjoy. Consumers are shy about buying porn, and if they cannot use their VISA they are unlikely to do it at all. This gives VISA a huge amount of negotiating power.

On top of this, credit card companies are increasingly imposing additional fees and regulations that specifically target small businesses, independent studios, and individual performers while skipping over larger studios and established websites. The less you have, the more it costs. To wax economic for a moment, this is a microcosm of the way big finance – and specifically the consumer credit industry – systematically favors the rich and broadens our country’s wealth disparity. They just don’t trust broke people with money. In the adult industry, as in other marginalized communities, they can get away with being especially blatant about these policies.

Visa’s agreement with CCbill, the largest adult credit card processor and Verotel’s biggest competitor, already involves a $500+ registration fee selectively imposed on small businesses. The lack of such a fee was the only reason we chose Verotel as a credit card processor. Now that they have a similar fee, Verotel is sure to lose a lot of business. Alertpay, an adult friendly micropayment system (i.e. paypal alternative), had its functionality crippled last year when negotiations with Visa and Mastercard fell apart and it’s credit card processing for adult business accounts was shut down indefinitely. It is through policies like these that credit card companies are (next to the government) the largest impediment to the autonomy of small business pornographers.

Life as a Small Porn Business

Building and running our own small, homemade independent porn site has been a challenging but rewarding experience. Over the past year the two of us have built a small business completely from scratch. We make up for having next to no investment capital by pouring our own time and skills into the project. The result is a true DIY porn site where everything from web development to editing to accounting, shooting, legal issues, photography, and marketing is done in our little Oakland apartment by the Mayhems ourselves.

Naturally there has been quite a steep learning curve in many of these professional skills, but we started small and have learned by doing. We ask our customers for only $8 per month, significantly below the industry standard price, with the caveat that a bad flu or a business trip might interrupt our schedule of updates. The quality of our product has grown steadily over the past year, and our membership has been slowly growing with it. We are now poised to launch innovative new sections of our website including homemade adult product sales and written erotica, and we have agreements with other independent adult performers and small studios who want to launch their own small porn sites using our software architecture. We are working not only to create an independent income stream for ourselves, but also to create a viable business model for all of the little guys in porn who want the tools to profit from their work without sacrificing their creative and entrepreneurial autonomy.

The Future of the Adult Industry

These new policies put that vision under attack. Verotel was the last adult credit card processor I know of that offered independent porn sites the ability to accept credit card payments with no money due up front. With their new fees, you simply cannot start a porn site without €500 to burn. Sites like Playpen and Clips4sale are the best options for performers who want to monetize their own content on the cheap, but as “cookie cutter” type sites they offer very little opportunity for innovation. In the porn industry these days, with profits dropping across the board and free porn more readily available than ever, innovative business models are not just for industry leaders -they are necessary for survival.

The adult industry is changing. Profits from DVDs have been falling for years, and traditional membership sites are now struggling to remain profitable. The freedom of information offered by widespread internet use has been a catalyst for change in all industries that rely on intellectual property rights. The television and music industries have been working hard to adapt their strategies to this new reality, but porn has not bothered to keep up. While Netflix is offering thousands of movies and TV shows streaming on demand for $5 per month, it is difficult for consumers to justify spending $29.99 per month on a niche fetish porn site that makes the same movie every week with a new performer.

Porn is not dying any more than music or TV have died. Porn is changing. Live shows, including webcam interactions, are one of the biggest growth sectors in porn, just as musicians are relying more heavily on profits from live performances. Pay per minute VOD sites are taking over a lot of the profits from porn content that used to be sold on DVD by centralizing distribution, similar to what Netflix has done outside of the adult industry. But production of porn has been slow to adapt their strategies to these changes.

I see change as an opportunity for growth. If the adult industry has to change, we should make sure it changes for the better. To me, better in this case means more power, rights, agency, and respect for performers, and more accountability for large corporations. This can never be achieved if performers are denied the tools to innovate during this vital period of industry wide change.

The Mayhems will continue to fight to empower performers and small businesses in porn (ourselves included!) as much as we possibly can. We hope to have our own credit card processing back online as soon as possible, and in the mean time we are offering free “preview” access to all of our content through April 24th. We will be vocal about our progress circumventing these policies. If anyone knows of innovative new solutions to adult industry micropayment processing, please contact us!