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RealNetworks mulling adult pay-per-view

It's not just a dirty rumor. A company executive says Real is expanding its tiers of service, possibly including "even an adult tier." Will there be a smut subscription?

RealNetworks is considering adding adult programming to its multimedia subscription service.

The company is in discussions with several audio and video producers to expand the lineup on RealOne SuperPass, the company's fast-growing content subscription service, said Dave Richards, RealNetworks' vice president of consumer systems, in an interview this week.

Although Richards said there are no immediate plans to launch an adult channel on SuperPass, he added the possibility would not be ruled out.

"We expect we will have different tiers" of service, Richards said. "Maybe even an adult tier."

SuperPass is an online streaming media service that provides access to video and audio programming over the Internet for a fee. RealNetworks lays claim to 750,000 active SuperPass subscribers, who can watch news clips from ABCNews and CNN, or listen to Major League Baseball and National Basketball Association games. CNET Networks, publisher of News.com, is a content partner with SuperPass.

Although many porn sites pay RealNetworks to use its technology for serving up online video clips, the company has thus far steered away from offering adult material through its own content channel. The decision reflects the main problem facing the online porn business: While adult content is a big moneymaker, few mainstream publishers want anything to do with it, forcing most porn distributors into a niche.

"If you're running a reputable company, before you make a decision to offer pornographic content, you'd have to evaluate the impact it would have on your future efforts to gain access to popular content from sources such as Disney," said Phil Leigh, an analyst at Raymond James.

Not whipping up a backlash?
Those calculations may be changing, however, thanks in part to some recent experiments that suggest mainstream distributors may be able to dabble in adult content without sparking a major backlash.

In the cable industry, for example, most players in the United States have been selling pay-per-view adult programming on their services without receiving much protest. RealNetworks may now be weighing whether it can pull off something similar by offering adult video content as part of a discrete add-on package to its SuperPass service.

RealNetworks has been open about its emulation of the cable industry. The company wants to become a distributor of name-brand content and software services and to charge users for access. But to increase its popularity, it will need to lure people into buying subscriptions by carrying programming that's exclusive to SuperPass.

So far, it's executed on the plan extremely well. According to a recent survey, SuperPass is the biggest generator of content revenue on the Internet--success that has helped prop up RealNetworks as its software sales have slumped. According to the company's most recent earnings report, subscriptions accounted for about two-fifths of its overall sales in the second quarter of 2002.

It's unclear for now whether adult offerings would boost those numbers--or cause them to boomerang.

Going by experience, there is still a stigma about the Internet's freewheeling nature in the public eye.

In April 2001, Yahoo pulled all pornographic ads, auction items and merchandise from its site after a series of complaints from customers, though it did so reluctantly, claiming it had received "little negative user-feedback regarding adult products." It was unclear whether the decision had any material effect on Yahoo's earnings since it was already suffering a collapse overall in its advertising revenue.

Other companies have tested the waters in addressing the booming online pornography industry. In January 2000, search engine Ask Jeeves confirmed it purchased Web addresses for "asksex.com" and "askadult.com" in preparation for launching a search engine for Web pornography. Ask Jeeves even created an alter ego named Mimi for its butler character. However, the plans for Mimi were eventually shelved to preserve the company's family-friendly image.

Search engines are particularly interested in offering sex-related results and reaping advertising revenue from related sites. Overture, which auctions off search-result placement and shares revenue with major distributors such as Yahoo, allows sex sites to link their wares to consumers. Search engine Google also has a pay-for-placement setup that accepts payments for sex-related results.