Danny Ting is staring at his latest delivery from Netflix. There’s nothing wrong with the disc (season two of GI Joe). But something is different about the familiar red and white envelope. “Let me bring in my archive,” he says.

Ting walks past the framed Jenna Jameson on the wall and the pornographic magazines on his partner’s desk, heading for the hallway. He returns with a 4-inch stack of Netflix envelopes and lays an earlier version down beside the new one. Then he sees it: In place of the old paste-on address label, the newer sample has his address printed right on the envelope, with a barcode above it. “See that?” Ting says. “They’re probably 20 to 30 percent more efficient, the way they’re doing it now.”

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.

It’s not the career path Ting and his partner Anh Tran, 29, expected. Five years ago, they were Silicon Valley tech consultants, working at Arthur Andersen for clients like Intel, Brio Technology, and Southern California Edison. Today, their San Fernando Valley office space has a warehouse stocked with enough dirty DVDs to keep a Jamboree’s worth of Boy Scouts permanently ensconced in their tents. Their schedules include meetings with sex toy experts and parties with porn stars. They have xxx wl tattoos on their wrists.

What they don’t have, though, are profits. And that’s puzzling. From subscription Web sites to tiny video production companies to pay-per-view cable channels, porn, after all, generates piles of cash for everyone. The movie rental industry (including some porn) is worth $8 billion, but Blockbuster and Netflix decline to stock adult titles in order to maintain a family-friendly aura. That leaves money on the table for the nation’s 15,000 mom-and-pop video rental stores, which derive more than 10 percent of their profits from adult titles. The WantedList founders figured their online business could get a piece of this action by letting porn renters avoid the embarrassment of face-to-face transactions (“So, Domination Diaries #3 is due back Saturday. Enjoy!”).

But WantedList has found it difficult to attract and keep customers. When it launched in 2001, Ting and Tran told potential investors that they would have 400,000 subscribers by 2004. Today they’re stalled at just over 5 percent of that. “They were very farsighted in coming up with this business plan,” says Frederick Lane III, author of Obscene Profits: The Entrepreneurs of Pornography in the Cyber Age. “The question is, Is it viable and sustainable?”

By Daniel McGinn

More here.

0