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Bailing Out the Red Light District

February 11, 2009

Tags Free MarketsEntrepreneurshipInterventionismPhilosophy and Methodology

Hustler magazine's Larry Flint

With the federal government ladling out billions in bailout money to the financial and auto industries, a number of businesses now have their hands out. Home builders, retailers and commercial real-estate developers all want a piece of the bailout pie. Not like there is an existing warm pie cooling on the window sill waiting to be cut and served. No, this money pie is created out of nowhere, to be paid for in higher prices as the inflation is forced upon the unwitting public.

Nobody could imagine that pornographers would be brazen enough to line up at the government trough. But sure enough, Hustler magazine publisher Larry Flynt and Joe Francis of Girls Gone Wild fame have asked their local Congressman, Henry Waxman, for $5 billion because, "People are too depressed to be sexually active," according to Flynt. Ever the patriot, Flynt says an unsexed nation is an "unhealthy" nation. "Americans can do without cars and such but they cannot do without sex."

No doubt being depressed about losing your job or the general correction of the real-estate bubble doesn't do much for your get up and go. And if past escapades on Capitol Hill are any guide, this is a subject lawmakers are very interested in. However, the head Hustler honcho is stretching it a bit to think that a $5 billion injection into the porn industry will provide a lasting stimulus — economic or otherwise.

Upon hearing the news of Flynt and Francis's panhandling, most people likely figured that it was all a big publicity stunt. But there really is a method to their madness. In an interview with Fox Business, Francis revealed what really has his business in a funk. When asked what he would do with the $5 billion, he said they would "invest in building new means of distribution, and shoring up our distribution right now to prevent further erosion from factors like YouPorn and other internet content that has seriously affected our business over the past few years."

"Most web-commerce innovations have come from the porn industry."

What Francis is talking about is that he and Flynt and others in the porn business have been unable to use copyright protections effectively to protect a monopoly on their content. Because pornographers don't enjoy the same social approval that other businesses have, "the industry has not focused on using the legal system to protect its intellectual property," professors Michele Boldrin and David K. Levine explain in their new book Against Intellectual Monopoly.

Unlike the mainstream Hollywood movie industry, the porn industry has had a tenuous legal status, according to the authors, making "it difficult for it to use copyright laws to inhibit competition, and so as technology has changed, pornography has become a cottage industry with many competing small-scale producers."

Indeed, Francis was once one of these small-scale producers until his Girls Gone Wild series took off. Now that his company employs 400 people and sales exceed $100 million, it sounds like he wants to use intellectual-property laws to protect his content from pesky competitors like YouPorn.

As Boldrin and Levine describe, "The thousands of Internet sites distributing pornographic materials around the globe are, most of the time, imitators of the main initial producers, most often in violation of copyrights and licensing restrictions."

Because porn companies have trouble enforcing copyright laws, they must constantly innovate, and, because of this, it is no secret that most web-commerce innovations have come from the porn industry. "Their bold experimentation has helped make porn one of the most profitable online industries, and their ideas have spread to other legitimate companies and become the source of many successful and highly valuable imitations," note Boldrin and Levine.

$30 $27

 

So the jobs that Joe Francis assured Fox Business that he and Flynt would create are likely to be jobs for intellectual-property lawyers, in hopes of benefiting Hustler and Francis's Mantra Films, Inc. at the expense of their innovative and creative competitors.

No matter what Larry Flynt contends, there is no lack of inexpensive porn available to stimulate Americans. In fact, using $5 billion of taxpayer money "to prevent further erosion from factors like YouPorn and other internet content that has seriously affected our business over the past few years," will only make his product more expensive and less accessible.

Throwing money at Flynt and Francis — like bailing out the automakers and the big banks — stifles innovation and new technologies in order to keep outmoded business models in place at the expense of taxpayers.

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This article originally appeared on LewRockwell.com.

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