Adult Site Broker Talk Episode 240 with Solomon Friedman of Ethical Capital Partners

It's my pleasure. Thanks so much for having me.

Challenges? There have been challenges? That's news to me, Bruce. First time hearing of it, as they say. But seriously, folks. Yeah, you know, this was an acquisition that was a long time coming. It's one that took thought and deliberation and strategy. Obviously, MindGeek, since rebranded to Aylo, faced a number of challenges. I'd say they weren't challenges that were unique to the company. In many ways, MindGeek was a canary in the coal mine for what the rest of the adult industry would face shortly thereafter. But what MindGeek faced was a very well-organized, very well-publicized campaign that I would say kicked off with the infamous opinion piece. I don't call it a news article because it wasn't news journalism; it was an opinion piece in the New York Times. It was a hit job. Yeah, it was. But the trouble was the response was really lacking from MindGeek, and their response was not much of a response at all. That snowballed. I think the rest of the industry sort of watched, and not only were others not leaping to the defense of MindGeek, and we can get to that, but MindGeek wasn't really leaping to its own defense. That then snowballed into some really unfortunate hearings in the Canadian Parliament, where those spewing misinformation were treated with kid gloves and praised as experts, and anyone with a contrary point of view was really silenced or marginalized. And the company did not do very well in all of those things, which were really unfortunate times. Having gotten to know many of the folks at Aylo, many of whom lived through that turbulent period, it was a very, very difficult time, in particular when the truth was so at odds with this popular narrative. But it was a narrative that those who are fundamentally opposed to the adult industry were eager to seize on. It then spawned litigation, it spawned significant financial troubles in the form of Visa and Mastercard withdrawing processing from the PornHub domain, and it really put the company in a very distressed state. So I always say that's the bad news. The good news is it gave an opportunity for new ownership to enter the picture. Every time I reflect on the challenges, and there are challenges and there continue to be challenges, I know that without those challenges, when I talked to my partners, I say we wouldn't be here. If this was easy, if it was smooth sailing, we never would have had this opportunity. So this is really an opportunity, and I very much believe it's an opportunity that was born out of a company's deepest crisis. The company really, in large part, weathered that storm. We at ECP don't take credit for that. I'd say if it hadn't been able to weather the storm, we wouldn't have been able to acquire it. But there's no question that when it comes to everything from employee morale at the time, public perception, public image, it was a very, very challenging time. And a big part of that was the company and its ownership were not willing to speak on their own behalf. And I always say that, you know, just a matter of simple math, there are only so many inches in the newspaper column, and if you are not present, then that is more inches that you have ceded to those who are committed to your destruction and will say whatever they have to say in order to destroy you.

Yeah, no doubt. And I actually think, as I've really gotten to know the industry over the past couple of years, I think there's actually a little bit of collective regret on that front. It's sort of the point being, there may have been a sentiment that the tube sites are getting their comeuppance, they rode high and mighty and now they're falling, not realizing that nobody was interested in taking down only PornHub. That was never anyone's interest. Those who wanted to take down PornHub want to take down the entire industry. I think one of the proofs of that, whenever I have an opportunity to respond to an allegation made by one of these so-called anti-trafficking organizations, and I say we work with legitimate anti-trafficking organizations, of course we actually do something to fight human trafficking, but those who claim to be anti-trafficking, I always say go back and ask that person or that organization what does their ideal porn site look like. What are the rules? Give them to me, I'd love to hear them. And of course they go back and they're met with stony silence because their ideal porn site is a porn site that doesn't exist at all. But I think the rest of the industry, in a certain way, didn't realize that this was just the first step. And the proof, by the way, I'm trained in the law, I believe in gathering evidence and analyzing it, is the wave of age verification laws that is sweeping the United States, targeting the adult entertainment industry, designed to do one thing and one thing alone, and that is make it impossible to operate in this industry. It doesn't matter what your brand is, how big of a site you are, how small of a site, whether you're a sole proprietor or a large corporation, that's what those laws are targeted to do, not to protect young people, of course. So I think it's become apparent to everyone that that was not the takedown of PornHub; it was the first salvo in a very well-planned and well-orchestrated campaign against the adult industry, which is essentially an attack on sexual freedom.

Absolutely, yeah.

Yeah, so there are a couple of barometers that I like to look at. I try to organize this into three categories. The first one, in many ways the most important one, is trust and safety. The second one I'd call public communications, and the third one I'd call government relations. How we're trying to do things very, very differently. So we'll start with that first one, which is trust and safety. In December of 2020, when that piece, 'The Children of PornHub,' came out in the New York Times, Nicholas Kristof's opinion piece, anybody who knew anything about the state of trust and safety in the tube site universe knew unequivocally that PornHub was not the Wild West. It was not an anything-goes site. It was a site, in fact, that was seen as quite vanilla by many in the industry. It was a site that had moderation, that had takedown, that was really starting to take copyright and DMCA violations very seriously, which is sort of ironic that they became the symbol of this crusade. But there was more work to be done. And as we know, if we look where things are at today, my view is that Aylo is setting the standard for what trust and safety looks like on a site that allows user-generated content. So it starts with full verification of the identity of the uploader, full verification of the age, identity, and consent of co-performers, and full content moderation. And you couple that with a content removal request process where all someone needs to do is indicate in a form that they have firsthand knowledge or they themselves are depicted and they don't consent, or it is depicting someone who appears to be underage, and notwithstanding all the other checks and balances that that content has gone through pre-upload, of course, because everything is moderated pre-upload, that content will be removed immediately and then subject to investigation after that. That is the gold standard. And just earlier this year, the Internet Watch Foundation in the United Kingdom released its best practices for combating sex abuse material by the adult industry online, and they partnered with Aylo in order to publish those standards. So you have recognition from a pretty distinguished source in the United Kingdom. So that's setting the standard. And that's been a journey. When at the end of December, early January 2021, when all unverified uploads were removed from the Aylo, then MindGeek, platforms. Not to say that that content was problematic or illegal at all, that's not what I'm saying, that's not what it was, but it was unverified in terms of the identity of the uploader. And on every other tube site today, it remains that way. People said you're going to die without content. You removed eight million pieces of content. This is a game driven by content. And I think we've actually seen a real change in that, a prioritization of quality over quantity, of organic traffic over quantity-driven SEO traffic. It's been a shift for everyone, and I think it's been one that has been a very positive one for the company, not just from a perspective of trust and safety, but from a perspective of having a site that promotes really high-quality content. So that's number one, trust and safety. It is a different world today. And I think I said this at Xbiz at Xbiz last year when I spoke, but I'll say it again: in many ways, the era of the tube site is over. There are no more tube sites, at least for responsibly run ones, as there used to be. The trust and safety at the so-called tube sites today is akin to what you would find on any pay site in days past and presently. We call them tube sites because they're free to access and ad-supported, but they're not tube sites in the way that we think they are. In fact, I think the term 'tube site' itself today creates some confusion. Even when I sit down with legislators or regulators or law enforcement and walk them through trust and safety, that's something I do very publicly and very vocally, they say, 'So it's like YouTube?' And I say, 'Well, it's like YouTube if you can't create an account without verifying your real identity, and nothing will go live until it's reviewed by both machine and human processes.' And they say, 'Well, how long can that take?' And my answer is simple: it's the same answer every time. As long as it takes. That's the answer. And it doesn't matter if it's an hour or 5 hours or 10 hours or 10 days. It'll take as long as it takes to get it right for that content to go live. Which of course can be a challenge for uploaders, we know that, and we try to work with creators, but we simply won't compromise on that. So that's the trust and safety piece. The second one is the communications piece. I'm really happy to be here speaking to you, and in some ways it's unfortunate it's taken so long for us to sit down, but in many ways I'm happy that we now have a real record that we can look back on and I can point your listeners to. If you go back and look at news stories pre-March 2023, when we made the acquisition, every story about PornHub and MindGeek was, whether intentionally so written or not, a hit piece. It was filled top to bottom with myths, not just about PornHub but about the industry, pervasive myths, with really very little correction. Since that time, I actually before this interview sat down and made a bit of a tally. I've done over 300 interviews, members of my team have done even more, and those are for the stories that appear. We also do interviews and give extensive background information for stories that never go anywhere because the journalists realize that there is no story here, that I have been fed misinformation. Speaking from a communications perspective, the stories that never get printed are in many ways far more important than stories that do get printed, because often we'll have well-meaning journalists who have been presented with a particular set of facts, and then we answer every single inquiry. One of my goals, I had a few set goals on the communication side when ECP made this acquisition, and the goal was simple: it was that the phrase 'MindGeek was not available for comment' will never again appear in a news item, ever. And I'll tell you this, I want to be very clear about this. There are journalists, as we know, who have a particular bent, who are anti-adult, just like there are journalists who are pro-adult, and the vast majority are neutral and generally not terrifically knowledgeable about the subject. But there are journalists who hate what we do and have an ax to grind. We speak to everyone as long as we'll be accurately quoted. If we're talking about someone who won't even quote what we're saying accurately, that's not a journalist at all. But if we will be accurately quoted, then we would rather participate in the story because then we are at least providing balance to a false narrative.

If you trace those news articles and look at them from pre-March 2023 and then start March 2023, in March 2023 they're like 25% have our perspective in them, and then 30%, and then 40%, and then 50%, and then soon you have stories that are not negative or hit pieces at all. For example, whether it's about age verification or about other forms of legislation or regulation, we're being quoted as an authority. We're being quoted with a perspective that carries weight with it. You can't do that unless you are willing to sit for those interviews and, of course, to do them well, to be well prepared for them, well informed, and to not look at the media as the enemy. I think we in this industry have a tendency to do that because we have a siege mentality. And the reason we have a siege mentality, Bruce, of course, is because we're under siege always. I'm not saying that's not the case; it is the case. But notwithstanding that, you really need to do the legwork and put yourself out there. Of course, that comes with the negative. When your name and face and contact information is easily accessible, you get an email inbox filled with really hateful bile and vitriol. If I'm not told that I am literally Satan three times a week, I'm like, 'We're not doing enough media work.' So the communications picture has changed drastically. That's number two. Number three is our presence with government, regulators, legislators, and law enforcement. As a result of being part of this industry, if you want to stay hidden, and I understand why people do, of course I understand why creators use stage names, it makes absolute sense because you're subject to harassment and physical danger, never mind the psychological effects. I get that. But on an industry level, if you're not able to be out there, then you cannot communicate with decision makers. You can't sit down with legislators as we have at ECP. We've met with Canadian and American legislators, regulators, and lawmakers. And you'd be so shocked how putting a human face and a name to our industry really humanizes us. In fact, one of the things that we do when we go out to meet with legislators and regulators is we always say, 'We have no ask. We're not here to ask you to do or not do anything in this meeting. That'll come, don't worry. But in this meeting, we're just here so you know who we are. So if a bill comes across your desk or a fellow lawmaker asks you to sign on to a motion or a petition or something, you know who we are and how to get in touch with us.' We are determined to be accessible, which of course is not only a total 180 for the company but it's a total 180 for the industry. I always say this, I don't want to be alone in doing this, and it's been really nice to see over the past year that I'm not. We've seen some really effective advocates rise from the industry because our industry is full of talented, articulate, thoughtful, and sophisticated people. If all we're doing at ECP is leading by example, that's something I think will benefit the rest of the industry. So you ask how the picture looks different. Those are the main categories. Obviously a lot of detail in there, but those are the main categories in which I can sit back and say the work's not done, the work has barely started, but we have blazed, I think, a positive trail for the company and the industry.

Yeah, and in particular when you think about what area that's in. I testified a dozen times before House of Commons and Senate committees in Canada on thorny issues: criminal law, constitutional law, the regulation of firearms, things that are often very emotive. 'Lock them up, throw away the key,' or 'Ban all guns,' or 'Abolish bail,' those sort of issues. If you thought porn was divisive. And one of the things that I really pride myself on is educating. I'm not sure if you mentioned this in my bio, but one of the things I'm very proud of and enjoy very much, and to this day I teach law at the University of Ottawa Faculty of Law, I'm an adjunct professor there. Education is really effective communication. So being able to unpack whether they're emotive issues or difficult or divisive issues and just try to take the emotion out of it, try to stick to the facts and the law, I think you're right, it has prepared me well for these kinds of conversations.

So, you know, both of those, yes, yes, yes, a million times yes. I have only the best things to say about both FSC and Woodhull. Not only do we work with them in terms of communicating and coordinating efforts and discussing shared challenges, but we're also joined with them in litigation. So in the Texas litigation, in which our company and others have challenged the age verification, that was done under the FSC banner. And now one of the really heartening things to see that I think tells us that our struggle is permeating the mainstream is that when we took the case to the Supreme Court of the United States, we were joined by the ACLU, and that case is now co-led by the ACLU and the FSC, which is really important. When it comes to Woodhull Freedom Foundation, that's an organization I think that does not often get enough credit for the work that it does. We often reference their academic materials. They have a great wealth of facts and citations to peer-reviewed scientific research to debunk so many of the myths that are just recklessly spread by those who hate porn. And Woodhull, what I really appreciate about them is they are not a porn advocacy group. They are not the porn lobby. What they stand for is sexual freedom. They recognize how essential of a freedom that is, and part of that is that sexuality is in many ways so intrinsic to who we are as human beings, both in the diversity of sexuality and the spectrum of sexuality and the wealth of sexual experiences that adults enjoy and are so important to shaping who we are in both public and private lives. Woodhull fights for that every day. So yeah, this is not a battle that one company can go at alone or even one organization. I always tell people, contributing to FSC and to Woodhull and supporting their work is something that everybody needs to do if you care about having these freedoms. If you want to continue to have them, you must contribute to those organizations because they are on the front lines. FSC, for example, is the reason that age verification failed in Arizona, in which it failed on the governor's desk. They were also present in California. And I know it's hard to imagine that a state like California can consider passing these types of age verification laws. And I say these types meaning site or platform based, but it's because it's very tough in an electoral environment to be put on the side of 'I don't care about children,' because they have framed the debate so misleadingly. But FSC has been there to educate at every turn, and they've had significant success in so doing. They're awesome, they're just awesome.

Yeah, no kidding. Yeah, she beat me out for Community Figure of the Year two years ago. So yeah, I'm up against her again. I sent her a sarcastic email: 'I suppose you'll win again.' Well, I'll tell you this, Bruce, the previous time I didn't have an Xbiz account, I couldn't vote. I have voted, and Bruce, you've got my vote. And that's with much respect to the very distinguished people who are on that list.

Yeah, that's what I'm saying. We got this real talk here, Friedman on Friedman. Some real Friedman on Friedman action, which in the porn industry is not a title that will ever sell anywhere else except on your podcast.

Obviously, yeah. So let's talk about it. I'll say we'll divide it into the wrong way to go about it and then the right way to go about it. What we have seen in the various states in the United States who have passed what is really copycat legislation is an approach that would require platforms to themselves verify the age with identification of an adult who wants to access legal adult content. So to us, our perspective is we start from the following premise. Number one: we do not want young people on our platforms. We do not want a single minor accessing content. And that's for two reasons. Either one of these reasons are sufficient. Number one, it's not good for young people. Young people have enough difficulty distinguishing between fantasy and reality, and this is adult entertainment. It's for those who can appreciate fantasy and fiction. Young people cannot. They shouldn't be on the site. That's number one. Number two, I remember having a conversation with a Canadian legislator who was pro this kind of age verification, and the legislator said to me, 'But come on, Mr. Friedman, you want the clicks. The clicks are good for you.' And I looked at this legislator, I'm not identifying them even by gender because it was a private conversation, so I'll just say that, and I said, 'You need to understand that clicks don't make us money. Clicks cost us money. Traffic costs money. What makes money is ad revenue, and advertisers are only interested in those who can buy their products. Every single one of the advertisers on any of the video sharing platforms operated by Aylo only sell products that are available to adults with an adult credit card. So any young person who accesses a site is costing the company money because traffic costs money and is lowering the price of the ads and the value to advertisers because the conversion rates are going down.' So let's say you reject the fact that there is an ethical bone in my body, okay? Go ahead, you can take that position, it's not true, but you can take that position. If I am motivated by nothing more than financial self-interest, I don't want a single young person on our platform, period. And it was like a light bulb moment. So you're talking about somebody who's one of the architects of this legislation who thought that every click makes money, every bit of traffic makes money, not understanding that there's no economic case, never mind a moral or ethical one. That's number one: we don't want young people on the platform. Number two: we want a method that is effective at keeping young people off the platform. And number three: we want a method which is not violative of the privacy of law-abiding adults who are doing nothing more than exercising their constitutional rights to access adult content. So when you look at the laws that have been passed by Texas, Mississippi, Virginia, etc., those fail on both protecting children and on protecting the privacy of adults. How do they fail on the protecting children side? It's very simple. It's like making a big locked door and placing it in the middle of the desert. All someone has to do is walk around it. As we all know, these methods are easy to get around. Not that I in any way encourage getting around them; we respect the law by not offering service in those locations. But it is no coincidence that two things happened the day those laws go into effect and we stop offering service. Number one: the searches for VPN go up 700%. Number two: the searches for our non-compliant competitors go up the exact ratio of visitors who were previously searching for our platforms. And that's by the way, you don't take my word for it. Google has that data open to everybody. This search data is not from some special Aylo lab. I know people think we're the kings of data, we are, but you don't need to be. It's all available out there on Google. So obviously that means that young people are accessing content, and it's actually even worse than that because they're being driven now to platforms that are by their very nature not compliant with this law, and who knows what other laws they're not compliant with. So you're actually driving both young people and adults to the darker corners of the internet where there are companies who don't respect the jurisdiction of these states. So that's why it doesn't protect children. And we tried, for example, when we were studying this issue, to answer one single question: how many porn sites are there online? Not an easy question to answer. The estimates are at least in the high hundreds of thousands, if not in the millions. Which means you have a system that is going to require giving ID to hundreds of thousands, if not millions, of platforms with no regard for the privacy of the individuals in question. So one of the things that I say, and I said this to a legislator, I said, 'Look, if this was the law everywhere, imagine you had a way of enforcing it, you don't, but imagine you did, it would be far more profitable to not be in the porn business but just be in the identity theft business. Operate a purportedly adult platform, say, 'Look, it's really sad, I have to take all your private information,' and then go around and do God knows what with it. That's what you're inviting here.' So for that reason, we made a policy decision that where there is a law that is both ineffective at protecting children and exposes the private data of users to real significant jeopardy, we would not offer service. And that's not an easy decision. It's been a painful decision, but it's one we did because you have to take a stand against these laws. And also, I'll say the other side of it, which I don't think people quite got at the beginning but they're really starting to see now, is the more that's happened, the more the public consciousness has been raised to how awful these laws are. So for example, we did, however, agree in Louisiana to offer service because in Louisiana the method was not to take anyone's information ourselves, but it all goes through the government LA Wallet system. And the reason we stuck around in Louisiana and continued to do so is we wanted to gather data, so that we could provide it to regulators down the road. And what did we see in Louisiana? Louisiana is a state where if this is ever going to work, this method would work in Louisiana. You have a state where the adult population, more than two-thirds of them, have this digital ID ready to go and they use it all the time. So we said, 'That's fine, let's try that out.' And what have we seen? An 80% bounce rate when users are confronted with what should be the ideal platform-based solution. 80% of Louisianians say, 'Thanks, but no thanks.' Which means if it's not going to work there, it's not going to work anywhere. We also have done some testing in France with the French government where we implemented a range of age verification methods on a segment of our traffic. One of the nice things about having significant traffic is we can slice off parts of it and test things. So we agreed to do that with a number of methods, and in France we saw between a 95 and 99% bounce rate of the French who said, 'Thanks, but no thanks.' That would be a 'non, merci' for my French-speaking French Canadian folks. So that told us this is not going to work. However, that's not to say that we sit on our hands and say there's nothing that can be done about this. So I want to talk about a couple of things. The first thing that Aylo put into practice all around the world after the acquisition: today, if you go visit PornHub or any other Aylo video sharing platform for the first time, without cookies, I always say the way I used to when I first started researching this in incognito mode, and then I quickly realized, 'Why am I doing all this research in incognito mode? I gotta be proud if I'm part of this acquisition.' Also, I thought to myself, if Google charged per use of incognito mode, I'd be bankrupt by this point. But if you look at it without cookies for your first time, what you're going to see before you see any explicit adult content whatsoever is a link to the parental controls, because we know that parents have a strong role to play in this, and we wanted to center for them how to block our platform. Of course they should. We know that's not enough. One of the things that we are of the view works well, and it's nice to see the rest of the internet seems to be coming around to this, the Australian eSafety Commissioner just released this as her findings, the Spanish data regulation regulator released this, as did the French telecommunications regulator, said that this is the solution. And that is device-based age verification, as opposed to basically spewing your private information to site after site after site. To have the device verify you one time, your credentials, your age, and then that would be the end of it. In fact, not much would actually probably be required to make that happen. For those of us who are on a contract with an AT&T or a Verizon in the United States or similar, they already know you're an adult because you had to give them your ID to lease this phone from them in the first place. And the way I put it, I said this to an audience of law enforcement, about 400 police officers and prosecutors, speaking at an anti-internet child exploitation conference. They invited us back, so apparently they like us. I'm going back in a couple weeks in Canada. And I said, 'PornHub wants to be blocked by default.' It was like a silence. I said, 'No, I'll say that again. We want it to be no access by default without age verification on the device.' And by the way, I know that's not a position that is shared in the entire adult internet. I'm aware of that, and that's okay. We're family, we can disagree with each other. We agree about more than we disagree on. To me, this is inevitable, and it needs to be done in a way that is number one effective, actually protects kids, because of course if an adult can get around something with a VPN, a kid can get around it with a VPN or many other methods. So the device, to us, is really where this has to happen. I think mainstream social media is starting to pick up on that. Child protection groups, very interestingly, in our litigation at the Supreme Court, this was one of the biggest surprises, and I encourage your listeners to go take a look at this. I can send you a link afterwards if you want to post it because I think it's a really important document. In our motions for the Supreme Court to hear the case, called a petition for certiorari for the Supreme Court to hear the case, a number of organizations filed motions in support. Obviously the usual suspects: the Free Speech Coalition, the Woodhull Freedom Foundation, all one would expect that, of course. But there's a brief filed by an organization called ICMEC, the International Center for Missing and Exploited Children, and their brief is focused exclusively on protecting kids, and it lays out in detail why the Texas-type legislation is ineffective, actually makes children less safe, and that device-based age verification is the only way to go. So it's not anymore just the adult internet saying this. We're seeing it more broadly, and in fact we saw it echoed by Meta in the wake of the criticisms that they faced. They sort of had their own New York Times moment when Mark Zuckerberg did not do very well in front of Congress and was confronted with some unfortunate things. For us, for example, the idea of seeing results for something unlawful coming up when you search for it, to us that's unthinkable. And seeing some of the negative effects of social media on young people, they're now saying this needs to be done at the browser device level. And that's fine. We don't need credit for it. We always know we've changed everything about the internet. We invented online credit card processing and video streaming. It's an industry that has so much to be proud of, but we don't need the credit for it. We just need to get it done. And we're now seeing mainstream social media starting to champion this. And who are the holdouts left? The device manufacturers: Google, Apple, Microsoft. They're the ones who need to ultimately implement this. I always say Google, Apple, Microsoft can be the key, and we will happily be the lock. But it's going to take time, it's going to take more will, for sure.