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Building the iTunes of porn

Source: Skweezme

Porn, goes the legend, is a technological bellwether. It was a chief reason the consumer world adopted VHS tapes instead of Beta, and it embraced putting content online long before the movie or music industries.

But when it comes to monetizing that digital content, the adult industry has fallen behind. While Apple, Netflix and other services were able to persuade customers to pay for songs and programming that were once regularly stolen, porn companies have seen their industry spiral, devastated by piracy.

Now a pair of companies is hoping to turn things around, launching competing services that give fans access to a vast library of porn—at a rate they hope consumers will find palatable.

(Read more: After rough 2013, porn studios look for a better year)

SkweezMe is scheduled to launch a video on demand service that closely follows the iTunes model at the end of this month. Meanwhile, MindGeek (formerly called Manwin), the industry's largest company, plans to unveil a similar venture this year.

In the works for over 18 months, SkweezMe bypasses a recurring payment model, which is the bread and butter of most adult studios. Instead, customers can pay 99 cents to get unlimited access to the service's collection of high definition films.

"Recurring billing is a marketer's dream, but it can be a consumer's nightmare," said Jamey Kirby, president of SkweezMe.

While the service will be available on PC, Kirby and co-founder Mike Kulich, who also owns adult studio Monarchy Distribution, say the focus is on the living room. They plan to launch an app for the Roku media center in early February to take advantage of that system's installed base, which according to Frost & Sullivan made up 21 percent of the streaming media devices market as of July.

MindGeek declined to comment on its pending service, though it is expected to use films and scenes from the company's many studios—as well as original content shot specifically for the service. The pricing model is still unknown, though.

(Read more: Porn's most popular stars)

For MindGeek, the service will be another tentacle in its growing empire. The company owns adult film studio Digital Playground, popular online streaming site Brazzers and the biggest porn "tube" sites (think YouTube for porn).

While MindGeek will likely pull content from its extensive catalog, SkweezMe is affiliating with other non-Manwin owned studios. By launch, Kulich says, the service should have a library of 15,000-20,000 titles, including films from major studios like Vivid and Elegant Angel.

Studios will be compensated via a revenue-share model, dividing 25 percent of the monthly revenue generated by the service.

The challenge with both SkweezMe and MindGeek's service, of course, is getting customers to pay for porn. Because consumers can so easily download pirated versions of films from BitTorrent sites or watch free clips on the tube sites, getting them to lay down cash could be difficult. Those sites, though, are loaded with pop-up and banner ads, which often infect a user's PC with malware.

(Read more: BitTorrent's PR makeover includes Moby, Madonna and more)

"It's very difficult to say you're going to create the iTunes of porn," said Scott Taylor, owner of porn studio New Sensations. "I think people over the past years have decided that it's a God-given right that porn is free."

Kulich and Kirby argue that the adult industry has simply not given customers a chance to be honest. And while they're under no illusions that this option will put an end to piracy—or even substantially curb it—they believe history shows there's a significant amount of money on the table.

"Music piracy was running rampant in the late '90s," Kulich said. "Apple came out with a pricing model saying 'we're not going to eliminate piracy, but we believe there is a large segment that's pirating music because it is the only way to get music onto their computers.' So they created a service where they thought they could pick some of that piracy up off of the floor and make some money from it. … We don't expect to be able to recuperate the $4 billion the industry loses each year to piracy, but it would be nice if we could recuperate a portion of it."

(Read more: How Beyoncé could turn pirates against themselves)

So what took the industry so long to attempt this model?

Despite its reputation, porn hasn't been a tech leader for some time, perhaps since the VHS days. The hasty decision to make content available online had a devastating financial impact on the industry. And efforts in 3-D and 4K filmmaking failed to take off with consumers. Similarly, adult novelties that attempted to use online components fell flat.

Because of this, and because revenues on the whole have been floundering, studios have gotten a bit gun-shy over the years when there's financial risk involved. But Kulich says that's slowly changing.

"I think the reason this hasn't been done before is a lot of studios feel if we're offering this content from hundreds of different producers at such a low price, that's giving away our content," he said. "As the industry has progressively lost revenue, though, these ideas are getting more and more support from the studios."

—By Chris Morris, special to CNBC.com.

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