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Porn Flounders, But Adult Novelty Business Booms

Chris Morris, Special to CNBC.com
Tuesday, 27 Oct 2009 | 10:47 AM ET

Contrary to popular belief, the adult entertainment industry is hardly recession-proof – particularly in the digital age.

Porn films are still being produced at a breakneck pace, but rampant piracy online has cut into the bottom line of many production companies. While film is faltering, however, adult novelties are in the midst of a renaissance.

Despite high unemployment rates and shoestring household budgets, America continues to find money in its pocket for sex toys.

“Generally, a recession means people stay at home more,” says Richard Longhurst, co-founder and co-owner of LoveHoney. “If you’re in a relationship, you need to spend more time with your partner and this often leads to wanting to rekindle or enhance a sexual relationship.”

While they were considered taboo for years, sex toys burst onto the mainstream scene on Aug. 2, 1998. That’s the night a “Sex & The City” episode immortalized “the rabbit” creating a rush of demand for the device and making it more acceptable for people to shop for sex toys.

While the current business surge among sex toys isn’t quite that strong, it’s notable. Babeland, a chain of sex toy stores across the country, says sales were up 10 percent in the first half of the year. Representatives at Hustler Hollywood, one of Los Angeles’ most high profile adult stores, said they have seen a significant increase in business as well, though declined to give numbers.

“What we’ve found across the industry is that while the traditional old ‘dirty book store’ seems to not be doing so well, the ones that cater to couples and females are doing quite well,” says Keith Caggiano of Bushman Products.

Some adult toy makers are doing even better. Lelo, a high-end designer and manufacturer of adult novelties, has seen its business double every month this year, while LoveHoney (which is both a retailer and manufacturer) reports a 30 percent year-to-date increase in sales.

“In a recession, people are seeing that sex is a way to not spend a lot of money,” says Claire Cavanah, co-founder of Babeland. “If you buy a sex toy for $150, that’s going to buy you a lot more entertainment in the long run than a dinner or show.”

That $150 price tag might surprise some people. While certainly there are hundreds, probably thousands of toys that cost significantly less, the best sellers in the current economy are high end items.

At Babeland, the five top toys range from $108 to $185.

Consumers, say manufacturers and retailers, are willing to pay more for a few reasons. Some feel the high end products are more effective than their cut-rate counterparts. Others buy into the high-end marketing. But a large percentage are willing to pay more – considerably more – for a product that will stand the test of time.

“I think that’s where the industry is going - into better design, more solid state and less novelty,” says Cavanah. “When we stared a few year ago, it was hard to find a vibrator that was going to last, because the manufacturers didn’t have to make them solid state. People were so ashamed to buy them in the first place, that [the toy] could break and no one would complain. Now that sex toys are going mainstream, the consumer expects a certain level of quality from manufacturers and they’re getting it.”

Those same manufacturers are learning a lesson from traditional retailers and making their products more aesthetically pleasing. Just as Target offers a coffeemaker designed by Michael Graves, many of today’s sex toys have a form factor that’s different than many people expect.

That’s particularly true at Lelo, which puts an increased focus on design. The company’s devices, which are rechargeable and offer warranties of up to 10 years, are so atypical looking that they’re carried in select mainstream stores, including Spencer’s, the Wynn hotel and an OEM product at Barney’s.

“We’re getting more and more inquiries on a regular basis,” says Donna Faro, Lelo’s U.S. sales manager. “The biggest interest in mainstream accounts is in the ladies lingerie high-end boutiques. We’re getting extremely high exposure in that market.”

While design is helping increase interest in sex toys, the general public is also always hungry for new trends.

LoveHoney discovered this when it unveiled its latest creation – the Sqweel. The $60 device was unique enough to garner stories and reviews by leading Internet tech sites (such as Engadget) and consumers raced to buy it.

LoveHoney sold out of its original shipment of 2,000 in two days.