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Meet the New King of Porn

Fabian Thylmann isn't a familiar name to most people outside the adult entertainment industry.

But while the 33-year-old managing partner of Manwin lacks the icon status of Hugh Hefner or the grand showmanship of Larry Flynt, he has quietly become one of the most powerful people in porn over the past two years.

Fabian Thylmann
Chris Morris for CNBC.com
Fabian Thylmann

His company, based in Luxembourg \(with offices around the globe\), owns many of the major online porn sites \(like Brazzers and Twisty's\), overseesPlayboy's online and television operations, manages the online operations of Wicked Pictures, and this week signed a deal to buy Digital Playground, one of the industry's largest filmmakers.

But ask Thylmann, who prefers to avoid the spotlight, about Manwin and he'll describe it as something much different from a porn empire.

"In essence, Manwin is a tech company," he said at a rare keynote speech at Internext, an industry-only conference held immediately before The Adult Entertainment Expo. "We're online and have such big sites that we have to be very, very good at the tech side of this business."

Some might roll their eyes at such a description, but Thylmann made a strong enough case over a 10-month period in 2010 and 2011 to convince a Wall Street fund (which he declines to name) to agree to a nine-figure loan in April 2011. The money was used to pay down previous acquisition debts and fund new takeovers, such as Digital Playground.

An investment that large, in any company, is worth noting. And Thylmann says that while there are no plans for an IPOat present, it's something the company has not ruled out.

"Clearly, I'm not going to say no, but I honestly haven't decided yet," he said in the speech. "The lenders asked that, because they want to know if I have an exit [strategy]. What I told them is: 'The money I make today is fine. I don't need to go public.'"

Besides, he notes, companies that are pure porn plays don't tend to do well with investors. Before he'd consider an IPO, Manwin would have to diversify.

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"I think going public is doable, but it's very difficult with a pure adult company. It needs to be mixed with something mainstream, and finding that isn't easy …. There are certainly a few good targets out there, but … there's nothing planned now," Thylmann said at the Internext event.

Of course, with Playboy TVamong its holdings, Manwin has an inroad to mainstream entertainment companies. And that's something Thylmann hopes to use to the company's advantage as streaming media becomes more commonplace in the living room.

"With Playboy TV, we also got … a way to get into the door of Google , Samsung's TV group, and Netflix ," he said. "With Brazzers, when we knock on the door, they tell us to leave, because they're afraid of the content. They're not afraid of Playboy, though. At least they can be convinced to talk to us about [airing] it. Later on, I can try to push other content into the mix."

It's a strategy that has earned Manwin respect among its peers.

"There's no question those Manwin guys are smart and they know what they're doing," says Steven Hirsch, founder of Vivid Entertainment.

Katie Morgan
Source: The Weinstein Company
Katie Morgan

Part of the key to Manwin's success in the adult industry, says Thylmann, has been the company's focus online. While TV operations like Playboy and the recent purchase of Digital Playground \(whose films include "Pirates II," which had a reported budget of $1 million\) grab headlines, it's the website operations that make the most for the company.

And as the company incorporates Digital Playground — and its future films — into its operations, it's already trying to find a way to maximize its potential with the Web surfing audience.

"Online is the first thing we think about when we do a production," Thylmann said in his speech. "We can always repackage it later and make a DVD or TV segment, but first and foremost it goes online, and that's where it needs to make money. Anything else that comes after that is an upside. We make more money, and it lowers production costs."

Online, though, is an area of concern for a lot of companies. Piracy has devastated the DVD business in porn — in large part due to "tube sites" (knockoffs of video sharing site YouTube), which often carry snippets of pirated films.

Mansef, the previous owner of the tube site PornHub (which Manwin acquired in 2010), was sued for copyright-infringement by Pink Visual. Thylmann and Manwin have been striking deals with porn studios to run the content there, but some critics have been unhappy with the pace of the changes.

Thylmann says to drastically and immediately change the business model would have made the sites a poor investment, but notes his efforts have convinced some viewers to pay for memberships that they might not have before.

While Manwin is respected by some, Thylmann knows he and his company are not well liked by many others in porn because of his actions with the tube sites. Still, he insists he's trying to be realistic when it comes to piracy.

"There will be no fix [to piracy]," he said in his Internext comments. "We need to find a way to make it interesting enough for people who do want to spend [money on subscriptions] to do it."

He noted that Brazzers once ran ads on the infamous Web piracy group, The Pirate Bay, and traffic from that site converted quite well.

As for the overall health of the industry, while there are plenty of doomsayers these days, Thylmann says he's confident there are plenty of healthy companies making adult movies —some doing even better than the industry leaders in the golden days of porn.

"I've looked at many books to see if something is interesting to buy," he says. "I know of many companies today that are making more than the big ones did in 1998, 1999, and 2000."

CORRECTION: The original version of this story said users were able to upload content to PornHub. This is incorrect. Additionally, though PornHub has been accused of harboring pirated material, the site's previous owners were the target of legal action, not Manwin.

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Porn Convention 2013