Sex still sells - but at what cost?
Creator platform OnlyFans is in talks to be sold for $8 billion. Sex still sells - but it’s the last possible exit for adult content before its AI reckoning comes with more worrisome implications.
Dear Readers,
This week’s main story will enter the raunchy territory of the entertainment business. It also deserves a musical interlude, which we haven’t had in weeks!
I promise we’ll keep this PG-13 and focused on business. Before we get there, here’s a quick roundup of some important headlines.
Apple is finally taking gaming seriously
Quietly, Apple acquired a gaming studio - the first time ever the company moved into outright owning the development of video games. The object of Apple’s desire was a studio called RAC7 - a 2-person team that is behind the Apple Arcade hit Sneaky Sasquatch. This deal may seem small in scope but it’s big in meaning: for years, Apple has kept a noticeable distance between itself and video games, content with providing the infrastructure (App Store) and ringing the bell on the toll booth of in-app purchases every time a user in any game installed from the App Store makes a purchase.
This marks a significant shift that acknowledges the power of video games in engaging consumers and giving them reasons to come back. It also gives Apple a way to differentiate the iPhone and its services from Samsung or Google. Pair this with the rumors that Apple is set to launch a new gaming app during the next WWDC day June 9th and we may have the most successful consumer company of our time entering the arena of the $100 billion mobile gaming market that is expected to grow beyond $160 billion by 2029.
We’re only 7 days out from Apple’s announcement…
Disney has another smash hit - again
Lilo & Stitch is killing it at the box office. The new movie raked in $280 million during its first two weeks in the US alone. Worldwide, it already generated $610 million bucks, making it the third most successful movie of 2025 only behind Ne Zha 2 and A Minecraft Movie. The latter is dangerously close to making it into the exclusive $1 billion box office club as it currently sits at $948 million.
What is remarkable about Lilo & Stitch is not just its top line success. It’s also the fact that the movie cost only $100 million to make and $75 million to market - already making one of the most profitable movies in years.
That math will only get better. This is just a remarkable outcome for Disney and a movie that was originally planned to go straight to its streaming service instead of the big screen.
Whoever at Disney decided to go the movie theatre route deserves a raise.
New York Times licenses its content to Amazon
In what could shape up to a landmark deal that reshapes the relationship between media and tech, the New York Times has reached an agreement with Amazon to license its content for use across its artificial intelligence platforms. What is profound about this is not the fact that the NYT went with Amazon - it’s the implications this deal has on its ongoing copyright lawsuit with OpenAI as well as similar lawsuits from the likes of NewsCorp with Perplexity.
What this deal essentially does is establish a market for licensing this type of content for AI model training purposes - meaning any party that simply uses NYT content without a licensing deal in place is undercutting that market and opening themselves up to legal ramifications.
It’s great to see the NYT come out of hiding and play offense here and it will be extremely interesting to see how the lawsuit with OpenAI now plays out. Worst case for the ChatGPT maker is they have to pay licensing fees for past usage, which could easily run into the hundreds of millions of dollars - times whatever number of other media companies jump on the bandwagon to get their fair share.
AI has a pricing problem
Anthropic, maker of GenAI chat model Claude, just hit $3 billion in annualized revenue. That’s a great accomplishment in and of itself as the company is trying to catch ChatGPT maker OpenAI. The company led by CEO Sam Altman recently stated in private conversations that it had hit close to 1 billion weekly active users and is expecting to reach revenues of roughly $13 billion by the end of 2025. Compared to their respective valuation of north of $60 billion and $300 billion, both companies on a basis of fundamentals look, quite simply, expensive. Which brings us to Mary Meeker.
Meeker, dubbed the “Queen of the Internet”, dropped a 340-page industry analysis report on all things AI. She used the word “unprecedented” 51 times on those 340 pages, yet it’s still hard to overstate the impact AI will have on our lives and the potential to create economic value.
“The wealth creation will be extraordinary. We have never had a five billion-user market that one could get to so easily.” - Mary Meeker
One of the main concerns she raised was the relationship between the costs of training large LLMs and the ability to charge consumers accordingly, especially as smaller, cheaper AI models that are trained for custom use cases emerge.
On to our main story.
OnlyFans is reportedly being sold to a consortium of investors. The current asking price is said to be in the region of $8 billion. What started as arguably the poster child of the creator economy is now a cash generating machine.
At an $8 billion valuation, it’s more valuable than the MatchGroup, which pretty much owns online dating.
End of 2023, the company reported net revenue of $1.3 billion. Considering that the business model is very simple - OnlyFans takes 20% of all transactions on its platform - this number is staggering. It means that OnlyFans users paid a total of $6.6 billion for all the different videos, photos, and more creators uploaded - $5.3 billion of that were paid out to those creators.
Yes, artists like CardiB or Iggy Azalea are content creators on OnlyFans as well. But let’s be honest - the majority of the content is adult content. Porn, quite simply, is still a massive business.
The largest adult content site, pornhub.com, registers between 5.2 and 5.6 billion monthly site visits, making it the sixth most popular website on the web globally. Different estimates put the industry at a market size of close to $100 billion.
But: there’s a perspective here when it comes to the OnlyFans sale that could signal the doomsday scenario for the entire industry. Professor Scott Galloway believes that OnlyFans may be sold for a number closer to $4.5 billion - and he makes a pretty compelling argument as to why.
AI is going to come for its money and selling now is OnlyFans’ last exit before it eventually drives the car off the cliff called GenAI. OnlyFans isn’t protected by IP and the profit margins on its content and business model are very attractive. It’s a prime target for AI to come in and disrupt it.
Amongst industries likely to be impacted by AI the most, adult content doesn’t get mentioned often. It should. And the threat by AI became as clear as ever when Google released its Veo 3 AI video creator. The generated videos are nearly perfect. It’s not hard to see what content could be generated without any of the typical overhead (studios, crew, tech, etc.).
This comes at a time where the EU is investigating the four largest porn sites for child pornography and their mishandling of content and protection of minors. 1 in 10 men in the US report being addicted to porn - a number that is increasing quickly.
Here’s the bad news: with pretty much unlimited resources and infinite capabilities to create any type of content, this is about to get worse. But here’s the good news: the big tech companies have the ability to use the same AI to detect and take down this type of content in seconds. Meta continues to claim how hard this is - because it generates clicks for them. More clicks mean more ad dollars.
Here’s the truth: the technology already exists and it could be turned on today if big tech wanted to. Just ask Finnish startup Valossa, who was able to detect explicit content involving minors within 3 seconds on Facebook.
Let’s hope big tech finds its conscience quickly (doubtful) - and that regulators around the world help them find it through legislation that actually gets them to move - perp walks are in order not over adult content itself, but over insufficient protection especially of children and those most vulnerable to the downward spiral it can cause.