Leo D'Angelo Fisher Columnist

Leo covers management and leadership issues, business trends and corporate strategy. He is a former senior business writer at The Bulletin and a former host of The Business Hour on 3AW.

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The business of sex

Published 04 May 2011 13:41, Updated 09 May 2011 10:59

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It’s a maxim straight out of a corporate human resources manual. “Treat your staff well and the business will prosper,” the young entrepreneur with dreams of a multinational business proclaims. “When you look after your staff, the result is pure gold.”

One might expect to hear such high management principles expressed around a boardroom table but on this occasion the impassioned speaker is Melbourne escort and aspiring escort agency owner “Angelina”.

Angelina is in her late 20s and has been working as a private escort for three years. She plans to open her own agency specialising in catering to well-heeled business clients later this year. Her business plan, framed with the assistance of a business adviser, envisages an agency employing 25 escorts – “20 girls and five guys”.

A former fashion industry worker who now charges her “high-end” clients $650 an hour for the pleasure of her company, or an all-night rate of $6000, Angelina speaks matter-of-factly about her vocation. She loves her work.

“I visit my clients at five-star hotels, I don’t do any private residences and my clients are a high class of business people – executives, people in finance, entrepreneurs,” she says. “These are people who want conversation, they want to take you out to dinner – they want a girlfriend experience. For me it’s a pleasurable experience. It can be quite addictive.”

Not just a sex worker, Angelina is a businesswoman in the making. She believes her agency – Angelina’s Angels, which is still awaiting approval from Victoria’s Business Licensing Authority – can replicate her success as a solo operator. “The sky’s the limit,” she says. “I plan to start small but I believe this is a business that I could expand.”

Angelina is the legitimate, business-savvy face of the burgeoning adult industry as it seeks to shake off its seedy image. But that’s no easy task. While given some room to operate with legal sanction (prostitution is legal across Australia), it remains heavily and inconsistently, regulated. And even legal operators of escort agencies and brothels find it difficult to escape the stigma surrounding their enterprises.

Angelina, for one, not only operates by her pseudonym but never reveals her face when she is photographed for promotional material. “My parents don’t know,” she explains.

For all that, sex is a money spinner. Canberra-based lobby group the Eros Association has been representing adult retail and entertainment businesses since 1992. It estimates the industry has an annual turnover of $2.6 billion and employs 27,000 people. For good measure, the association has calculated that Australians buy 1 million vibrators a year.

It’s those kinds of growth trends that Rob Godwin, the managing director of Sexpo, has been riding as his business has gone from humble beginnings as a one-off expo for the adult industry in Melbourne’s Carlton Crest Hotel to seven shows a year, with anywhere up to 290 exhibitors.

Godwin says the adult industry has been undergoing a huge change since the advent of the internet. A huge proportion of sales used to come from adult films but the internet has meant a proliferation of free adult content leading to a dramatic decline in over-the-counter sales.

Businesses that relied on film sales had to revamp their offerings and changed their product lines so as to cater to women and couples, as well as their more traditional male clientele.

“[Men] were the bread and butter of adult shops and when there was a massive decline in sales, the industry basically had to reinvent itself,” Godwin says. “It’s moved completely away from the boobs and bums advertising of yesteryear because our largest demographic is heterosexual couples and a lot of the advertising is now aimed at the female audience.”

As a result of this shift, the Sexpo shows has become more mainstream and shifted its content more towards education, products and services that can be shared between couples.

“In the next show, there will be over 200 square metres dedicated to educational exhibitors, including celebrity speakers and workshops,” Godwin says. “Couples are more comfortable coming to the event together and talking about sex, which has really enabled a show like Sexpo to become mainstream.”

However, although Godwin considers Sexpo to be mainstream, many businesses in the adult industry struggle to be considered credible.

In 2010, the Advertising Standards Bureau received complaints about 520 advertisements and seven of the top 10 complaints related to sex, sexuality and nudity. Topping the list of the most complained about advertisements was a television commercial offering treatment for erectile dysfunction (220 complaints) followed by an advertisement for online dating agency Ashley Madison, which encouraged viewers to “have an affair”, with 115 complaints.

Billboards for Brisbane’s Sexpo and Ashley Madison in Sydney (“Life is short. Have an affair”) also featured in the top 10, prompting the Outdoor Media Association to start work on a code of practice to self-regulate the portrayal of sex and sexuality on billboards. Preying on the OMA’s mind is a federal government inquiry into billboard and outdoor advertising, which is due to report in June.

This, says Eros in its submission to the inquiry, is yet another example of the discrimination facing adult-industry operators.

“Billboard and outdoor advertising plays an important part in the promotional mix that our members need to run a profitable business. However, it is one of the most discriminatory and difficult areas of all to deal in,” it states. “As a result, many traders in this industry who would like to use outdoor advertising choose not to. Many of them report that it is not the content of the ads that is an issue with billboard owners but simply the fact that they are from the adult industry.”

Long-time Melbourne adult-industry entrepreneur Maxine Fensom – strippers’ agent, club owner and proprietor of Maxine’s lingerie restaurant – was so fed up with her industry not receiving the recognition it deserves that in 2002 she started the Australian Adult Industry Awards to honour “excellence in customer service”. The aim of the awards is to “establish legitimacy for the industry and its participants” and promote “mainstream acceptance”.

“Governments have made it quite hard for the legal adult industry to operate,” Fensom says. “They say, ‘yes, you can operate your business but we’re going to make it hard for you to grow’. Anything to do with sex is still taboo. You’re not going to hear a politician stand up and admit to going to an adult shop to buy sex toys.”

Probably the most inconsistently regulated area in the adult industry is brothels. The Australian Adult Entertainment Industry, which represents legal brothels in Victoria, South Australia and the Australian Capital Territory, argues that governments want to be seen to be tough on legal operators even as they fail to stem the tide of illegal brothels. The result is an industry skewed in favour of criminal operators, says convenor William Albon.

According to the AAEI, in Victoria there are about 90 legal brothels and 20 licensed operators of escort agencies but it estimates that there are 400 illegal brothels that manage to evade government and policy scrutiny.

Brothels and escort agencies have been legal in Victoria since 1996 but despite amendments since then, the legislation “retains its anti-business core”, Albon says.

Victoria’s Sex Work Act prevents the owner of a brothel or an escort agency from advertising for ancillary staff, such as receptionists, bookkeepers and cleaners, ostensibly because applicants may be coerced into providing sexual services. The Victorian legislation allows a person to own only one establishment and a brothel is limited to a maximum of six rooms.

Advertising restrictions are another bugbear for legal brothel operators. “When we advertise our product, if we use imagery of a woman it can only be head and shoulders in the photo but on the same page of a newspaper you will have depicted a full-bodied image of a woman in a swimsuit promoting a strip club,” Albon says.

These disparities come as a great shock to many of the AAEI’s members, who come to the legal sex industry from diverse and sometimes mundane backgrounds, including former bankers, teachers, plumbers, real estate agents, florists and farmers. “They would have been used to operating in fair and non-discriminatory environments,” Albon says.

“The legislation and regulation needs to be on a par with legislation governing other licensed industries. Prostitution is lawful, it needs to enjoy the independence that travel agents and real estate agents enjoy.”

Businessman Bernie Craddock entered the sex industry 22 years ago when he started male escort agency Global Escorts, which he still operates. Six years ago he bought a Melbourne brothel, the Presidential Suite.

Craddock, a former restaurant owner and principal of his own marketing consultancy, views his businesses as just that. “I’ve always treated them like any other business.” The problem, he says, is that successive state governments do not.

“I have no qualms about the vetting and scrutiny that legal operators have to go through and I don’t have problems with making it a difficult industry to get into, but it’s not a level playing field,” he says.

There are also market forces to contend with. Craddock says the internet and social media have enabled gay men to source sexual liaisons online rather than through an escort agency. At his agency’s peak he employed 25 male escorts; today it’s half that. Craddock says he bought the brothel, an established business, when he saw the writing on the wall. But there may be life in his male escort agency yet. Market forces are also coming to the rescue. While more and more gay men are using technology instead of his agency, the number of women seeking male escorts has grown steadily over the past decade.

“Global’s business used to be 80 per cent male [clients], 20 per cent female. But now it’s about 50-50 as we hear from more women wanting a male escort. They can pay for sex and it’s legal; I can see that market growing.”

Craddock says that first and foremost he is an entrepreneur – until recently he was a part owner of dental laboratories in Queensland and NSW. “It doesn’t matter whether I’m running a 7-Eleven or a brothel, I’m in it for the money,” he says. “It’s still a worthwhile industry financially but the government refuses to treat us like a legitimate industry. We’re not crying poor, we’re crying hard done by.”

The fact that the adult industry still attracts such disquiet, however, can throw up business opportunities for others who are not so squeamish.

Insurance broker Nick Rossoukas, director of specialist insurer Adult Industry Business Insurance, provides insurance cover for adult shops, licensed brothels, escort agencies and adult clubs – businesses that other insurance companies would prefer to avoid.

“Many mainstream insurers won’t even consider insurance for adult-industry businesses. It has nothing to do with the risk of these businesses, it’s purely a moral judgment they’re making,” Rossoukas says. “We felt it was a niche that we could service.”

AIBI writes $2 million in premiums a year, mainly for property and public liability insurance. “Absolutely they’re legitimate businesses,” he says. “We don’t share the views of the big insurers.”

But old perceptions die hard and not everyone shares Rossoukas’ equanimity about the adult industry.

“When I’m out and about and the phone rings and it’s one of the ladies, if my wife is with me she’s not too happy,” he says.

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