Evil Angel is hardcore. More than a quarter-century after John Stagliano revolutionized adult filmmaking with his unique brand of gonzo titles and a lucrative director-as-producer business model, CFO Adam Grayson has co-shepherded the company to the zenith of a volatile industry.
Backed by the digital media wizardry of Gamma Entertainment, not to mention a legendary roster of critically and commercially acclaimed content creators, Evil Angel maneuvered its resources and personnel with such adaptive tenacity, it has emerged leaner and meaner than ever before — even after the inevitable collapse of DVD sales.
We don’t delude ourselves; everything we do here is about a guy jerking off into a tissue. So unless a new kind of content or new tech makes the experience better for that guy, we’re generally not interested.
Jetting above a marketplace strewn with the fossilized remains of fallen titans, Evil Angel secured its battlefield dominance with a ruthless adherence to business-savvy tactics, scything the chaff from the wheat at every opportunity. Scouting the terrain ahead, Grayson and his cohorts analyzed analytics, deployed data-mined defenses and finessed finances to pivot swiftly, all the while operating from a core company culture of meritocratic excellence. That is why, unlike many of its “hobby loss” peers and shadow-funded contemporaries, Evil Angel has carved out a sovereign kingdom with international reach and healthy coffers.
Grayson first joined Evil Angel in 2008 at the behest of the late Christian Mann, initially as an interim replacement for the head of its internet department. On his first day, he was accepted into the globally renowned UCLA Anderson School of Management, from which he graduated with an MBA earned as much by academic rigor as by in-the-trenches conquest. And from the aftermath of a ruinous global financial crisis, Grayson forged Evil Angel into an armored behemoth helmed by rugged veterans and major players, aiming the prolific studio’s skyward trajectory towards an explosive future.
With visionary Stagliano in the wings and a ceaseless influx of wealth from multiple revenue streams — courtesy of cable television deals, online network ventures, social media promotions and B2B/B2C partnerships — Grayson has positioned Evil Angel for even greater success. To unveil the method behind his mathematics, XBIZ invited the evilest CFO on the block to share keen insights in this exclusive interview.
XBIZ: Tell us about the genesis of Evil Angel. How have its core principles of content creator ownership and hardcore gonzo evolved over the years? In what ways have they stayed the same, steadfastly withstanding the shifting sands of marketplace competition?
Grayson: John probably tells the story more precisely than I do (since he was there), but after years of toiling as a director for hire in the 1980s, John believed there was a better way. He maxed out all of his credit cards and shot a few movies in 1988 with his own money. It’s totally obvious now, but keep in mind that he was one of the first directors ever to own his movies and control his own distribution.
John really struck gold when the fifth release from Evil Angel was “The Adventures of Buttman.” He had already pioneered this director-as-producer model, and he had invented what we now call “gonzo porn.” That movie absolutely killed it and moved Evil Angel into the “bona fide success” column.
Over the next few years, some of John’s friends approached him and asked if he would be interested in distributing their movies for a fee. It started with Bruce Seven, and by 1996 the classic Evil Angel lineup of John Leslie, Rocco Siffredi and Joey Silvera was assembled.
The core principle was this: A director who finances and owns his own movies will create them with a different level of care than a director for hire. That, in turn, would lead to a higher quality of movie, which is exactly what happened at Evil Angel. You have to remember that in the early ’90s, almost all porn was terrible by modern standards. It was predominantly bad stories and bad acting, mixed in with poorly shot, usually lame, sex. John and Evil Angel changed that. Evil Angel movies were hot tease and hotter sex, and customers responded to the revolution.
Our core value was always to give the customer what he really wanted to see, so that he always felt he got at least his money’s worth. That hasn’t changed at all. Evil Angel never tolerated phone sex ads, low-quality tape stock, over-compressed DVDs, pre-checked cross sells and all the other “industry standards” that are, frankly, just creative ways of ripping off customers. By never crossing those lines, Evil Angel has built really strong, long-term relationships with our customers.
Technology and customer tastes are always shifting, and to stay relevant, we have to change with them. But the core values have never changed.
XBIZ: Talk about what led you to join the Evil Angel team around 2009, and what your initial goals were. What professional experience did you have beforehand, that influenced your work at Evil? How did an MBA degree from the prestigious UCLA Anderson School of Management inform your decision-making as you navigated the adult biz?
Grayson: I had sold my site SearchExtreme.com to GameLink and frankly, after 12 years of hustling, I was done with the adult business. I was gonna go legit! It was also 2008 and the global economy was collapsing. I had applied to the MBA program at UCLA Anderson as the first step toward my next adventure.
SearchExtreme had rented office space for years in the same office park where Evil Angel has been for the past 20-plus years, and I casually knew a lot of employees there. I had been good friends with Joey Silvera for a number of years, and through him I knew John. The late, great Christian Mann reached out in late 2008, saying that Evil had lost the head of its internet department on short notice, and John was interested in me serving on an interim basis until they found a permanent replacement. Like I said, I was totally burned out on the business, but I knew and respected John and Evil (in addition to being a long-time fan), and it was probably the only adult company I would have said “yes” to at that point.
My first day at Evil was the same day I was accepted into UCLA Anderson.
My initial goal was to give Evil value for my time and figure out how to improve what was a pretty bad situation within their web department. Soon after I arrived, we were approached by Gamma Entertainment to take over operation of the sites, and I was brought on full-time to steward that transition.
UCLA Anderson gave me a ton of tools that I really do use every day. Whether it’s management, finance, marketing, etc., the frameworks have been integral.
XBIZ: During the recession and inevitable DVD sales plunge, what steps did you and Evil Angel take to proactively stay ahead of the curve and not fall by the wayside, like so many other formerly monolithic companies? What lessons did you learn from overcoming unforeseen challenges during those turbulent years?
Grayson: In some ways, we were a bit insulated from the carnage happening around the business at that time. Not to say we weren’t impacted, because for sure we were. But a 60% drop in new release DVD sales isn’t quite as painful when you’re starting at ridiculously high numbers.
In 2008, while the global economy and the old school porn business were simultaneously imploding, Evil Angel hired Christian Mann, who in turn hired me. We didn’t really know each other, but we soon realized what a complementary team we were. As outsiders, we came to Evil Angel with a consultant’s mindset: Identify everything that was broken and figure out how to fix it. Christian had all the “soft skills” — schmoozing, sales, marketing, HR. I brought the finance and technology side. In about 24 months together, we had completely re-jiggered Evil — streamlining, upgrading personnel, getting out of bad contracts and looking toward the future.
We had the right people and the right vision to know that 2010 was a stepping stone to 2020. And if we wanted to see 2020, we had to make aggressive business decisions in 2010. We learned about the value of hiring truly great people and understanding every crevice of our business. As great as it is to be wildly successful and wildly profitable, it has a way of masking inefficiency. During the global financial crisis, Evil Angel was forced to grow up, which was, in retrospect, probably the best thing that could have happened to us.
XBIZ: Given your impressive roster of directors, how do you balance building loyalty, with making tough calls based on sales? For example, if a director’s titles are not generating solid revenue, how do you partner with them to succeed once again? At what point do you take a look at the numbers and make the decision to part ways?
Grayson: This is a real tricky one. For 15 years or so, being invited to join the Evil Angel roster of directors was basically an invitation to the millionaires club. Even the worst selling Evil Angel movies at that time were generating incredible money for the directors. Now, with everything brought back to Earth, there have been a number of times where we’ve tried to help a director re-create their line, but sometimes it works, and sometimes it doesn’t. Over the past few years, we’ve had to cut ties with a few directors because it just wasn’t working, but that’s truly a last resort.
I have a very clear vision about what the Evil Angel brand means to our customers and what components it needs to succeed. Some of our directors are, for lack of a better word, more “Evil Angel-y” than others, and are more integral to our long-term plans. And frankly, in a world where producing profit-generating content is harder than it has been in decades, I have no doubt that the cream of our director crop will succeed, but there may be some left behind.
XBIZ: Maintaining your unique business model of content creator ownership must involve some compromises on both sides. How does Evil Angel ensure it is making a profit from distributing a director’s content, while still encouraging them to be entrepreneurs and feel empowered? Do you create various contractual agreements with the directors, meeting their unique demands while adhering to an overarching set of standards? When a director begins pulling away too much, attending to unaffiliated sites/channels and creating content that doesn’t grow Evil Angel, how do you step in to corral them?
Grayson: Unlike many studios that have come after us and mimicked our business model, Evil Angel really is built for the directors to make money. I don’t know anyone in our industry less interested in lining his own pockets than John Stagliano. When we invest hundreds of thousands of dollars in building a television division, it’s so we can return more money to our directors. Our infrastructure provides a revenue baseline for all of our content, but it’s the magic of our top directors that really makes some movies shine.
The relationships were historically laissez-faire: Directors made so much money at Evil Angel, they were always committed to the company. But as things have waned over the past decade, more and more of them have needed to supplement their Evil Angel income with other directing gigs. Last year we decided it had gone too far and was really eroding our brand. We gave all of our directors an ultimatum to direct exclusively for us or we were going to part ways. (Only Manuel Ferrara chose the door). We have uniquely built our brand around the brand of these directors, so we felt it was more pressing than it may have been for other studios. This was clearly a decision that was better for Evil Angel than for the affected directors, but we have a certain sense of “what’s good for the goose is good for the gander.” If Evil Angel is healthy and successful, our affiliated directors will profit as well.
We are increasingly collaborative with the directors to find market opportunities and exploit them. If their movies don’t turn a decent profit, they will stop making new movies, and in turn, we will have nothing to distribute. So, it’s a classic symbiosis.
It’s pretty easy here because each director has almost an identical deal with us. It’s core to John’s sense of fairness. The ground rules, both in terms of content and business, are very clear, and if they stray we will let them know.
XBIZ: How does your role as CFO differ at Evil Angel from John Stagliano’s duties. Is it a bad cop/good cop kind of dynamic? Does he provide the vision and you the execution, or is there a more subtle/interwoven web at play?
Grayson: As much as he scowls at me when I say it, John is semi-retired. He works on his own movies, has his hobbies and attending to the management of Evil Angel is a small percentage of his time. He really delegates most of the day-to-day to me, though we talk every day to go over things. I think we’re both confident that I’m carrying out operations in a way he sees fit, but I always know he’s watching.
John is really a pornographer first and a businessman second. He’s really passionate about the content, but he doesn’t want me to bore him with discussions about our 401(k) plan. When it’s a question about content or photo selection, that’s all John. Most of the boring stuff comes to me. We also have an outstanding team of lieutenants who keep the trains running on time here.
XBIZ: In 2013, you pivoted from Hustler TV to a more independent broadcast avenue. As traditional cable boxes are merged into streaming devices like PlayStation, or even Smart TVs with fully integrated webs/apps, how is Evil Angel planning to meet the demands of digital media? Does VR have a place in that future? How about traditional DVDs?
Grayson: DVD is still pretty lucrative for us, but I’m honest with myself that it has a finite life. I tend to make most strategic plans here with “DVD=0” in mind. We are going to make sure we’re doing our best in the DVD market until it doesn’t exist any longer, but it certainly isn’t steering our big picture decisions. The web is almost everything for us strategically, with television in a supporting role.
We’re cautious about new gimmicks and technologies since the whole Evil Angel brand is about delivering maximum quality all the time. Whether or not something new like VR makes money isn’t all that relevant to us. It’s all about VR, or whatever tech, not sucking. We won’t associate ourselves with anything that fans might think sucks.
We don’t delude ourselves; everything we do here is about a guy jerking off into a tissue. So unless a new kind of content or new tech makes the experience better for that guy, we’re generally not interested.
XBIZ: In what ways does Evil Angel internally track the various genres and titles that are doing well vs. on the way out. At what point do you decide, for example, that “cuckolding” isn’t selling as well as “trans” and make changes accordingly? Do you ask certain directors to expand their repertoire or shy away from certain genres? Is there value to sticking to your guns vs. jumping on the latest trends?
Grayson: We have spent a good amount of money to build our own in-house revenue analytics tool so every penny that comes to Evil Angel is tagged and logged. We know how much each scene makes on different platforms, in different countries, in different months. So it’s pretty easy for us to use big data best practices to know not only the global trends, but the trends in a subset of the market. We regularly use this business intelligence to steer our directors toward better performing niches or performers. Sticking to your guns is for companies who will go bankrupt.
XBIZ: Given your analytics and data-crunching, what are customers gravitating towards in terms of adult content purchases from Evil Angel? Any hot genres? Timeless genres? Do you make most of your cash from a small percentage of connoisseurs or is there a way to harvest the broader field of freeloaders who are less likely to pony up cash?
Grayson: You’d be shocked how much it varies from platform to platform. What kills it on EvilAngel.com may be a dog on HotMovies.com and only mediocre on cable. It’s a funny thing lining up all our data to identify actionable opportunities. Our core EvilAngel.com audience is still about the stereotypical hard gonzo anal. They can’t get enough. We always have some hypotheses being tested here, so keep an eye on EvilAngel.com to see what we’re cooking up next.
XBIZ: How does Evil Angel maintain its high standards of quality adult filmmaking and distribution to ensure existing customer loyalty and to attract new customers? How do you outmaneuver tube sites in terms of providing a compelling reason to pay for content (via superior meta-tagging, web design slickness, smoothly integrated video players and such)?
Grayson: In an era of free, if you expect customers to pay $39.95 a month for a site or $25 for a DVD, you damn well better deliver value to them. We work really hard at that, whether it’s internal quality standards for content, or talking to our customers about what is and isn’t working for them. Like almost every company in the media world, adult or not, everything we do is about the intersection of great porn and a great user experience.
XBIZ: What is your approach to promoting the Evil Angel brand, as far as advertising and social media strategies? How does that approach differ in terms of B2B and B2C? What sort of licensing agreements do you employ to lengthen your reach?
Grayson: We’re definitely 95% B2C and 5% B2B at this point. Over the past couple of decades that shift has happened across the industry. In the old days, money primarily came from VHS distributors and cable buyers. The relationships were what made you successful. But now you’re successful because end users want to pay for your content, so it’s paramount to market to them and make sure you’re connecting. We spend a lot of time and energy on social media, with measurable returns. That being said, when there are relevant trade shows, we are usually there to build and maintain important B2B relationships.
XBIZ: When you say 95% B2C, are you saying you get the bulk of your traffic through type-ins and social media? Because B2B partnerships (be they ad buys, traffic deals, digital distro deals, etc.) are what typically drive traffic for most companies.
Grayson: No, definitely not referring to a measurement of revenue or traffic. Just saying that 95% of our marketing energy goes into B2C (like social media). The other factor is that Gamma handles most of our digital B2B, so that’s a complication in my answer.
