As the portion of Americans with broadband connections (47 percent and growing) continues to rise, consumers are becoming increasingly addicted to the immediate gratification of Web video. But suddenly, there’s a chasm between porn consumption and porn sales. While sales of internet-based adult entertainment grew 14 percent last year, to $2.8 billion, that figure would be substantially higher if there wasn’t so much free competition, especially from the user-generated adult sites.

So far, the Valley’s biggest players have tried to combat this by offering subscription sites, which give users access to a deep trove of content in exchange for a membership fee, usually paid monthly. Vivid.com is one of the more successful. With about 40,000 subscribers paying $30 a month, Hirsch says, the site generates roughly $15 million in annual revenue. Ali Joone, the founder of Digital Playground, charges the same monthly rate and says he has a comparable number of subscribers.

Much like the TV networks, movie studios, and record labels on the other side of town, porn companies are also engaged in a frantic attempt to diversify their offerings, filleting their films into smaller pieces that can be easily sold via an ever-shifting variety of digital distribution channels. From the pay-by-the-minute model on video-on-demand sites such as Adult Entertainment Broadcast Network and Hotmovies.com, to the four- to six-minute clips edited for mobile devices, the industry is looking to take the 90-minute sex videos from its old business strategy and carve them into bite-size moneymakers.

But for many companies, the sum of these new revenue streams doesn’t even come close to offsetting the decline in DVD sales. What’s happening in porn right now is directly analogous to what’s happening to the music industry—CD sales are down 16 percent since 2005, according to Nielsen SoundScan—but worse.

“What you’re losing in the DVD market, you’re not making up on the paid internet side,” says Fishbein. “Instead of 99 cents a song on iTunes, these guys are doing 10 cents a minute for porn.”

The irony is that Hirsch and his ilk have always been the first to experiment with—and profit from—new technologies. The revolution began with VHS, which moved porn out of the theater and into the home. This made watching pornography private, an advance that created millions of new customers overnight. But to buy the stuff, you still had to venture out to the store, and who knew who you might run into?

The Web, in its early days, solved this problem. Few industries, if any, figured out e-commerce faster than the adult-entertainment business, and online DVD sales soared as a result. But Web 2.0, the catchall term for the crush of user-driven startups that have emerged in the past few years, has left the porn industry’s biggest players scrambling to keep up. For the first time, technology is hurting Big Porn. “Everyone was excited because they thought the internet was going to affect our business in a positive way, and it’s been the opposite,” says David Joseph, the founder of Red Light District. “It’s been a little scary.”

“Instilling the most fear are YouPorn and its closest competitors, Adult Entertainment Broadcast Network’s PornoTube and Megarotic, which draws in users with a limited layer of free videos, then tries to sell premium memberships that offer more content and faster video streaming.

These sites didn’t invent free porn; they just made it exponentially easier to access. Of the three, YouPorn most closely resembles YouTube, with its stripped-down interface, unobtrusive advertising, and—for now, at least—content that’s 100 percent free. PornoTube and Megarotic feel more commercial, with plenty of links to the for-pay features. But the free parts of all three sites are basically the same. Some videos are lengthy (30 minutes or more), but most are closer to three minutes. Some are bona fide amateur videos, shot and uploaded by exhibitionists, but most are clips of copyrighted professional pornography. Of these, some are scenes from high-end features, but a larger percentage are so-called gonzo clips—unscripted, rough-cut footage in which the camera operator often jumps into the action. Some clips are posted by the porn companies themselves, as trailers for the full-length versions available on their own sites, but most are uploaded by users from their own collections. Some are gay, some are straight.