The Internet was supposed to be a tremendous boon for the pornography industry, creating a global market of images and videos accessible from the privacy of a home computer. For a time it worked, with wider distribution and social acceptance driving a steady increase in sales.

But now the established pornography business is in decline — and the Internet is being held responsible.

The online availability of free or low-cost photos and videos has begun to take a fierce toll on sales of X-rated DVDs. Inexpensive digital technology has paved the way for aspiring amateur pornographers, who are flooding the market, while everyone in the industry is giving away more material to lure paying customers.

And unlike consumers looking for music and other media, viewers of pornography do not seem to mind giving up brand-name producers and performers for anonymous ones, or a well-lighted movie set for a ratty couch at an amateur videographer’s house.

After years of essentially steady increases, sales and rentals of pornographic videos were $3.62 billion in 2006, down from $4.28 billion in 2005, according to estimates by AVN, an industry trade publication. If the situation does not change, the overall $13 billion sex-related entertainment market may shrink this year, said Paul Fishbein, president of AVN Media Network, the magazine’s publisher. The industry’s online revenue is substantial but is not growing quickly enough to make up for the drop in video income.

Older companies in the industry are responding with better production values and more sophisticated Web offerings. But to their chagrin, making and distributing pornography have become a lot easier.

“People are making movies in their houses and dragging and dropping them” onto free Web sites, said Harvey Kaplan, a former maker of pornographic movies and now chief executive of GoGoBill.com, which processes payments for pornographic Web sites. “It’s killing the marketplace.”

It is an unusual twist on the Internet-transforms-industry story. The Internet quickly presented a challenge to some businesses, like recorded music and newspapers. But initially, the digital age led to a kind of mainstreaming of pornography by providing easy and anonymous access online.

The spread of high-speed Internet access promised even further growth. Instead, faster connections have simply allowed people to download free movies more quickly, and allowed amateur moviemakers to upload their creations easily.

Perhaps counterintuitively, the market continues to be flooded with new video releases, both online and on disc. Mr. Fishbein said that this year he expected to see more than 1,000 X-rated DVDs a month produced for retail sale, a figure driven in part by the new spate of low-budget filmmakers.

“The barrier to get into the industry is so low: you need a video camera and a couple of people who will have sex,” Mr. Fishbein said.

Some companies say they have had success with selling subscriptions to their Web sites, and in offering movies for download or watching online. But Internet revenue, while growing modestly, is not compensating for the drop in video sales and rentals. In 2006, revenue from online subscriptions and sales was $2.8 billion, up from $2.5 billion in 2005, according to estimates from AVN — an increase but nothing near the e-commerce growth enjoyed by many industries.

The more traditional pornographic film companies are not giving up, of course. They say they have an answer to the new competition: quality.

They are seeking to differentiate themselves from makers of inexpensive films by selling with fancier packaging in stores or through slicker Web sites, and by using better cameras and more experienced directors and performers. They are banking that viewers will be discerning when it comes to sex.

“We use good-quality lighting and very good sound,” said David Joseph, president of Red Light District, a production company in Los Angeles that has made films like “Obscene Behavior.”

Mr. Joseph said his company did not waste its time, or that of the viewers, on unnecessary plot lines.

“There’s not a whole lot of story — it’s basically right to the sex, but we’re consistent with the quality,” he said, noting that the company is also careful to pick interesting backdrops. “We use different locations, rooms and couches.”

Red Light’s sales have dropped more than 30 percent in the last two years. To counter the trend, Mr. Joseph says the company plans to start giving film buyers an extra promotional DVD with more scenes from its movies, which typically cost $20. He also plans to improve the packaging of his DVDs.

A similar tactic is planned by Sean Logan, chief of Nectar Entertainment, which has made movies like “Exxxtasy Island.” Business is down 25 percent in the last year, Mr. Logan said, and, because his movies cost $50,000 to $80,000 to make, he cannot afford to compete with some DVD competitors who are dropping their prices as low as a few dollars a film to maintain their volume of sales.

But Mr. Logan said he could improve his packaging for retail shelves. He has begun adding a sleeve around his box covers that includes a foil logo and metallic sheen to bring out the images, as was done on “Brazilian Island Trilogy.”

He said he was sticking to his plan to shoot his movies in exotic locations like Brazil or simulating them with elaborate sets. For the movie “Mystified,” Nectar built an elaborate set that included a waterfall in a warehouse in Canoga Park, Calif. It is not your everyday backdrop for hard-core sex, Mr. Logan noted: “It looks like ‘Lord of the Rings.’ ”

Nectar, like Red Light, recently introduced a redesigned Web site to compete better online. Nectar charges $29.95 a month for access, which allows members to look at thousands of still photos and stream 35 movies from its library.

But this is a far cry from the price and the volume of free X-rated content available on some sites. One site operated by Adult Entertainment Broadcast Network has 200,000 videos, many of them submitted by amateur videographers, said Scott Coffman, the company’s president.

“We get input from all over the world — Japan, Germany, Brazil,” Mr. Coffman said, noting that even he was surprised by the number of contributors. “It’s the same thing as YouTube, where you’re wondering, How many people out there have cameras and are filming this stuff?”

Mr. Coffman said he was not in the business of giving away content. About half the videos submitted to the site, he said, are from pornographic movie companies looking to get viewers interested and persuade them to pay for a longer download or DVD. Some companies pay to have their clips displayed on the site, and some give it a cut of the revenue if a visitor turns into a customer.

In fact, many of the free video clips circulating online are distributed by companies using them as marketing tools. Mr. Kaplan of GoGoBill.com said he thought that was a failed strategy.

“They think that if they give people enough of a free sample, they’ll come back and pay, but that’s not true,” he said. The reality, he said, is that people are surfing for free material, getting what they want and then leaving.

But some in the industry disagree. Manny Ulele, the founder of a Las Vegas-based video production company and Web site, said the use of these teaser videos was turning the online pornography business into something of a science. (That is not his real name, but one he uses for business purposes.)

Mr. Ulele said his company could pay $500 to $600 a day to get its short clips listed prominently on popular video clearinghouses. He said that fee could be justified by the rates at which people follow through: 1 in 1,000 viewers of the free content click onto his site, he said, and 1 in 600 of those might buy something — a subscription, DVD or other product.

Over all, he said, his Web site has around 10,000 customers paying $30 a month to download or stream video clips.

“The perception of the consumer is that there is free porn,” Mr. Ulele said. “But most of it nowadays is controlled.” He added that he and other operators understood what length of video clip, and what kind of clip, would hook viewers.

“We’ve been fine-tuning it for years,” he said. “We’re able to determine exactly what works and what doesn’t.”

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