CES 2016

James Martin/CNET

It was getting a little awkward.

Two nipple-pierced brunettes, completely naked, were all over me. They promised me a blow job I wouldn't forget.

But I couldn't forget I was in a crowded suite on the 34th floor of the Cosmopolitan, a fancy hotel on the Las Vegas strip. Or that I was wearing a boxy virtual reality headset while sitting next to my co-workers. The girls were just performers in a Naughty America video that had been recorded with the new technology.

"VR is the next logical step" for the porn industry, Ian Paul, Naughty's chief information officer, told me earlier that day at the CES 2016 conference in Las Vegas. "Haven't we all wanted to be immersed in what we're watching?"

It's an axiom of the tech world: Wherever adult entertainment goes, consumers follow. Adult videos helped cable television make inroads, giving (mostly male) viewers a reason to pay for TV. The widespread availability of porn at video stores helped fuel the popularity of VHS players. After all, it's more comfortable to watch your fantasies at home than in a dingy movie theater. Just ask Paul Reubens.

As media shifted to the Internet, the porn industry saw a new opportunity to peddle its steamy wares. A Dutch company, Red Light District, developed streaming-video technology and a payment system, helping pave the way for mainstream entertainment companies. Even the growth of mobile has enticed porn to invest. When Apple launched the iPod Video player in 2005, porn was there.

Now it's virtual reality's turn. VR has evolved from a small collection of startups four years ago to one of the hottest trends in technology today. Slot your phone into the goggles, strap 'em on, and you're an astronaut exploring Mars, a knight jousting in medieval England or an Aussie rules football player hitting the field.

"You're not going to buy a device that's just for porn. It's embarrassing." Ian Paul, CIO of Naughty America

Samsung, the South Korean electronics giant, is already selling its Gear VR headset. Taiwan's HTC, Japan's Sony, and Oculus, owned by California-based Facebook, are expected to sell headsets this year. Video games from Ubisoft, Sony and Valve are slated to follow.

No surprise, porn's beaten them to the punch. Adult entertainment company SugarDVD began making VR porn in 2014. Another, BaDoink, started offering a selection of VR skin flicks last year. Though the VR porn industry is still in its early days, you can nevertheless find hundreds of VR porn videos online, with titles that leave little to the imagination, including "Tour of Booty," "The Bad Student" and "Your Dirty Maid." And let's not forget "Hookers" and "Hookers 2," its imaginatively named sequel.

Researching this story, I found one title intended for women, called "In Her Shoes."

Piper Jaffray, an investment bank, reckons the industry activity will pay off. By 2020, VR porn will be a $1 billion-a-year business, making it the third-largest VR segment after gaming and sports.

Leading porn's charge into virtual reality is Paul's Naughty America, which began selling VR porn last July. Those who have tried it "are going nuts," he says.

Naughty America, one of the largest producers of adult content, launched online in 2003, and considers itself something of an innovator. It used Twitter early on and began accepting bitcoin as payment two years ago. The company made headlines in The Wall Street Journal when it started filming in ultra-high-definition.

Adopting the next latest thing in tech was a natural move, says Paul. "The immersion and the intimacy is like no other format."

Starting to feel real

CNET Reviewer Scott Stein says Paul isn't exaggerating. He watched "Very Merry XXXmas" -- Naughty America's subtly named holiday flick -- on a Samsung Gear VR headset, and came away impressed.

"It's right in front of your face ... in one of the more eerily successful examples of VR-ready video I've ever seen," Stein told me. "It starts to feel real at times."

Making VR porn is different than making conventional 2D movies, and filmmakers are still learning how to shoot with the technology's cameras. VR cameras record as much as 360 degrees -- all around the room -- and they capture more data than conventional video devices.

The digital files are huge, so Naughty America has limited its videos to just 180 degrees: left, right, up and down. The productions don't bother with the view behind the camera, Paul says.

"People want a super-immersive experience, and I have no doubt we will see it." Dan O'Brien, head of HTC VR

The videos don't have full interactivity either. You can't turn your head, for example, to change the viewing angle. If you want to get a better look at the woman wearing a Santa hat and little else -- she's the star of "Very Merry XXXmas" -- you're out of luck.

Stein said it feels like a "peep show."

Paul says he's still working out the kinks. In the meantime, Naughty America has already stumbled on new approaches for his "seasoned performers" in moviemaking.

"We instruct them to come close to the camera," he says. "We tell them to treat the camera like it's a person."

A grower

Naughty America currently has 24 VR videos available on its website and is producing one to two new VR titles per month. (If you're reading this in the office, don't check out Naughty's website.)

About 2 percent of the company's customers watch VR titles now. Naughty America forecasts that as many as 20 million people will be watching its VR porn monthly by the end of this year.

Of course, not all members of the VR industry are happy about the revolution in porn.

Samsung won't allow a designated porn channel on its online VR store. The company declined to comment on people using Gear VR to watch pornography and is so concerned about tarnishing its brand it doesn't want to see porn and Samsung in the same sentence.

A spokesman for Oculus says its terms of service forbid porn from the Oculus Store.

HTC seems a little more relaxed. Dan O'Brien, who runs the phone maker's VR project, cracked a smile and blushed when asked about porn being viewed through his company's headset.

"People want a super-immersive experience, and I have no doubt we will see it," he said at CES. He added that none of the developers testing the HTC VR system is working on porn.

Sony didn't respond to an email about the subject.

Naughty America's Paul wishes companies were a little more open-minded. People who own Sony's PlayStation video game console are likely candidates for buying VR goggles. And once they own the goggles, Naughty America can sell them VR porn.

"We look to the gaming industry to really drive adoption," Paul tells me.

"You're not going to buy a device that's just for porn. It's embarrassing."

CNET's Roger Cheng and Ian Sherr contributed to this report.