June 7, 2022 • 32 mins
A decade ago, a computer programmer named Fabian Thylmann began to build one of the biggest porn empires in the world.
How did Fabian do it? He was good with money in a business that was starved of finance. He convinced Wall Street to bankroll his vision to take control of the industry.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Pushkin. So warning time. We're two journalists from the Financial Times,
and for six months we were set free to pursue
one question. Who controls the porn industry. There's some content
that really won't be suitable for kids, and only when
(00:35):
strictly necessary, we've used recordings of investment bankers in the wild.
I want to take you back in time to two
thousand and twelve, to winter evening in Las Vegas. The
porn industry had convened for one of its flagship conferences.
(00:57):
It's like dovls, but for porn models, computer geeks, moguls.
They were all there, gathered together in a flashy music
arena where Mottley Crewe had its presidency that year. It
was the most packed I've ever seen one of those
keynote speeches. Everybody's sitting there talking like I don't know,
I don't know. He's going to say, who are a
(01:17):
car crash like type of thing, like we have to
see this to see what happens. Sarah Jane Anderson sat
in the hall, not waiting for a rock band, but
for a speech. Sarah Jane had been working in the
online adult world since the nineties. She was on the
business and marketing side of things. It was a close
knit community. Sarah Jane talks about it like an eccentric family,
(01:40):
but they were on hard times. Sitting beside her that
night were a bunch of porn executives, all from big companies,
all facing the same dilemma. What was the point of
making new content when your content was being plundered. There's
no way to stop because trucking. So as much as
I said, content is king the real king of traffic,
and the tube sites had a swallowed up all the traffic.
(02:04):
More people were looking at online porn than ever, but
they weren't paying for it. Profits had evaporated. It was
beyond the panic stage. Producers were desperate. They watched their
best movies get ripped and streamed online for free by
a faceless enemy, the tube sites. But finally, at their
conference they would see their problem in the flesh. They
(02:27):
were going to meet the man behind the biggest tube sites.
And as the lights came up, everyone began to hum.
They actually sang underneath their breath the death March for
Star Wars. When he came out, Don't Don't, Don't. The
(02:51):
Lord Vader of Pawn was a man called Fabian Tillman,
the German software engineer who bore XTube roughly four years
before this conference, the one who started buying tube sites
as a step towards adult industry domination. When he came
on stage, he made an impression before a word, he's
(03:12):
wearing a hoodie Verry Zuckerberg, and then he sat on
the table and crossed his legs pompous. I just remember
my whole road just laughing at that out of ridiculousness.
It was his public debut. Baby faced Fabian, at just
thirty three, was basically there to introduce himself to an
industry that he had conquered in just four years. I
(03:34):
wanted to talk a bit about myself, since I know
that many of you do not really know where where
I come from and such, and I thought it's a
better if people know more, and then should make it
obvious that I'm not that evil person that so many
people think I am, that my role was just like okay, then,
especially in the digital world, a lot of those people
people are faceless nicknames. So I think he got some
(03:57):
credit for showing up in taking the heat a little bit,
but I still think it was pretty much I own
you I'm Patrician Wilson. He's Alex Parker from Pushkin Industries
and The Financial Times. This is Hot Money, Act one,
(04:45):
the Disruptor. How did Fabian do it? He was good
at coding, but so are lots of people in the
adult industry. The thing that marked him out was money.
He was good with money in a business that was
starved of finance. He was the guy in the hoodie
who convinced Wall Street to bankroll his vision to take
(05:07):
control of the adult industry. The guy who managed to
get even the most prestigious of banks and investors to
buy in, to look away from the problems what they
saw as a sin industry and raise more money than
anyone thought possible. Fabian was like Mercury. Let me tell
you what it was like trying to get an interview
with him. He got in touch with me, then he
(05:31):
went dark. Then he said yes, then he ghosted me.
I watched in his social media feeds as he found
love and traveled the world. I saw mere cats, campollion temples,
bead boats. He even posted picks from her London art
gallery on the same Saturday that I was there. I
know he didn't respond to me when I reached out. Then,
(05:52):
after more than a year of trying, he finally gave
us a date. We traveled to Cologne in Germany and
went to his no frills office above a nineteen eighties
shopping arcade in a nightclub called Vanity. As we waited,
surrounded by merch from his clubs piled up at the corners,
I still had this uneasy feeling would he actually answer
(06:14):
our questions? Would he even show up? And then there
he was. My name is Fabian. I hate the same
enemy English. I don't like it. My name is Fabian Tuman,
and I'm an investor. I guess his family is German,
(06:35):
but he grew up in Brussels and still lives there,
just down the road from where I used to live,
actually on the other side of a royal hunting forest.
The Tillmans were well to do family, and like many
people in this business, a teenage Fabian basically stumbled into
pawn partly for laughs but also to get ahead. I
was a programmer. I looked online where I could do
(06:57):
fun projects in an easy way as a young person
without any connections, not being in La or what San
Francisco or something, I stumbled over our porn people basically online.
The chat wools started working for them. He helped build
something called NATS, a tracking program for afiliate marketing that
took off in the adult business. It's still around today.
(07:18):
With this software, he could see where traffic was flowing
and what porn customers actually paid for. When Fabian peaked
behind the curtains of these businesses, he had the best
view in pawn land. It was interesting how how I exaggerated.
Everybody was talking about how great they were, which they
(07:38):
really weren't, or at least not as grand as they
made it look. Fabian thought he could do a better job.
The first business he bought was a small German porn site.
He didn't really have a plan. Some friends were selling
and he could just about get the money together. But
then I started to look at other things and let's
see what else is possible to buy. And that's when
you realize more and more how the industry worked, and
(08:01):
how is what's there and what isn't And so the
buying spree began. It started with a few more porn
sites in Germany, a webcam's business, then x Tube, you
know the side run by Curtis, the Subpeanut King the
guy would talk to. In the previous episode the Ft,
we cover this kind of investor driven buying spreebe all
the time. It's called a roll up, basically seeing value
(08:24):
in a sector, raising money and buying up as many
companies as possible. Money has been cheap for quite a while,
so plenty of deeply unimpressive buy out groups managed to
do it. But Fabian he was doing it in porn,
hardcore porn just after the financial crash in two thousand
and eight. That's no small feat. There wasn't much money
(08:44):
around and with all those free videos flooding the web,
everyone thought the porn industry was doomed. I don't know
if I had, if I really in the beginning at
least realized how big this could become. It was a
game in some shape or form, you know, to look
at all these companies to be the one of the
few people that is actually willing to buy anything, because
(09:05):
everybody else was like, what the way are you buying this?
This will die in two months. Things got more serious
when a company called Mansef approached him. The Canadian engineering
students who were behind this company had founded sites like
Pornhoub and Browsers. These were already big brands. I was
lucky they knew about me and they just took the
(09:27):
chance and came to me. But they were talking to
four other people at the same time, and I just decided, Okay,
this is going to be really expensive. I have absolutely
no clue how to pay for this, but let's just
chat with them and let's try. He flew to Montreal
a few days before Christmas in two thousand and nine.
(09:48):
His wife didn't mind him staying there, at least for
a few days, but Fabian was so keen to get
the deal done he was stuck there for three months.
The thing about Mansef was abridged old and new that
had production studios and sites like Browsers where he had
to pay to get access the traditional way of selling
porn online. But they'd also cracked how to make money
(10:11):
from free tube sites. They could either sell ad space
to other pornographers or just channel the viewers to their
own pay sites. The trick was to just get a
tiny percentage of all that traffic to actually pay for porn. Really,
it was uncomparable. The amount of money that this team
(10:31):
could make with traffic was unheard of in this industry
before it was impressive. Fabian loved the business. The trouble
was he didn't have the money to pay for it.
He bought his first sites with support from a few backers,
whom he paid back. The next stage, though, was much harder,
(10:51):
and that's when the financial acrobatics began. When compared to
the rest of the industry, this turned out to be
Fabian's real superpower. People think of him as the German
tech guy that he actually brought financial engineering to online porn.
He conjured up magic money for a business that no
mainstream investor wanted to touch. To make his offer from mansef,
(11:15):
he siphoned cash from other companies, used an asset he
wasn't allowed to use, staggered payments, massaged payment dates, every
trick in the book, and just to be clear, some
were definitely in the gray zone of what's legal. I mean,
what you were doing when you were buying manse It's
almost like you want to buy a restaurant and you're
(11:37):
going to do it with like four different credit cards overlapping. Yeah,
let's just figure on the way to do it and
then fix it later, you know, And if it doesn't
fix then I am like before the deal, so who cares?
It worked? Fabian bought Mansef, then bundled together all his
sites x Tube and porn Hub and Browsers and my
Dirty Hobby in Germany and gave his company a new name.
(12:01):
It turned out to be one of the most infamous
and ridiculous in porn, man Win. Fabian squears it wasn't intentional,
but might remember back in our first episode what the
performer Stawyer thought of Fabian's company when it bought the
pawn studio she was working for. And I was like, oh,
I am now tied to a company that is literally
(12:23):
named man Win. This is awful, Fabian thought to himself.
As an opportunistic buyer, he was making waves. Everyone in
the industry was talking about this rookie turned kingpin, and
he started to think maybe I could build an empire.
Then came the day when the CEO of Playboy tapped
(12:43):
Fabian on the shoulder and asked for a private chat.
Part of the legendary Bunny brand was for sale. Would
Fabian be interested? He was, but there was one big hitch.
Fabian's deal with Mansef, the one that created man Win,
turned on a big promise because he didn't have the money.
The payments to buy the company were spread over a
(13:05):
few years, and right at the end, Fabian agreed to
make a balloon payment, a big lump sum, and if
he failed to deliver, the old owners of the company
would just get it back, so he simply had to
pay the Fabian still had no idea how to get
that much money on his own, and so he thought
(13:25):
he might as well try to do the impossible. He
would go to Wall Street Act two, the money Game.
Fabian reckon if Wall Street would fund cigarettes, fossil fuels,
(13:46):
and even the global arms trade, surely no one would
think that pawn was worse. He went to one of
his financial advisors, a group called Raymond Shadow Grant Thornton.
It's part of one of the world's biggest accounting firms.
I went to Hamoshable and told them, listen, you know
these numbers, you've seen them. Why can't we not get that?
This is ridiculous. There must be away to get that,
(14:09):
even just one year, just one x leverage, that's it.
Let's try. And they're like, yeah, it should be simple.
So his advice has got busy making a slide deck
bankers love slides. Meanwhile, Fabian got busy running his new
porn sites, the ones he bought without really having the
money to pay for them. Before long, the bankers thought
they'd found the lender, someone who didn't mind porn, someone
(14:34):
who would let them borrow almost one hundred million that
would have allowed Fabian to cover what he owed and
help him buy the playboy business. We had a meeting
in Chicago, term sheet everything we celebrated in the evening,
had dinner with them. Sitting at that dinner, Fabian thought
he'd pulled it off. He found the magic money pot.
(14:56):
It didn't last long. The next morning the owner said
that I'm not signing, but because he talked to his wife.
So it looked very, very easy and good in the
very beginning, and when this happened, Romishrouble realized all this
is difficult. So to recap. Fabian Tillman, in his early thirties,
(15:17):
was on his way to wrestle control over the porn
industry that had been smashed to bits by two sides,
many which were run by him. He'd promised a bunch
of pornographers money to take over their companies. These businesses
were profitable but he thought he could do even better.
But to buy them, he'd committed to payment schedule that
he just could not afford. He needed to borrow otherwise.
(15:41):
He was toasted. But at the same time, no lenders
wanted to touch porn. By now we're in the summer
of twenty and ten, Fabian had a small army of advices.
They're all on ridiculously high commissions, millions of dollars if
they could get the deal done, but they were getting nowhere.
(16:01):
In desperation, one of the advices called an old contact
in New York. It was the banking equivalent of sending
up the signal, and the man that answered was called
Rick Rosenbloom. I'm a special situations investment banker, which is
a mouthful, but it's a fancy way of saying I
find capital for people, firms, ventures that don't fit in
(16:25):
a typical box. I'm essentially a finance specialist for alternative
investments and misfit toys of the capital world. Ricks firm
is fuel break Capital. It's a sort of marriage broker
in the world of finance, a matchmaker for the untouchables,
maverick companies that need money but can't get it through
the normal channels. Maybe they are a so called sin industry.
(16:48):
Maybe they're out of favor industry. Maybe they're what a
lot of people call headline risk. Headline risk isn't a
fancy financial term, by the way, it actually means the
risk of an investor peering in a newspaper headline. You see.
Finance people don't like bad headlines about their investments, and
porn it's made for bad headlines. For Rick, it was
(17:12):
a lottery ticket assignment. The chances of success for low,
but the potential rewards were huge. Something like this had
never been done for corn. But Rick could see there
was something about Fabian's business. Once I dug into it
and realized how profitable it was. I mean, you can't
take the content out, but if you just ignored the content,
(17:32):
it was an incredibly profitable technology company. Let's just unpack
what very profitable tech company means. A grocer might have
a margin about two percent. A real moneymaker can have
something like twenty percent. Fabian's business had a margin of
about fifty percent. Very two dollars of revenue his porn
(17:53):
sites generated more than one dollar was clean operating profit.
Now that will get any investors heart pounding. Yeah, it's
a home run. There's no bell curve for that. With
Rick's experience in New York's world of alternative finance, he
knew it tended to be easier to borrow large amount
of money like one. In this world, five or ten
(18:15):
million is just not worth people's time. And if you
bring a business, would it roughly fifty percent margin? That
is likely to get a few ears to perk up.
But for porn, Rick was starting to realize what Fabian
had learned the hard way on Wall Street. Porn was
dirtier than guns, cigarettes, and gambling. I knew it was complicated.
(18:36):
I knew it wasn't going to be easy, but I
knew that if I could find the capital, would be
highly profitable. And I'm ken to keep shaking trees, turning
over rocks until I'm out. I probably went to forty
or fifty firms. I got my door slammed in my
face almost every time, but then fate intervenes. It's another
(18:58):
historic moment for the porn industry. And where else would
it be but Las Vegas. It's always in Sin City.
At a conference, ran into a guy called Jason Klobney
Co founder of a fledgling investment firm called Colbeck Capital.
They hit it off. He asked me kind of the
deals I did? And I told them, Hey, I've got
(19:18):
this great deal, but it's got a lot of hair
on it, it's got a lot of noise around it,
and you know, he said, tell me more. Cologny like
his co founder was a former Goldman sax banker. Colbeck
was interested, tempted, deepen, but very wary. This would be
(19:39):
one of their first big deals and they just weren't
too keen on porn. IM not sure about how well
the industry was run, but mainly they just wanted to
make sure that Fabian's company was financially sound. Took me
probably four or five meetings to get them to really
dig in. Jason Cologne. He said to me, Rick, we
(20:00):
tried to kill this deal so many times, but every
time we did another layer of diligence it checked out.
In fact, it was probably I'm paraphrasing here, but something
like the cleanest, best run company we've ever diligenced. That's
quite a statement, right, Yeah, it was. These guys came
from Colman Sex and Morgan Stanley. It's a pretty strong statement,
(20:21):
this wasn't their first barbecue. Eventually, Colbeck said yes, Like
all of Wall Street, they knew bankrolling a hardcore porn
company was dangerous, but it was such a sound bet
they couldn't resist. They agreed to one to write the
deal and help raise the money. And here's why they
couldn't resist. When all the loan costs were blended together,
(20:43):
the annual interest rate was more than twenty percent. Remember,
Fabian's company wasn't that big in an era of cheap money.
This was breathtakingly expensive, but somehow it made sense to Fabian.
Nobody learned to porn companies, so if you managed to
raise serious money, you take it. In porn land, even
(21:08):
a man paying twenty two percent interest can become king.
You're looking at what a quarter of the company's revenue
going out of the door in interest payments on the
debt right roughly. Once again, it's the money that enabled
them to build the empire. You're the largest player by
a long shot. You dictate a lot of what goes
(21:28):
on in your industry. The porn industry had been broken
by tube sites, and Fabian had just raised the money
to assemble the giant conglomerate that would dominate global porn
Act three impossible dreams. So Fabian managed what nobody thought
(21:52):
was possible, raise serious money to begin a roll up
of the porn industry. But by god did he pay
for it. To understand why a twenty percent interest loan
made sense for Fabian, you have to understand the alternative.
There was only one really selling parts of the company.
Fabian would have to give up control and share the
profits paying twenty percent interest. It was worth it just
(22:16):
to avoid that. And that's extraordinary number. I mean it's
like usury. Yes, yes, yes. Then on the other side,
the lenders loved this deal. They came from a banking
sector and known as distressed finance, so most of the
time they were backing companies and crisis corn was risky,
but only to the reputation Fabian's business was humming, so
(22:38):
they could use the same rights they would use for
distressed asset for us it was great, much safer, right,
same rates but safe, safe, I cash flow perfect. They
loved it, and once Fabian had the former Goldman bankers
on board, the world of finance warmed to him. A
bank was hired to farm out the debt and find
(22:59):
other lenders who wanted to join the syndicate. JP Morgan
put up money, so did Fortress, a well known New
York buyout group. Even Cornell University was involved at on stage.
Cornell told us they had no idea what their fund
manager had done and later sacked him. When Fabian started out,
he was trying to raise around one hundred million, and
(23:21):
he struggled, but then as the process went on, that
number crept up to one hundred and seventy million, and
then by early two thousand and eleven, Fabian had raised
up to three hundred and sixty two million. So, like us,
you're probably wondering how a pornographer struggling to raise one
(23:43):
hundred million managed to walk away With Wren and Triple
that it was hard to find bankers who dared to
invest in porn, but once they were on board, their
appetite for business conquest turned out to be even larger
than Fabians. Not long after Fabian's request for one hundred
million was accepted, he heard back from one of his
(24:03):
financial advisors. They said, do you have a wish list?
And I'm like, what do you mean? Can you write
us a list of what you would want to buy
and how much this would cost? Like, okay, sure, we'll
make a wish list. And we made a wish list
the next day and it came to two hundred something
million or something that we estimated it would cost. And
(24:25):
then they came to me and said, yeah, look, let's
why are we talking about one hundred if you want
two hundred fifty? I don't understand. Well, don't we talking
about two hundred and fifty? And I realized, okay, they
are hungry and they want to do more. Because obviously
the term sheet it was expensive as hell. It was crazy,
really crazy, but it worked cash war wise, so I
didn't care. And then I said, okay, look, let's let's
(24:46):
talk about a number you like more. And that's how
Fabian landed alone of three hundred and sixty two million
dollars Jack Pop. Remember what Sarah Jane said when she
was in the crowd of that poorn conference. She was
waiting for the man who embodied how the world of
porn had changed those out to make money. We're no
(25:08):
longer thinking about the most desirable pawn stars or where
to shoot the next blockbuster. Fabian's game was all about
internet traffic and With that extra money, he started buying
it all up. He acquired upawn, probably the most popular
tube site at the time. Fabian had finance, scale and
a proven recipe for running site. He thought he could
(25:30):
make more money from traffic than anybody else, and with
upawn he was right. Trucking the quadruple the profits of
the science in two months. After two months, a be
able of four climates as profitable considering that you buy
it for peanuts, you know. In the end, it didn't
take long until people started asking Fabian whereas it's all going,
(25:53):
are you going to sell? Take the company public? People
asked me all the time. Also, the lenders asked me
once I think, what's your excess strategy? I said, we
make one hundred something million a year. Why would I
exit this for what reason? There was the social impact too,
from creating this big tech conglomerate that pumped out free
(26:15):
pawn to the world. Fabian argues it had a positive
effect that people became more tolerant of different sexual identities.
But even he recognizes there is another side to that.
We've spent a lot of time looking in this industry.
I've got two preteen boys. I still struggle with how
(26:37):
to explain that there is this vast well of pawn
out there? How do I explain it to them? Ye,
it's a good questions. I have a fourteen year old
daughter right, for example, and she knows when I did,
and she knows how I'm involved in this, and I
told her personally and she kind of knew before, but
(27:00):
kind of didn't because obviously every single person in class
knows who I am, every single one of them. In
my opinion, it's more about the fact that, yes, all
of this exists, are there, but one is it so
bad that it does? And tool You need to be
(27:20):
sure that the kids understand how to put all of
this in their red buckets or to speak, Just like
they need to understand what in a Marvel movie is
veal and what isn't, they need to understand that they're
tool buckets. I wish it were as easy as that.
(27:41):
There are tens of millions of pawn videos online, in
no small part thanks to guys like Fabian, and when
you're a teen and angsty and learning about your sexuality,
it's hard just to put pawn in the fiction fantasy.
Don't try this at home, bucket, But let's be clear.
This isn't just about conversations with kids. Pawn is a
big part of our culture. Now it will be freely
(28:03):
available for generations to come. We can't just compartmentalize the
darker sides of the industry. The Fabian not only left
a mark on our world, but the industry he embodied
the digital world wind that crashed through it. Pay rates
for producers and performers plummeted. A lot of the traditional
industry just went out of business. Fabian's name is still
(28:24):
mud to many of them. But his power it didn't
come from inventing sites. It came from buying them. I
cannot help it that technology changes, like the Internet shift
flow of money, how it works. It shifted it in
fifty different industries, and it took it important, that's it.
(28:45):
And I just happened to be there when it was
there for the taking. And I did it, you know,
And I wasn't afraid that it might look weird or
bad or whatever. I guess someone has to be the
bad guy, right, because it doesn't work without the bad
guy in the end change, it just doesn't. It was
always a bad guy at the peak of this power.
(29:09):
Fabian reckons he controls sixty to seventy percent of all
the porn traffic. We see it all the time tech
disruptors pumped up with cash from Wall Street that rapidly
become giants and push out other companies because they can
offer things on the cheap or in this case, for free.
When we started reporting this podcast, we set out to
(29:31):
find who rules the porn world? So is it Fabian Tillman?
A decade ago the answer to that would have been yes.
After his roll up, Fabian truly was the Darth Vader
of porn, but he had some surprising ideas about how
to use his power and control. For one thing, he
(29:54):
says he actually never believed the tube side business model
would last. He has never said this publicly before, but
his grand plan was to buy all the tube sides
and then put behind the paywall. And I would have
then turned off their websites completely, as in, closed off
(30:17):
the free content. Because changing one hundred and fifty million
people's free content from day one to day tool to
no longer being there makes them buy stuff. This does
sound like a completely crazy plan. These days, pawn Have
alone is hosting two billion visits a month. It's hard
to imagine anybody could just turn off the tap of
free pawn, especially not the man who managed to convince
(30:40):
Wall Street that it was a sure bet for quick
and easy money. So are you saying that the few
would have been successful and this plan maybe we wouldn't
have had tub sides today. Yes, basically, yes, that's what
my plan was. Now, imagine YouTube would turn off today
and make it pay. Oh my god, I don't know
what would happen, even at two bucks a month. It
(31:02):
would be interesting how many would do this? A lot?
I think famous master plan failed. But what stopped him?
That's coming up next time on Hot Money. My bank said,
this person's thick. This is all thick. This person's exist
who was paying his money. We cann't find anything on him.
It is impossible that we cannot find anything on him.
(31:24):
We'll tell the story of how the Wall Street bankers
who made Fabian the kingpin of porn ended up knocking
him down. And that was the moment that a long
time rival had been waiting for him, a man who
would never tell anyone what his plan was. Hot Money
(31:53):
is a production of The Financial Times and Pushkin Industries.
It was written or reported by me Patrician Elson and
me Alex Barker. Peter Sale is our lead producer and
sound designer. Edith Russelo is our associate producer. Our editor
is Karen Shakurji. Amanda Kwong is our engineer. Music compositioned
(32:14):
by Pascal Wise, fact checking by Andrea Lopez Kusado. Our
executive producers are Cheryl Brumley and Jacob Goldstein. Special thanks
to Renee Kaplin and Ruler Kalov at The Financial Times
and Mia Lobel, Lital Molad, Justine Lang, Julia Barton and
Jacob Weisberg at Pushkin Industries. Thank you to a similar
(32:37):
Web for providing our web traffic data. If you liked
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Pushkin. So warning time. We're two journalists from the Financial Times,
and for six months we were set free to pursue
one question. Who controls the porn industry. There's some content
that really won't be suitable for kids, and only when
(00:35):
strictly necessary, we've used recordings of investment bankers in the wild.
I want to take you back in time to two
thousand and twelve, to winter evening in Las Vegas. The
porn industry had convened for one of its flagship conferences.
(00:57):
It's like dovls, but for porn models, computer geeks, moguls.
They were all there, gathered together in a flashy music
arena where Mottley Crewe had its presidency that year. It
was the most packed I've ever seen one of those
keynote speeches. Everybody's sitting there talking like I don't know,
I don't know. He's going to say, who are a
(01:17):
car crash like type of thing, like we have to
see this to see what happens. Sarah Jane Anderson sat
in the hall, not waiting for a rock band, but
for a speech. Sarah Jane had been working in the
online adult world since the nineties. She was on the
business and marketing side of things. It was a close
knit community. Sarah Jane talks about it like an eccentric family,
(01:40):
but they were on hard times. Sitting beside her that
night were a bunch of porn executives, all from big companies,
all facing the same dilemma. What was the point of
making new content when your content was being plundered. There's
no way to stop because trucking. So as much as
I said, content is king the real king of traffic,
and the tube sites had a swallowed up all the traffic.
(02:04):
More people were looking at online porn than ever, but
they weren't paying for it. Profits had evaporated. It was
beyond the panic stage. Producers were desperate. They watched their
best movies get ripped and streamed online for free by
a faceless enemy, the tube sites. But finally, at their
conference they would see their problem in the flesh. They
(02:27):
were going to meet the man behind the biggest tube sites.
And as the lights came up, everyone began to hum.
They actually sang underneath their breath the death March for
Star Wars. When he came out, Don't Don't, Don't. The
(02:51):
Lord Vader of Pawn was a man called Fabian Tillman,
the German software engineer who bore XTube roughly four years
before this conference, the one who started buying tube sites
as a step towards adult industry domination. When he came
on stage, he made an impression before a word, he's
(03:12):
wearing a hoodie Verry Zuckerberg, and then he sat on
the table and crossed his legs pompous. I just remember
my whole road just laughing at that out of ridiculousness.
It was his public debut. Baby faced Fabian, at just
thirty three, was basically there to introduce himself to an
industry that he had conquered in just four years. I
(03:34):
wanted to talk a bit about myself, since I know
that many of you do not really know where where
I come from and such, and I thought it's a
better if people know more, and then should make it
obvious that I'm not that evil person that so many
people think I am, that my role was just like okay, then,
especially in the digital world, a lot of those people
people are faceless nicknames. So I think he got some
(03:57):
credit for showing up in taking the heat a little bit,
but I still think it was pretty much I own
you I'm Patrician Wilson. He's Alex Parker from Pushkin Industries
and The Financial Times. This is Hot Money, Act one,
(04:45):
the Disruptor. How did Fabian do it? He was good
at coding, but so are lots of people in the
adult industry. The thing that marked him out was money.
He was good with money in a business that was
starved of finance. He was the guy in the hoodie
who convinced Wall Street to bankroll his vision to take
(05:07):
control of the adult industry. The guy who managed to
get even the most prestigious of banks and investors to
buy in, to look away from the problems what they
saw as a sin industry and raise more money than
anyone thought possible. Fabian was like Mercury. Let me tell
you what it was like trying to get an interview
with him. He got in touch with me, then he
(05:31):
went dark. Then he said yes, then he ghosted me.
I watched in his social media feeds as he found
love and traveled the world. I saw mere cats, campollion temples,
bead boats. He even posted picks from her London art
gallery on the same Saturday that I was there. I
know he didn't respond to me when I reached out. Then,
(05:52):
after more than a year of trying, he finally gave
us a date. We traveled to Cologne in Germany and
went to his no frills office above a nineteen eighties
shopping arcade in a nightclub called Vanity. As we waited,
surrounded by merch from his clubs piled up at the corners,
I still had this uneasy feeling would he actually answer
(06:14):
our questions? Would he even show up? And then there
he was. My name is Fabian. I hate the same
enemy English. I don't like it. My name is Fabian Tuman,
and I'm an investor. I guess his family is German,
(06:35):
but he grew up in Brussels and still lives there,
just down the road from where I used to live,
actually on the other side of a royal hunting forest.
The Tillmans were well to do family, and like many
people in this business, a teenage Fabian basically stumbled into
pawn partly for laughs but also to get ahead. I
was a programmer. I looked online where I could do
(06:57):
fun projects in an easy way as a young person
without any connections, not being in La or what San
Francisco or something, I stumbled over our porn people basically online.
The chat wools started working for them. He helped build
something called NATS, a tracking program for afiliate marketing that
took off in the adult business. It's still around today.
(07:18):
With this software, he could see where traffic was flowing
and what porn customers actually paid for. When Fabian peaked
behind the curtains of these businesses, he had the best
view in pawn land. It was interesting how how I exaggerated.
Everybody was talking about how great they were, which they
(07:38):
really weren't, or at least not as grand as they
made it look. Fabian thought he could do a better job.
The first business he bought was a small German porn site.
He didn't really have a plan. Some friends were selling
and he could just about get the money together. But
then I started to look at other things and let's
see what else is possible to buy. And that's when
you realize more and more how the industry worked, and
(08:01):
how is what's there and what isn't And so the
buying spree began. It started with a few more porn
sites in Germany, a webcam's business, then x Tube, you
know the side run by Curtis, the Subpeanut King the
guy would talk to. In the previous episode the Ft,
we cover this kind of investor driven buying spreebe all
the time. It's called a roll up, basically seeing value
(08:24):
in a sector, raising money and buying up as many
companies as possible. Money has been cheap for quite a while,
so plenty of deeply unimpressive buy out groups managed to
do it. But Fabian he was doing it in porn,
hardcore porn just after the financial crash in two thousand
and eight. That's no small feat. There wasn't much money
(08:44):
around and with all those free videos flooding the web,
everyone thought the porn industry was doomed. I don't know
if I had, if I really in the beginning at
least realized how big this could become. It was a
game in some shape or form, you know, to look
at all these companies to be the one of the
few people that is actually willing to buy anything, because
(09:05):
everybody else was like, what the way are you buying this?
This will die in two months. Things got more serious
when a company called Mansef approached him. The Canadian engineering
students who were behind this company had founded sites like
Pornhoub and Browsers. These were already big brands. I was
lucky they knew about me and they just took the
(09:27):
chance and came to me. But they were talking to
four other people at the same time, and I just decided, Okay,
this is going to be really expensive. I have absolutely
no clue how to pay for this, but let's just
chat with them and let's try. He flew to Montreal
a few days before Christmas in two thousand and nine.
(09:48):
His wife didn't mind him staying there, at least for
a few days, but Fabian was so keen to get
the deal done he was stuck there for three months.
The thing about Mansef was abridged old and new that
had production studios and sites like Browsers where he had
to pay to get access the traditional way of selling
porn online. But they'd also cracked how to make money
(10:11):
from free tube sites. They could either sell ad space
to other pornographers or just channel the viewers to their
own pay sites. The trick was to just get a
tiny percentage of all that traffic to actually pay for porn. Really,
it was uncomparable. The amount of money that this team
(10:31):
could make with traffic was unheard of in this industry
before it was impressive. Fabian loved the business. The trouble
was he didn't have the money to pay for it.
He bought his first sites with support from a few backers,
whom he paid back. The next stage, though, was much harder,
(10:51):
and that's when the financial acrobatics began. When compared to
the rest of the industry, this turned out to be
Fabian's real superpower. People think of him as the German
tech guy that he actually brought financial engineering to online porn.
He conjured up magic money for a business that no
mainstream investor wanted to touch. To make his offer from mansef,
(11:15):
he siphoned cash from other companies, used an asset he
wasn't allowed to use, staggered payments, massaged payment dates, every
trick in the book, and just to be clear, some
were definitely in the gray zone of what's legal. I mean,
what you were doing when you were buying manse It's
almost like you want to buy a restaurant and you're
(11:37):
going to do it with like four different credit cards overlapping. Yeah,
let's just figure on the way to do it and
then fix it later, you know, And if it doesn't
fix then I am like before the deal, so who cares?
It worked? Fabian bought Mansef, then bundled together all his
sites x Tube and porn Hub and Browsers and my
Dirty Hobby in Germany and gave his company a new name.
(12:01):
It turned out to be one of the most infamous
and ridiculous in porn, man Win. Fabian squears it wasn't intentional,
but might remember back in our first episode what the
performer Stawyer thought of Fabian's company when it bought the
pawn studio she was working for. And I was like, oh,
I am now tied to a company that is literally
(12:23):
named man Win. This is awful, Fabian thought to himself.
As an opportunistic buyer, he was making waves. Everyone in
the industry was talking about this rookie turned kingpin, and
he started to think maybe I could build an empire.
Then came the day when the CEO of Playboy tapped
(12:43):
Fabian on the shoulder and asked for a private chat.
Part of the legendary Bunny brand was for sale. Would
Fabian be interested? He was, but there was one big hitch.
Fabian's deal with Mansef, the one that created man Win,
turned on a big promise because he didn't have the money.
The payments to buy the company were spread over a
(13:05):
few years, and right at the end, Fabian agreed to
make a balloon payment, a big lump sum, and if
he failed to deliver, the old owners of the company
would just get it back, so he simply had to
pay the Fabian still had no idea how to get
that much money on his own, and so he thought
(13:25):
he might as well try to do the impossible. He
would go to Wall Street Act two, the money Game.
Fabian reckon if Wall Street would fund cigarettes, fossil fuels,
(13:46):
and even the global arms trade, surely no one would
think that pawn was worse. He went to one of
his financial advisors, a group called Raymond Shadow Grant Thornton.
It's part of one of the world's biggest accounting firms.
I went to Hamoshable and told them, listen, you know
these numbers, you've seen them. Why can't we not get that?
This is ridiculous. There must be away to get that,
(14:09):
even just one year, just one x leverage, that's it.
Let's try. And they're like, yeah, it should be simple.
So his advice has got busy making a slide deck
bankers love slides. Meanwhile, Fabian got busy running his new
porn sites, the ones he bought without really having the
money to pay for them. Before long, the bankers thought
they'd found the lender, someone who didn't mind porn, someone
(14:34):
who would let them borrow almost one hundred million that
would have allowed Fabian to cover what he owed and
help him buy the playboy business. We had a meeting
in Chicago, term sheet everything we celebrated in the evening,
had dinner with them. Sitting at that dinner, Fabian thought
he'd pulled it off. He found the magic money pot.
(14:56):
It didn't last long. The next morning the owner said
that I'm not signing, but because he talked to his wife.
So it looked very, very easy and good in the
very beginning, and when this happened, Romishrouble realized all this
is difficult. So to recap. Fabian Tillman, in his early thirties,
(15:17):
was on his way to wrestle control over the porn
industry that had been smashed to bits by two sides,
many which were run by him. He'd promised a bunch
of pornographers money to take over their companies. These businesses
were profitable but he thought he could do even better.
But to buy them, he'd committed to payment schedule that
he just could not afford. He needed to borrow otherwise.
(15:41):
He was toasted. But at the same time, no lenders
wanted to touch porn. By now we're in the summer
of twenty and ten, Fabian had a small army of advices.
They're all on ridiculously high commissions, millions of dollars if
they could get the deal done, but they were getting nowhere.
(16:01):
In desperation, one of the advices called an old contact
in New York. It was the banking equivalent of sending
up the signal, and the man that answered was called
Rick Rosenbloom. I'm a special situations investment banker, which is
a mouthful, but it's a fancy way of saying I
find capital for people, firms, ventures that don't fit in
(16:25):
a typical box. I'm essentially a finance specialist for alternative
investments and misfit toys of the capital world. Ricks firm
is fuel break Capital. It's a sort of marriage broker
in the world of finance, a matchmaker for the untouchables,
maverick companies that need money but can't get it through
the normal channels. Maybe they are a so called sin industry.
(16:48):
Maybe they're out of favor industry. Maybe they're what a
lot of people call headline risk. Headline risk isn't a
fancy financial term, by the way, it actually means the
risk of an investor peering in a newspaper headline. You see.
Finance people don't like bad headlines about their investments, and
porn it's made for bad headlines. For Rick, it was
(17:12):
a lottery ticket assignment. The chances of success for low,
but the potential rewards were huge. Something like this had
never been done for corn. But Rick could see there
was something about Fabian's business. Once I dug into it
and realized how profitable it was. I mean, you can't
take the content out, but if you just ignored the content,
(17:32):
it was an incredibly profitable technology company. Let's just unpack
what very profitable tech company means. A grocer might have
a margin about two percent. A real moneymaker can have
something like twenty percent. Fabian's business had a margin of
about fifty percent. Very two dollars of revenue his porn
(17:53):
sites generated more than one dollar was clean operating profit.
Now that will get any investors heart pounding. Yeah, it's
a home run. There's no bell curve for that. With
Rick's experience in New York's world of alternative finance, he
knew it tended to be easier to borrow large amount
of money like one. In this world, five or ten
(18:15):
million is just not worth people's time. And if you
bring a business, would it roughly fifty percent margin? That
is likely to get a few ears to perk up.
But for porn, Rick was starting to realize what Fabian
had learned the hard way on Wall Street. Porn was
dirtier than guns, cigarettes, and gambling. I knew it was complicated.
(18:36):
I knew it wasn't going to be easy, but I
knew that if I could find the capital, would be
highly profitable. And I'm ken to keep shaking trees, turning
over rocks until I'm out. I probably went to forty
or fifty firms. I got my door slammed in my
face almost every time, but then fate intervenes. It's another
(18:58):
historic moment for the porn industry. And where else would
it be but Las Vegas. It's always in Sin City.
At a conference, ran into a guy called Jason Klobney
Co founder of a fledgling investment firm called Colbeck Capital.
They hit it off. He asked me kind of the
deals I did? And I told them, Hey, I've got
(19:18):
this great deal, but it's got a lot of hair
on it, it's got a lot of noise around it,
and you know, he said, tell me more. Cologny like
his co founder was a former Goldman sax banker. Colbeck
was interested, tempted, deepen, but very wary. This would be
(19:39):
one of their first big deals and they just weren't
too keen on porn. IM not sure about how well
the industry was run, but mainly they just wanted to
make sure that Fabian's company was financially sound. Took me
probably four or five meetings to get them to really
dig in. Jason Cologne. He said to me, Rick, we
(20:00):
tried to kill this deal so many times, but every
time we did another layer of diligence it checked out.
In fact, it was probably I'm paraphrasing here, but something
like the cleanest, best run company we've ever diligenced. That's
quite a statement, right, Yeah, it was. These guys came
from Colman Sex and Morgan Stanley. It's a pretty strong statement,
(20:21):
this wasn't their first barbecue. Eventually, Colbeck said yes, Like
all of Wall Street, they knew bankrolling a hardcore porn
company was dangerous, but it was such a sound bet
they couldn't resist. They agreed to one to write the
deal and help raise the money. And here's why they
couldn't resist. When all the loan costs were blended together,
(20:43):
the annual interest rate was more than twenty percent. Remember,
Fabian's company wasn't that big in an era of cheap money.
This was breathtakingly expensive, but somehow it made sense to Fabian.
Nobody learned to porn companies, so if you managed to
raise serious money, you take it. In porn land, even
(21:08):
a man paying twenty two percent interest can become king.
You're looking at what a quarter of the company's revenue
going out of the door in interest payments on the
debt right roughly. Once again, it's the money that enabled
them to build the empire. You're the largest player by
a long shot. You dictate a lot of what goes
(21:28):
on in your industry. The porn industry had been broken
by tube sites, and Fabian had just raised the money
to assemble the giant conglomerate that would dominate global porn
Act three impossible dreams. So Fabian managed what nobody thought
(21:52):
was possible, raise serious money to begin a roll up
of the porn industry. But by god did he pay
for it. To understand why a twenty percent interest loan
made sense for Fabian, you have to understand the alternative.
There was only one really selling parts of the company.
Fabian would have to give up control and share the
profits paying twenty percent interest. It was worth it just
(22:16):
to avoid that. And that's extraordinary number. I mean it's
like usury. Yes, yes, yes. Then on the other side,
the lenders loved this deal. They came from a banking
sector and known as distressed finance, so most of the
time they were backing companies and crisis corn was risky,
but only to the reputation Fabian's business was humming, so
(22:38):
they could use the same rights they would use for
distressed asset for us it was great, much safer, right,
same rates but safe, safe, I cash flow perfect. They
loved it, and once Fabian had the former Goldman bankers
on board, the world of finance warmed to him. A
bank was hired to farm out the debt and find
(22:59):
other lenders who wanted to join the syndicate. JP Morgan
put up money, so did Fortress, a well known New
York buyout group. Even Cornell University was involved at on stage.
Cornell told us they had no idea what their fund
manager had done and later sacked him. When Fabian started out,
he was trying to raise around one hundred million, and
(23:21):
he struggled, but then as the process went on, that
number crept up to one hundred and seventy million, and
then by early two thousand and eleven, Fabian had raised
up to three hundred and sixty two million. So, like us,
you're probably wondering how a pornographer struggling to raise one
(23:43):
hundred million managed to walk away With Wren and Triple
that it was hard to find bankers who dared to
invest in porn, but once they were on board, their
appetite for business conquest turned out to be even larger
than Fabians. Not long after Fabian's request for one hundred
million was accepted, he heard back from one of his
(24:03):
financial advisors. They said, do you have a wish list?
And I'm like, what do you mean? Can you write
us a list of what you would want to buy
and how much this would cost? Like, okay, sure, we'll
make a wish list. And we made a wish list
the next day and it came to two hundred something
million or something that we estimated it would cost. And
(24:25):
then they came to me and said, yeah, look, let's
why are we talking about one hundred if you want
two hundred fifty? I don't understand. Well, don't we talking
about two hundred and fifty? And I realized, okay, they
are hungry and they want to do more. Because obviously
the term sheet it was expensive as hell. It was crazy,
really crazy, but it worked cash war wise, so I
didn't care. And then I said, okay, look, let's let's
(24:46):
talk about a number you like more. And that's how
Fabian landed alone of three hundred and sixty two million
dollars Jack Pop. Remember what Sarah Jane said when she
was in the crowd of that poorn conference. She was
waiting for the man who embodied how the world of
porn had changed those out to make money. We're no
(25:08):
longer thinking about the most desirable pawn stars or where
to shoot the next blockbuster. Fabian's game was all about
internet traffic and With that extra money, he started buying
it all up. He acquired upawn, probably the most popular
tube site at the time. Fabian had finance, scale and
a proven recipe for running site. He thought he could
(25:30):
make more money from traffic than anybody else, and with
upawn he was right. Trucking the quadruple the profits of
the science in two months. After two months, a be
able of four climates as profitable considering that you buy
it for peanuts, you know. In the end, it didn't
take long until people started asking Fabian whereas it's all going,
(25:53):
are you going to sell? Take the company public? People
asked me all the time. Also, the lenders asked me
once I think, what's your excess strategy? I said, we
make one hundred something million a year. Why would I
exit this for what reason? There was the social impact too,
from creating this big tech conglomerate that pumped out free
(26:15):
pawn to the world. Fabian argues it had a positive
effect that people became more tolerant of different sexual identities.
But even he recognizes there is another side to that.
We've spent a lot of time looking in this industry.
I've got two preteen boys. I still struggle with how
(26:37):
to explain that there is this vast well of pawn
out there? How do I explain it to them? Ye,
it's a good questions. I have a fourteen year old
daughter right, for example, and she knows when I did,
and she knows how I'm involved in this, and I
told her personally and she kind of knew before, but
(27:00):
kind of didn't because obviously every single person in class
knows who I am, every single one of them. In
my opinion, it's more about the fact that, yes, all
of this exists, are there, but one is it so
bad that it does? And tool You need to be
(27:20):
sure that the kids understand how to put all of
this in their red buckets or to speak, Just like
they need to understand what in a Marvel movie is
veal and what isn't, they need to understand that they're
tool buckets. I wish it were as easy as that.
(27:41):
There are tens of millions of pawn videos online, in
no small part thanks to guys like Fabian, and when
you're a teen and angsty and learning about your sexuality,
it's hard just to put pawn in the fiction fantasy.
Don't try this at home, bucket, But let's be clear.
This isn't just about conversations with kids. Pawn is a
big part of our culture. Now it will be freely
(28:03):
available for generations to come. We can't just compartmentalize the
darker sides of the industry. The Fabian not only left
a mark on our world, but the industry he embodied
the digital world wind that crashed through it. Pay rates
for producers and performers plummeted. A lot of the traditional
industry just went out of business. Fabian's name is still
(28:24):
mud to many of them. But his power it didn't
come from inventing sites. It came from buying them. I
cannot help it that technology changes, like the Internet shift
flow of money, how it works. It shifted it in
fifty different industries, and it took it important, that's it.
(28:45):
And I just happened to be there when it was
there for the taking. And I did it, you know,
And I wasn't afraid that it might look weird or
bad or whatever. I guess someone has to be the
bad guy, right, because it doesn't work without the bad
guy in the end change, it just doesn't. It was
always a bad guy at the peak of this power.
(29:09):
Fabian reckons he controls sixty to seventy percent of all
the porn traffic. We see it all the time tech
disruptors pumped up with cash from Wall Street that rapidly
become giants and push out other companies because they can
offer things on the cheap or in this case, for free.
When we started reporting this podcast, we set out to
(29:31):
find who rules the porn world? So is it Fabian Tillman?
A decade ago the answer to that would have been yes.
After his roll up, Fabian truly was the Darth Vader
of porn, but he had some surprising ideas about how
to use his power and control. For one thing, he
(29:54):
says he actually never believed the tube side business model
would last. He has never said this publicly before, but
his grand plan was to buy all the tube sides
and then put behind the paywall. And I would have
then turned off their websites completely, as in, closed off
(30:17):
the free content. Because changing one hundred and fifty million
people's free content from day one to day tool to
no longer being there makes them buy stuff. This does
sound like a completely crazy plan. These days, pawn Have
alone is hosting two billion visits a month. It's hard
to imagine anybody could just turn off the tap of
free pawn, especially not the man who managed to convince
(30:40):
Wall Street that it was a sure bet for quick
and easy money. So are you saying that the few
would have been successful and this plan maybe we wouldn't
have had tub sides today. Yes, basically, yes, that's what
my plan was. Now, imagine YouTube would turn off today
and make it pay. Oh my god, I don't know
what would happen, even at two bucks a month. It
(31:02):
would be interesting how many would do this? A lot?
I think famous master plan failed. But what stopped him?
That's coming up next time on Hot Money. My bank said,
this person's thick. This is all thick. This person's exist
who was paying his money. We cann't find anything on him.
It is impossible that we cannot find anything on him.
(31:24):
We'll tell the story of how the Wall Street bankers
who made Fabian the kingpin of porn ended up knocking
him down. And that was the moment that a long
time rival had been waiting for him, a man who
would never tell anyone what his plan was. Hot Money
(31:53):
is a production of The Financial Times and Pushkin Industries.
It was written or reported by me Patrician Elson and
me Alex Barker. Peter Sale is our lead producer and
sound designer. Edith Russelo is our associate producer. Our editor
is Karen Shakurji. Amanda Kwong is our engineer. Music compositioned
(32:14):
by Pascal Wise, fact checking by Andrea Lopez Kusado. Our
executive producers are Cheryl Brumley and Jacob Goldstein. Special thanks
to Renee Kaplin and Ruler Kalov at The Financial Times
and Mia Lobel, Lital Molad, Justine Lang, Julia Barton and
Jacob Weisberg at Pushkin Industries. Thank you to a similar
(32:37):
Web for providing our web traffic data. If you liked
this show, consider subscribing to pushkin Plus, offering bonus content
and ad free listening across our network for four dollars
ninety nine a month. Look for the Pushkin Plus channel
on Apple Podcasts or at pushkin dot fm
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If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.