NEW YORK (AP) _ For his grandfather, it was Vargas girls and naughty Bettie Page pinups that drew the customers in the 1950s. His father held out through the hard-core revolution of the 1970s that turned Times Square into a chaotic swirl of prurience and purple neon.

Lou Lipkin is long dead. George Lipkin has retired to Long Island. So it falls to a third generation of Lipkins to keep the family business prospering _ a business as synonymous with Times Square as the word ``theater'' is with Broadway.

Now, at a time when the most vocal sentiment from New York's mayor down paints him as an agent of filth, Scott Lipkin wants people to know he's a law-abiding merchant trying, like his father and grandfather, to make a living selling sexual imagery in the place some call the world's crossroad.

It has never been easy. It is less so today.

``I love New York,'' says Lipkin, 29, a compact man with a stoical face and a black ponytail that reaches down his back. ``I just don't love what they're doing to us. We've paid taxes for three generations.''

Wait _ hold that value judgment. Whether you support his right to purvey porn or believe he is an agent of Satan, Scott Lipkin's story is, if nothing else, interesting.

He respects his opponents' right to dislike what he does and despises hypocrites who condemn his products but shop at his store. He has watched Disney buy up Times Square property, watched the Olive Gardens and Sbarros pop up, and now sees Mayor Rudolph W. Giuliani promoting a law to drive sex shops out of residential areas.

He tells of guys who come in and ask to rent videos under assumed names. ``I'm politically involved,'' they tell him. He knows about the businessmen in the Italian-cut suits whose eyes dart furtively about before they scurry into his store.

He also knows that there is one constant: Sex sells, and it has put food on the table for three generations of Lipkins.

``We're all here because of sex,'' Lipkin says. ``We're interested in it. It's a beautiful thing. We should have places where people can come to understand sexuality. It's a lot more dangerous when you hide it _ when you say, `Oh _ that's disgusting.'''

In Times Square, sex has hardly been subtle; the district is known across the world as the place where the gargoyles shine in voluptuous neon, where names like ``Peep World'' and ``Playpen'' protrude from among newsstands, bodegas and electronics shops.

But as Giuliani pushes his effort to revitalize New York, Times Square's very visibility has made it a centerpiece of reform. High rents are driving out small businesses.

``This town's all about big business right now,'' Lipkin says. ``The small stores are getting nailed _ the delis, the little clothes shops get run over for a Home Depot or a Blockbuster,'' he says.

``I see these things being torn down, and it's generations of my history.''

His grandfather, Lou Lipkin, fled Nazi Germany in the 1930s and opened a bookstore just off Times Square. He soon discovered that sex sells; the back room where he kept the pinups and nudie magazines proved a big attraction, though it represented only 5 percent of his business.

Before he died at age 61, he had built something unusual in an industry that thrives on anonymity _ customer loyalty.

``I have people who have been coming to my business for three generations. They'll say, ``I remember your grandfather,''' Scott Lipkin says today.

His father and uncle took over from his grandfather. They opened other stores, five at their peak.

His uncle, bruised by opposition and police, moved to Canada. Some stores closed; their leases ran out. The flagship store burned down _ the only time, Scott Lipkin says, that he saw his father cry. George Lipkin grew ill and retired in 1991.

``I look at my father as a hero in some senses,'' Scott Lipkin says.

Lipkin had a ``normal, typical'' childhood, growing up on Long Island, never entering his father's stores until he was 20. Today, where the flagship store once stood, a big fence says ``42nd Street Development.''

Five years ago, Lipkin bought the store he owns today. It was called the Pleasure Palace. He changed it to The Palace to sound less provocative. It is also a nod to a similarly named vaudeville house that once stood nearby.

Today, the porn consumer profile has changed, primarily with the rise of video. Women and couples have joined the regulars. Lipkin says he now ships videos to women he went to college with. Even police officers patronize his stores, he says, including one who used to arrest his father in the 1970s.

Lipkin says he and his employees monitor the peep-show booths and eject anyone who misbehaves. But he says the city law that bars sex shops _ whether strip joints or video stores _ from many areas of the city is just too much.

``My family's always abided by the law,'' he says. ``But it makes me sick. Look at HBO. Look at the Internet. There's a lot of people who are accepting of this. They just don't want to say it.''

Last September, Lipkin, a film fan, realized a dream: He opened a cult-video store one door over from The Palace. It has all sorts of offbeat, nonsexual movies, and a small, low-key adult section, dominated by old porn _ movies like ``Historic Erotica'' and magazines like ``Model Studies'' and ``Sir!'', quaint in their odd mix of nudity and modesty. But his adult place continues to pay most of his rent.

The new law says that if the sexual content of the inventory is above 40 percent, the store cannot be within 500 feet of a residential neighborhood. So The Palace is having a sale. All goods are half-price. ``Everything must go-go,'' says a hand-lettered sign.

But Scott Lipkin vows one thing: Though his stock may be less than 40 percent sexual, it's not going to be even 1 percent knickknackery. Not for him the plastic Statues of Liberty and ``I Love New York'' T-shirts that fill the neighboring stores.

He'll reduce his stock, yes. But Scott Lipkin _ free-speech hero to some, reviled pornography merchant to others _ isn't giving up. The law is under review in federal court, and the American Civil Liberties Union, a prominent defense attorney and adult-video studios are helping wage the battle.

``Why do people come to New York City? Because you're going to get material you're not going to get anywhere else,'' Lipkin says.

``I like that they're trying to get more tourists and clean up the neighborhood,'' he says. ``But we're not dirt. We don't need to be cleaned up. I like what they're doing. I'd just like our business to be a part of it.''