Playboy fights declining revenue, irrelevance

When he is not busy "entertaining" his newest girlfriends -- 19-year-old twins, I believe -- Playboy Enterprises Inc. (PLA) founder Hugh Hefner must be lamenting the state of the company he founded more than five decades ago.

Hef has done a lot in his 83 years, including making huge contributions to First Amendment rights. He paid the legal bills of his friend, comedian Lenny Bruce, whose act was so shocking in the 1950s and 1960s that he was arrested for obscenity. Without Bruce, there would be no Howard Stern or countless other comedians.

At the time, Playboy was at the apex of the cultural zeitgeist. For generations of young men, Playboy was the symbol of everything cool and desirable.

But the world has changed. There is a huge supply of free adult content on the internet. Loads of publications including Maxim and Blender are competing for the young male demographic. This leaves Playboy with a very bleak outlook.

Playboy reported yet another dismal quarterly earnings. For the quarter ended March 31, the Chicago-based company reported a net loss of $13.7 million, or 41 cents a share, up from $4.2 million. This compares to a net loss in the same period last year of $4.2 million, or 13 cents per share. Revenue declined to $61.6 million from $78.5 million a year before.

Shares of Playboy, which have ridden the recent run-up in the market to a 55 percent surge over the past month, fell in pre-market trading. Overall, the stock has tumbled more than 72 percent over the past five years as revenue in the company's flagship magazine plunged.

First-quarter revenue fell 16 percent to $13.5 million compared to last year's first quarter due to softer circulation and advertising sales. Advertising revenue at Playboy magazine is expected to plummet by 39 percent in the second quarter. In a cost-cutting move, Playboy recently moved its editorial staff from New York to Chicago. It is now considering raising its per-issue price or cutting back on publication.

Licensing Group, one of Playboy's few bright spots, also had a rough quarter. Segment income fell $1.1 million to $5.6 million in the quarter. Revenue dropped $1.2 million decline to $9.3 million.

Cost-cutting boosted segment income in the Entertainment Group by 25 percent as revenues in the same period were down 20 percent to $26.2 million, primarily due to the sale of the Andrita television studio assets in 2008 and the effects of a stronger U.S. dollar on international TV revenue.

Over the past few decades, Hefner has dodged bullets ranging from government prosecutors to criticism from feminists. The fight against irrelevance may be his toughest battle yet.

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