Playboy Shocks World With Lower Losses -- and Magazine Profits

Playboy Enterprises (PLA) is showing signs of life -- which, in this market, means it's losing less blood. And for once, it's the company's flagship Playboy magazine that's really raising eyebrows: It managed to turn a profit last quarter.The media and entertainment company, founded by Hugh Hefner (pictured) and based in Chicago, reported a net loss of $27.8 million, or 83 cents per share, for the fourth quarter -- compared to a net loss of $146.8 million, or $4.40 per share, a year earlier. Revenue fell 13%, to $60.6 million, according to the company. Analysts expected a loss of 1 cent this quarter, on revenue of $63.25 million.

Shares of the house that Hef built were trading up in the wake of the earnings announcement.

Managing the Playboy Lifestyle

CEO Scott Flanders -- who replaced Hugh Hefner's daughter, Christie, last year -- sounded an optimistic note to investors, many of whom would like to see Playboy sold. Flanders has been slashing costs, contracting flagship Playboy magazine's non-editorial functions to American Media. Today, Playboy announced a deal to outsource its Asian licensing business to IMG.

But Flanders said there's more work ahead. "We will refine our focus around the management of the Playboy brand and lifestyle," he said in a release. "Core creative competencies will remain in-house, but we will seek to identify partners who can effectively manage and build our businesses."

The Magazine Turns a Profit

Playboy continues to swim against a very tough media current. All adult-content providers continue to be hurt by the exponential growth in free porn sites over the past few years. Worse, Hefner has allowed himself to be portrayed as a girl-chasing geezer caricature -- and his company to slip into near-irrelevancy. It's a sad era for the man who made American culture increasingly permissible. Even today, you can thank (or blame) Hefner for Jon Stewart and Jersey Shore -- his legacy is that complex.

And Flanders, cleaning up the property to ready it for sale, has scored some victories. Of particular note was the $2.5 million profit the magazine turned last quarter, as readers snapped up the Marge Simpson centerfold, and costs were further reduced by combing the January and February issues. But lower advertising revenue continues to hurt the magazine's profits.

Of course, one big question remains: What to do with the Playboy Mansion? Hef's opulent home in L.A.'s Holmby Hills belongs to the company, and any buyer with any sense will want to sell the property. That may be one of the many reasons why the company remains unsold -- and symbolizes the hurdles Flanders faces.
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