Playboy Looks for Profits in the Gambling Mecca of Macau

Think Playboy has been left for dead? Perhaps not. The company, famous for its iconic magazine and women dressed as velvet-clad bunnies, is heading to the world's biggest casino playground this year: the Chinese gambling region of Macau. The idea: To use its well-known brand name to tap into a fast-growing market.

To do this, Playboy Enterprises (PLA) has entered into a licensing agreement that will bring not one, but two Playboy clubs to the Sands China in Macau. The first will be a 12,00-square-foot club located at the top of the Sands Macau. Guests will receive VIP treatment, and the club will offer private and live entertainment, as well as lounges and gaming rooms, all with stunning views of Macau's skyline. The club should open by the end of the year.

The partnership also plans to build a 30,000-square-foot Playboy Mansion on the Cotai Strip, complete with bars, lounges and a nightclub. That's expected to open in 2012.

All this could be good news for the struggling company and its investors. Playboy got into the club business in the 1960s and quickly expanded to about 50 clubs, where guests including then-A-list stars such as Steve Allen and Mel Torme would indulge in cocktails, steak, lobster and cabaret. Today, the clubs have mostly closed -- only one, which opened in 2006 at the Palms Resort and Casino in Las Vegas, remains.

Playboy Magazine has suffered heavily with the rise of the Internet. Its circulation has fallen from more than 6 million in the 1970s to 3.5 million in 2006 and even further to around 1.5 million today. Who needs Playboy when the Internet serves up porn for free? The magazine has tried to boost newsstand sales with gimmicks such as a recent 3-D centerfold and a centerfold featuring animated Fox television star Marge Simpson.

Good News for Playboy Shares?

While such one-shot moves probably won't save the company, Hilary Kramer, editor of GameChangerStocks, points out that there is more to Playboy than meets the eye. Playboy's lifestyle and adult entertainment products include the cable TV channel Spice, pay-per-view services, subscription pay-per-month services and video on demand. In the print business, the company publishes Playboy and licenses international editions of the famous magazine. It also generates books and calendars and even provides content for mobile devices. Licensed products alone generate more than $900 million in global retail sales.

During an interview with DailyFinance (see video) Kramer said that the growing excitement around the Playboy brand, plus the revenue that will be generated from its media businesses and its growing presence in Macau, should all be good for the company and the stock. She says that Playboy is now on the verge of getting back to sustained positive earnings thanks partly to significant restructuring.