Playboy Magazine Shows Profit in 4th Quarter

Bob Johnson

CHICAGO — Playboy Enterprises reported its fourth quarter results Thursday.

Although the company listed a net loss of $27.8 million for the fourth quarter, and declining revenue of more than 17 percent to $240.4 million, Playboy magazine showed a profit of $18.6 million.

According to the company, Playboy magazine's swing from a loss in the 2008 fourth quarter was due to the decision to combine the January/February issues into one editorial package and the newsstand success of the November "Marge Simpson" issue. This led to an increase in fourth quarter 2009 circulation revenues and profit contribution.

“These revenue benefits were more than offset by a decline in the magazine's advertising revenues compared to the prior year. Cost reduction efforts also contributed to the improvement in domestic magazine segment results.

International publishing recorded top-and bottom-line declines in the fourth quarter due to the global economic slowdown and resulting pressure on advertisers and publishers,” the company said.

The company added that in part because it will be publishing one fewer issue in the 2010 first quarter, it expects to report a 47% decline in advertising revenues compared to last year's first quarter.

Overall, the print/digital group reported a fourth quarter income of $2.5 million, compared to a loss of $400,000 during the same period in 2008. Revenues were down 14 percent to $28.2 million.

Fourth quarter digital revenues slipped slightly to $9.6 million compared to $10.7 million in 2008 due to sluggish online membership sales and advertising, according to the company. Licensing revenues – the company’s recent strong suit – grew 10 percent to $8.7 million during the period.

Playboy Chief Executive Officer Scott Flanders said, "We are a long way from effectively monetizing the power of the Playboy brand. Today, we distribute content across five unique media platforms and oversee well over 100 licensing agreements globally.

"Although each of our businesses has promising opportunities, our operations are subscale in industries dominated by large players. In our business, size matters. Our mission is to create a stronger and significantly more profitable company. To do so, we are changing the way we do business.

"Earlier today we announced a deal with IMG to outsource our Asian licensing business," Flanders said. "This follows our November announcement of an agreement with American Media, Inc. to handle most of the non-editorial operations of Playboy magazine. These partnerships illustrate our strategic direction and represent the first steps in our repositioning.

"Going forward, we will refine our focus around the management of the Playboy brand and lifestyle. Core creative competencies will remain in-house, but we will seek to identify partners who can effectively manage and build our businesses.

"In executing this strategy, our goal is to create a leaner organization and to remove cost centers and overhead, while building relationships that create value for the brand, our businesses and our shareholders," Flanders said.

"As the deals we've signed demonstrate, we are making progress in transforming the company," Flanders said. "This work continues, and our direction is clear. Evaluations of each of our businesses are underway and ongoing, as are discussions with potential partners.

"We will be putting the pieces of our new structure together in 2010 and expect to begin to see significant financial benefits from this transition next year. The media businesses will remain challenged through this year, although the domestic magazine business will benefit from our recently announced partnership with AMI in the 2010 second half.

"With new licensees in place and consumer spending showing signs of improvement, the Licensing Group is expected to report solid improvement in 2010 revenue and profits. In total, we expect double-digit percentage growth in segment income for 2010, but, more importantly, our goal this year is to position the company for much greater future profitability in 2011 and beyond by focusing on our core strengths and better optimizing the use of the brand," Flanders said.