Playboy Ratings Go From Stable to Positive

Rhett Pardon
NEW YORK – Playboy Enterprises Inc. got the thumbs up this week from Standard & Poor's Ratings Services, as it revised its outlook on the adult entertainment giant from stable to positive.

"The rating on Playboy reflects the niche audience for paid adult content, the company's relatively smaller cable TV distribution compared to top 10 broadcast networks, the abundance of free adult materials online and high financial risk," Standard & Poor’s analyst Andy Liu told XBiz. "These factors are only partly offset by the company's significant presence in the non-cyclical adult entertainment industry, strong brand recognition, and good satellite direct-to-home TV coverage."

Playboy said last month it expects to see continuing growth in revenue and operating income across all of its businesses for the next year.

The company made the announcement as it released its first-quarter results, where it saw its net income nearly triple on revenue growth.

Standard & Poor's on Monday affirmed its “B” corporate credit rating on Chicago-based Playboy on news that the company will benefit from a better operating cash flow as it lowered its debt burden.

The company is still paying down debt from $35.5 million in Califa Entertainment Group Inc. and Playboy TV International acquisition liabilities.

Playboy in July 2001 bought back The Hot Network, The Hot Zone and Vivid TV from Califa, the owners of Vivid, in a $92 million deal. The Hot Network and The Hot Zone were formed after the Spice Entertainment Companies Inc. were bought by Playboy two years ago. Playboy sold Califa the right to operate Spice Hot, access to channels operated by Spice Hot (which became the Hot Network and, later, its sister channel, The Hot Zone) and the right to distribute movies domestically edited to the Spice Hot standard. Playboy had an exclusive buyback option, which it exercised.

Playboy TV business is now the main cog for the parent company, as its TV business outstrip its publishing units in terms of revenues and growth.

For 2003, domestic and foreign TV revenues combined for $130.8 million of Playboy's total sales compared with $110.8 million the previous year.

The company is hoping added services like video-on-demand will boost TV sales even further.

Playboy Enterprises closed at $12.21 a share Tuesday, down 33 percent, on the New York Stock Exchange, down 4 cents.