"Traditional media are facing a secular shift as a result of changes in consumer behavior and the migration of advertisers to new platforms,” Playboy CEO Christie Hefner said in the report to shareholders.
“This has created a challenging environment for our print and TV businesses, which has been compounded by the current macro-economic climate,” she added. “However, we believe that the changing media business model also creates a number of opportunities for us, both because of our globally recognized brand and our profitable existing digital businesses.”
The company posted its largest losses in the area of entertainment, stating that revenue from domestic TV sales was $14.6 million in 2008, down from $21.6 million in the second quarter of 2007.
Increased rates by cable and satellite distributors were cited for decreased revenue despite an increase in Playboy TV subscriptions. The company also said that some decline was resultant of consumers moving from linear distribution platforms to on-demand platforms. International sales revenue was relatively flat at $13.4 million.
In publishing, the company posted a $1.9 million loss, which was a relative improvement from losses of $2.6 million from the same period last year. Playboy noted lower editorial and manufacturing costs as having offset some of the losses in this area.
In licensing sales, the company saw an increase of 10 percent, up to $6 million from $5.5 million in the second quarter of 2007. Sales in the Southeast Asian, U.S. and Latin American markets contributed to revenue in this sector.
Playboy also noted a modest decline in corporate administration and promotion expenses over the quarter.
Hefner also said in her statement that, going forward, the company would implement a strategic streamlining and cost reduction scheme, especially focused on mature media businesses and corporate administration.
She pointed out efforts in the publishing sector to reduce costs over the last three years, and a $5 million reduction in editorial and manufacturing cost during the first half of 2008.
An additional $10 million in cost saving efforts in the publishing, domestic TV and corporate sectors will be implemented in the second half of the year, according to the statement. Hefner said the cuts in expenditures were “critical” to the company moving forward with solid footing in 2009.
Hefner also said that expenditures related to a redesign of Playboy.com, which are planned to roll out in late 2008, are also impacting the company’s bottom line. The effort to increase its presence on digital platforms, Hefner said, would help to improve print and television content assets, as well as produce hoped-for increase in advertising revenue.
The company also is looking toward outreach to expanding overseas markets, resulting in improvement in the international media businesses sector.
"2008 has been and will remain a difficult year. At the same time, the Playboy brand has never been more popular, and we see significant growth opportunities across our licensing, digital and other international businesses. We are committed to rationalizing our cost structure and executing our strategic plan to ensure that we leverage our assets against the right business model to return this company to consistent profitability and increase shareholder value," Hefner said.