The adult media giant also said it would consolidate its West Coast offices by subletting its Santa Monica, Calif., facilities and moving them to its Media Tech center in a suburb of Los Angeles near Glendale, Calif.
It also said it would go out of the DVD business.
“The company is well-positioned to weather these difficult economic times,” President Christie Hefner said. “Our balance sheet is strong, our debt level is reasonable with a below market interest rate of 3 percent, and we have a solid cash position of more than $25 million and access to a $50 million revolving credit agreement.”
In a Dear Fellow Employees letter by Hefner, Playboy also said it expects to “significantly reduce travel and entertainment, as well as premium and overtime.”
“Our goal is to return the company to solid profitability in 2009,” Hefner said to employees in the letter. “When we reported earnings two months ago, we indicated that we expected to reduce expenses by $10 million, with approximately half coming from corporate and other overhead and the other half from the publishing and television businesses. Today we are announcing the specific actions being taken to achieve those goals.”
Those actions on Wednesday increase its cost savings to $12 million annually.
Hefner said some of the cost savings will come from changing how it does business.
“This includes capitalizing on technology in ways that include doing our own magazine pre-production work and building a more robust digital asset management system. It also means finding outside resources to handle those functions that are not our core competencies, as we did with our Andrita studio [in its Los Angeles studio near Glendale, which is now known as Media Tech] and our catalog and e-commerce business last year. As a result, we will outsource newsstand sales for Playboy magazine and special editions.”
Hefner said Playboy will exit the DVD business in phases over a few months to concentrate on selling that content online.
Hefner noted that of the 80 jobs being axed, 25 positions have been open for some time.
“All of those affected have been notified, and we will provide assistance to them in their job searches,” she said.
Hefner also said the company’s management incentive plan will not pay out and employees will forgo profit-sharing payments.
In addition, Playboy plans to dig deeper to look for savings, including the elimination of holiday greeting cards, which will be replaced with ecards, and curtailing the purchase of water bottles at company offices.