Playboy Magazine Outsources Noneditorial Functions

CHICAGO — Playboy struck a deal last week with American Media Inc. to take over noneditorial functions of its legendary magazine.

Production, circulation, advertising sales, marketing and other support services of both Playboy magazine and the company’s other domestic publications now are in the hands of Boca Raton, Fla.-based American Media.

The company already publishes 16 titles reaching more than 50 million readers. Some of the titles include National Enquirer, Fit Pregnancy, Men's Fitness, Star, Shape, Country Weekly and Muscle & Fitness.

The term of the deal is for five years, with recurring one-year options based on sales revenue benchmarks.

“Under the terms of the agreement, the company will pay American Media a flat rate fee in consideration for the services provided as well as cost savings and subscription incentive fees if certain benchmarks are achieved during the next two years,” Playboy said in a filing Tuesday with the Securities and Exchange Commission.

“The company will also pay certain costs and expenses so long as American Media maintains a guaranteed rate base and subscriber mix.”

Playboy magazine, which lost about $13 million last year, will keep its editorial offices in Chicago.

"Our goal is to focus our resources on what we do best, which is to create compelling content," Playboy Enterprises CEO Scott Flanders said in the release. "At the same time, we were looking to partner with companies who can manage the operations of the magazine more effectively than we can as a stand-alone publisher.

"By joining forces with American Media, we will be able to significantly reduce our cost structure and leverage the economies of scale related to manufacturing, distribution and marketing that are available to this large, multititle publisher."