“The challenges we face center around our two largest businesses of domestic publishing and domestic TV, each of which is in the midst of significant industrywide structural changes," Hefner said. "On the magazine side we are seeing lower revenues stemming from shifts in advertising spending to other media and a difficult newsstand market combined with higher paper and postage expenses."
Publishing revenue dropped by 7 percent to $23.8 million. The entertainment division, which includes TV, saw a 3 percent decline in revenue to $47.5 million.
According to Hefner, the emergence of VOD distribution for adult content has eroded the company’s TV earnings, as consumers switch to an alternative model. The VOD model increases the field of competition and lowers the barrier to entry, Hefner said, adding that the company expects to improve revenues in the near future as it continues to develop its VOD business and educate consumers on how to use the new model.
“We believe that our performance will begin to improve in the fourth quarter as a result of the rollout of Playboy as a subscription video-on-demand product," Hefner said.
While Hefner cited the overall decline in the publishing sector as the main force driving the drop in Playboy magazine revenue, she stressed that the company is committed to maintaining its flagship publication. Hefner told the conference call that Playboy had instituted cost cutting measures — including the elimination of 30 jobs, raised the cover price and developed marketing strategies to leverage the brand into various multimedia ventures, particularly mobile and online.
The company recently confirmed plans to launch both a Playboy casino website as well as a Playboy poker site.
Playboy recently acquired Jenna Jameson’s coveted Club Jenna. No information on the price of that acquisition was made available on the company’s quarterly conference call.
Hefner said that the acquisition of Club Jenna strengthened Playboy’s position in the adult entertainment marketplace.
Despite poor quarterly result, Hefner was optimistic about the company’s outlook.
"We believe that we have the strategies in place to take advantage of the value of our brand, appeal of our content and loyalty of our audiences and that the actions we are taking will result in significant improvements in future results."
