The porn industry is still healthy, with guesstimates ranging into the billions for how much revenue and profits this wide-ranging but financially murky industry generates.
But the larger companies in the business, the ones you may have heard of over the years, are not doing well. Blame a combination of widespread piracy biting into the adult DVD business, and amateur-driven online sites like Burning Angel and Suicide Girls stealing an increasing bit of business away from the “mainstream” porn pros.
Ironically, one of the businesses that most suffered from the onslaught of the Internet might be on the verge of a comeback. That’s 60-year-old Playboy Enterprises, founded by Hugh Hefner, the man who put “if you don’t swing, don’t ring” on the doorbell of the Playboy Mansion.
For now, Playboy is not be the darling of investors, in an age where the slightest whiff of political incorrectness can send the feminists to the barricades.
After several years of pullbacks and down financials, and a buy-back that took the Playboy Enterprises empire private, the hoary but iconic Playboy is hinting that it is contemplating returning to the public markets before the end of this year.
If that happens, it would be a remarkable turnaround. Because while it still is one of the world’s most recognizable brands, Playboy had gone limp in the 2000s.
THE DARKEST HOURS
By 2009, things were looking grim for Playboy. Playboy Enterprises' revenue had gone from almost $1 billion to $240 million, the lower figure representing profits of $20 million. While impressive, the massive drain — and the perceived likelihood that the aging founder would take it all with him — brought muttered threats of delisting by the New York Stock Exchange.
Who could blame them? The Playboy Clubs, which had provided a huge revenue boost to the company when first opened, had long since been shuttered (a licensed one is open in Las Vegas). Its foundation, the magazine, had become something of a relic, with its heavily airbrushed photography, sorely testing the theory that men bought it for the articles.
Hefner’s daughter, Christie Hefner, had run the empire for 20 years, but was perceived to be too respectful to Hef, and afraid to jettison employees who had held on past their useful shelf life. Thus, a crossroads moment: the company was allegedly seeking a buyer for $300 million, but found few interested at that price. The recession had eroded advertising revenues, the piracy bug bit into its line of Playboy DVDs, and the brand felt old and tired.
At the end of 2009, Christie Hefner stepped down as CEO. Enter Scott Flanders, the first non-family member to run Playboy.
Since the company wasn’t being sold, Hef engineered a leveraged private equity buyout of Playboy Enterprises. That began its transition from selling nude women, to become a licensing and branding machine using the Playboy bunny as the symbol of a forgotten, swinging lifestyle.
The transition wasn’t easy. About 75% of Playboy’s staff was axed, as the company moved most of its operations from its long-time Chicago home to Beverly Hills, and the Playboy Spice Channel and other TV and Internet properties were sold.
The downsizing strategy is working. Although the company is privately held, the Wall Street Journal reports it has annual revenue of $135 million, with adjusted earnings before EBITA coming to $38.9 million, although the WSJ reported it was short of its profitability targets. Licensing revenue is about $62 million. While that isn’t huge, it does represent a doubling of profit and a reinvigorated direction.
Still, going public may be just a dream. The core business of magazine publishing is still allegedly a money-loser for Playboy; and while there are now iPhone apps for the brand, it will need to do more work to move itself into the mainstream. Liberal America has become increasingly tolerant of an industry that once operated on the fringes and in the dark — and that may be good news for Playboy.
For now, Playboy Enterprises may not be the darling of institutional investors, in an age where the slightest whiff of political incorrectness can send the feminists to the barricades. But the atmosphere can’t be worse than it was in the early 1950s, when Hugh Hefner took a chance, and founded a magazine based on what he correctly perceived as a changing climate.