Playboy Enterprises (NYSE:PLA) is an adult media corporation that earns revenue from a diverse group of holdings; its businesses range from the world-renowned Playboy magazine to a licensing group that has managed to attach the Playboy name to everything from watches to the Palms Casino in Las Vegas. While the company's publishing and television businesses have been hit with declining revenues, corporate restructuring could allow Playboy to realize the earnings potential of the world's number one men's magazine. Furthermore, worldwide economic growth is changing the social values of more conservative societies around the world, creating new markets for Playboy's previously taboo products.
The company is also taking advantage of evolving media technologies like online video and smartphones to distribute its content and further expand its brand recognition, which helps boost its already highly profitable licensing division. While Playboy is technically a media company, its unique content separates it from traditional media and publishing conglomerates. At the same time, it isn't limited to pornographic material and, as such, doesn't exclusively compete in the adult entertainment market. Despite its niche position and highly visible brand name, Playboy is facing the same difficulties that plague both the traditional media and porn industries; as the Internet becomes more popular, the demand for print material (including the Playboy magazine) continues to decline. Additionally, the Internet has spurred the proliferation of free porn sites, which can steal business away from Playboy's subscription-based online offerings. The future of the company will hinge on its ability to adapt to these changing trends and adjust its operations accordingly.
Playboy Enterprises is an adult media and licensing company that has been crafting the lifestyle vision of the American male since 1953, when Hugh Hefner published the first magazine. As close to a family business as a publicly-traded company can get, Playboy is run by Christie Hefner; her father, the founder, is Chief Creative Officer. The company is now a multi-million dollar, international phenomenon; with television, radio, nightclubs, and resorts, the company is known across the world for its sexy, progressive portrayal of the American dream. To most people Playboy means one thing: sex. Playboy's history, public image, and product line are synonymous with sex and porn; its products reflect this image, an image that subjects the company to some unique forces that few other companies face.
Playboy is known for many things, from the sexy, provocative magazine that mixes modern trends with racy photography to the iconic, smoking-jacket-clad founder who decided to live the lifestyle his magazine portrayed. The company began peddling Hefner's vision of the sophisticated alpha male through its magazine, but has since expanded into nearly every available platform:
The developing world has seen tremendous economic growth in the past few years; countries like China and India are great examples this. As formerly low-income countries develop and their citizens gain more spending power, the demand for luxury goods is increasing. All this amounts to one thing: a fantastic opportunity for Playboy. Playboy's influence on the consumerism and lifestyle choices of the United States is hard to ignore. Fifty years ago, when the bunny logo first showed itself, women asserting their sexuality was not nearly as accepted as it is today, and the average woman wouldn't have associated themselves with the Playboy image. Now the Playboy lifestyle has become more mainstream and it has penetrated American society. In many developing countries, the situation is reminiscent of the U.S. fifty years ago. Economies are developing and with them so are social norms. As progressive values begin to undermine the traditional, Playboy has an opportunity to accelerate consumerism in developing countries. By helping to push along the adoption of progressive values, the company can coax markets for its products into emerging out of the woodwork. The worldwide proliferation of Playboy's magazines and television networks, as well as the introduction of Playboy in India, a country notorious for its kiss- and sex-free Bollywood film industry, are clear indications of this potential.
The print publishing industry has seen a drop in circulation; it appears that the Internet has replaced newspapers, pamphlets, and magazines, as the go-to source for news and information. This has been hurting the Playboy magazine, as can be seen by the diminishing gains the publishing department at Playboy has incurred over the past few years. The magazine, however, does bring benefits other than just revenue. It is a major driver of the Playboy brand name, and it is what brought the company to fame in the first place, making the brand a household name. Playboy Online is also a major brand driver; though revenues from Playboy Online are negligible, the website and its content push Playboy's sexy and sophisticated image in such a way that anything bearing the logo would be associated with the website. While magazine revenues might stagnate as they appear to have done with the website, both will remain very important to generating revenue from other segments of the company, especially in the high-margin licensing business.
Playboy's use of rapidly advancing media technologies will be important to its future success as an entertainment company. The Internet, for example, has seen increasing technological gains; triple-play technology has the ability to bring voice, video, and data together to create comprehensive gaming and communications experience. Additionally, the Web 2.0 movement promises greater digital interactivity, advancing research, advertising, and entertainment. The greater penetration of wireless technologies like the iPhone in emerging markets is also creating new opportunities for Playboy to deliver content to a substantially larger customer base.
As one of the United States' major media companies, Playboy could be considered as competing with such major corporations as Time Warner, Vivendi, Sony, and News Corp. None of these are adult entertainment companies, however, which is why they aren't really competing against Playboy; the adult media market, thanks to government legislation and good parenting, is far removed from the general media market. In terms of Playboy magazine's editorial and non-pornographic material, magazines such as Esquire (owned by the Hearst Corporation), GQ (owned by Conde Nast Publications Inc.), and Maxim (Dennis Publishing, which owns the U.K. edition, sold the U.S. version to private equity firm Quadrangle Group earlier this year) all target a similar demographic. None of these companies are publicly held.
Playboy's major competitors in the adult entertainment industry include New Frontier Media (NOOF), Private Media Group (PRVT), LFP Inc., Vivid Entertainment Group, and Penthouse Media Group, Inc. Of these companies, only New Frontier and Private Media are publicly traded, and none of them offer as diverse a product line as Playboy. Additionally, these companies' products are generally heavier on the "graphics" and lighter on the writing and other content that sets Playboy apart.
Playboy, however, faces increasing competition from a large number of small websites that offer similar content for free. Sites like AskMen.com offer the journalism of Playboy at no cost, and thousands of small, ad-funded sites offer free adult content without the inconvenience of subscriptions. Because of this, Playboy runs the risk of losing online revenues while simultaneously spending large amounts of money to maintain its website.