Playboy Enterprises (PLA)

There are an untold number of small, free pornography sites on the internet that offer the same content as Playboy Online without the need for subscriptions. This provides heavy competition for Playboy's internet porn business by putting a cap on the sites revenue; there will always be potential Playboy customers who would rather trawl the free sites than pay for similar content.

The publisher of one of the world’s best known adult magazines, Playboy Enterprises Inc., (PLA) said it would be open to discussions about an outright sale after posting a wider fourth-quarter loss on weaker-than-expected revenue. The company, which has been through a management shake-up including the resignation in December of longtime Chief Executive Officer Christie Hefner, posted a net loss in each quarter of 2008. A restructuring charge of $157.2 million, and other one-time costs, also hurt results, Reuters reported.

There are an untold number of small, free pornography sites on the internet that offer the same content as Playboy Online without the need for subscriptions. This provides heavy competition for Playboy's internet porn business by putting a cap on the sites revenue; there will always be potential Playboy customers who would rather trawl the free sites than pay for similar content.

The company's most profitable sector is also its smallest sector; Media revenues are almost ten times more than licensing revenues, but Media profits are about even with licensing profits. This illustrates an inefficiency in Playboy's business, as the majority of resources are going to promote the less profitable part of the business.

Playboy magazine, the flagship of the company, has earned negative profits for the past two years, and does not appear to be on course to break even this year.