The Fat Bunny is Close to Singing

[gonzo]

--Chicago Tribune

Playboy Enterprises Inc. disclosed in a Wednesday regulatory filing that upcoming cost-cutting measures will include eliminating 55 jobs at the Chicago publishing and entertainment concern.

In the Securities and Exchange Commission document, Playboy said that a plan to reduce annual costs by $10 million is being increased to $12 million "in light of current economic and media conditions." That effort will generate a $2 million charge, the company said, and the fourth quarter will include a $4 million charge to cover a troubled receivable and other issues. "The resulting $6 million in charges against operating income for the third quarter … is expected to result in a loss for the quarter," the filing said.

Playboy had net income in the 2007 third quarter of $2.6 million, or 8 cents a share. Before Wednesday's disclosure analysts had been expecting the company to eke out earnings in the 2008 third quarter of $550,000, or 2 cents a share.

Playboy also included in the filing a copy of a "Dear Fellow Employees" letter sent out to workers Wednesday, in which Chairman and Chief Executive Christie Hefner said the economy's deterioration make it "unavoidable that we reduce our cost structure to reflect current economic realities."

Hefner's letter spells out a number of cost-cutting moves, including consolidating facilities and reducing travel outlays and overtime. "Unfortunately," she continued, the changes will also mean the elimination of about 80 positions in the company, 25 of which are currently unfilled."

As of Feb. 29, Playboy reported a workforce of 789 full-time employees.

[gonzo]

This was my favorite part of the reports....

In addition, Playboy plans to dig deeper to look for savings, including the elimination of holiday greeting cards, which will be replaced with ecards, and curtailing the purchase of water bottles at company office.


Playboy stock closed at 3.03 yesterday.

[Toby]

Poor Hef is gonna have to give all the live-in girlfriends pink slips.

[miz_wright]

Originally Posted by Toby

Poor Hef is gonna have to give all the live-in girlfriends pink slips.

Based on recent news, looks like they're giving him the slip, actually.

[ali25extreme]

He did get the slip from one of his girlfriends but then went out and is now envolved with twins.

[TheEnforcer]

I'm sure Hef and Playboy will survive just fine. Businesses changes and they are changing with it.

[RawAlex]

What the heck would 789 people do over there?

Penthouse, Playboy, and pretty much all the mainstream adult producers missed the boat when the internet came along. They have 30 years plus of back content on slides, Playboy could have created a mega-mega site that could have featured all their girls, all their centerfolds, and all their various content over the years, and instead they went with a policy of shooting exclusive for web and exclusive for the magazine. What a waste of money. Then they run the playboy channel, but I don't think any of the content produced there ends up online either.

Hugh Hefner (and his staff) apparently doesn't know what synergy means.

789 people. That explains everything.

[softball]

Originally Posted by Toby

Poor Hef is gonna have to give all the live-in girlfriends pink slips.

Good idea. Toby, you and I make money out of girls in pink slips. Maybe it could save his business...

[Hell Puppy]

Originally Posted by ali25extreme

He did get the slip from one of his girlfriends but then went out and is now envolved with twins.

it's good to be hef.

[Jim_Gunn]

789 employees? Not counting groundskeepers and cooks and such, he probably needs a couple of dozen or so really good employees to run the magazine, the DVD division, the internet division and licensing and everything else. No wonder they are hemorrhaging money!

[gonzo]

Originally Posted by Jim_Gunn

789 employees? Not counting groundskeepers and cooks and such, he probably needs a couple of dozen or so really good employees to run the magazine, the DVD division, the internet division and licensing and everything else. No wonder they are hemorrhaging money!

Dont forget the zoo thats on the grounds as well.

[LAJ]

I'm guessing they could run the company with 1/4 the number of employees.

[pornlaw]

Its just a matter of time until the stock goes private and they get sold off. Watch divisions of Playboy close in the coming months. The only one making money is their licensing division.

Michael

www.AdultBizLaw.com

[tony404]

i wonder if any of the adult.com people are going to be pitched.

[Hell Puppy]

Originally Posted by tony404

i wonder if any of the adult.com people are going to be pitched.

That segment is profitable according to their SEC filings, as well it should be. However, it's hard to say whether they are overstaffed or may have some duplicated functions. With their financials, safe bet they would love to increase profits anywhere they can to add to bottom line.

They have around $25 million in cash, that's good. But they also have $115 million in liabilities, which is bad....very bad if you look at their cash flow and way too close to the value of their combined assets, which is around $150 million.

The brand itself IS the value. When Hef dies, or they have to file Chapter 11, someone will buy the brand and likely dump almost everything else.

[gonzo]

Originally Posted by pornlaw

Its just a matter of time until the stock goes private and they get sold off. Watch divisions of Playboy close in the coming months. The only one making money is their licensing division.

Michael

www.AdultBizLaw.com

Ill be buying another big chunk Monday Morning

[RawAlex]

If those numbers are correct, it would probably be in the process of going private already if it wasn't for the credit crunch. The brand is still very powerful, and it hasn't been used to anywhere near it's potential in a long, long time.

[Hell Puppy]

Originally Posted by RawAlex

If those numbers are correct, it would probably be in the process of going private already if it wasn't for the credit crunch. The brand is still very powerful, and it hasn't been used to anywhere near it's potential in a long, long time.

Those are straight out of the SEC docs available via google finance pages. So they are close. Updated numbers should be released second week in November.

Market cap is under $60 million. $25 million in cash still a bit short of being able to buy back and take it all the way private without an outside investor. Also in a credit crunch, remember that cash is king, so wouldn't be wise to touch their cash position while not significantly cash flow positive or again have a buyer or new partner with cash on the hook.

Shedding DVD production may be part of grooming themselves for a buyer.

[RawAlex]

What I don't understand is why they wouldn't have moved the DVD business off to someone else. It would suggest that their videos are too expensive to produce versus sales, rather than just "not enough sales". It would also show that the online division and the DVD division weren't sharing content, because otherwise the cost of producing the content would stay in the mix, not saving them all that much money.

From the outside peeping in, it looks like one very screwed up business, something that a buyer might actually be able to fix.

[Hell Puppy]

Originally Posted by RawAlex

What I don't understand is why they wouldn't have moved the DVD business off to someone else. It would suggest that their videos are too expensive to produce versus sales, rather than just "not enough sales". It would also show that the online division and the DVD division weren't sharing content, because otherwise the cost of producing the content would stay in the mix, not saving them all that much money.

From the outside peeping in, it looks like one very screwed up business, something that a buyer might actually be able to fix.

Agree completely.

Cost of production of DVD's should be negligible unless you are cutting out all production, which obviously they aren't.

It all smacks of a very silo'd set of business units, in which case yes, there's a huge opportunity for someone to step in and fix it.

[tony404]

how do we know they arent cutting back production? i have heard in la alot less shoots are happening.

[RawAlex]

Is the number of overall shoots drops (industry wide) it won't be a bad thing. The porn business has tried quantity as a business plan and it really hasn't worked. Quality might be a step in the right direction instead, spend a little more on a single shoot rather than shooting 10 ugly scenes in a week, and then market that one better movie instead of 10 disposable ones.

Some companies are pushing so much product that there is no way anyone can stock even some of it, let alone all of it. For places that rent porn movies (still a big enough business) they need to hold videos for a few months at least to make their money on them. So if they have 500 titles, they are only replacing 100 or so a month. You don't make any more trying to jam 200 titles at them, they only buy 100.

The economics need to change. Can anyone pull it off right?

[Hell Puppy]

Originally Posted by tony404

how do we know they arent cutting back production? i have heard in la alot less shoots are happening.

We dont.

It is only implied that distribution is changing and not production.