PLBY Group CEO Ben Kohn on the Future of Playboy and Other Parts of the Business

PLBY Group (PLBY -1.40%) CEO Ben Kohn joins this episode of Industry Focus: Wildcard to discuss how he and his team are transforming Playboy from a content company focused on selling to men into a lifestyle brand primarily selling products to women.

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This video was recorded on August 11, 2021.

Nick Sciple: Welcome to Industry Focus. I'm Nick Sciple. Today, I'm excited to welcome my special guest, Ben Kohn, CEO of the PLBY Group. The company just reported second-quarter earnings yesterday, its second report since returning to the public markets via a SPAC transaction earlier this year. Ben, thanks for joining me today.

Ben Kohn: Thanks for having me. I appreciate it.

Sciple: Yeah. Great to have you here. Just off the bat, Ben, you hear PLBY Group, I don't think that's a company that everybody is familiar with, but the brands that you own people are much more familiar with. Just high level for folks who've never heard of your company, what is PLBY Group?

Kohn: Yeah, PLBY Group is a holding company. Our largest brand is Playboy. I think most people have heard about that. The products are sold in 180 countries, driving over $3 billion of consumer spend. Probably one of the top three or four most recognized brands in the world.

But we're a holding company, all focused on pleasure and leisure in people's lives. In addition to Playboy, we own Yandy, which is an e-commerce site selling lingerie in the United States, Lovers, which is a sexual wellness chain of stores and digital footprint. Then, we just recently acquired Honey Birdette. Really excited by it, one of the top lingerie brands, in our opinion, in the world. Formerly based out of Australia, the business is growing 40%, $80 million of revenue this year. Just entering in a large way, the United States and then other Western markets in Europe.

Sciple: Yeah, absolutely. Ben, I mentioned off the top, Playboy returning public through this transaction earlier this year, now you have this big portfolio of brands. You've been involved with the company since it was taken private back in 2011. Why now all these transactions? Yandy was a 2020 transaction, those other two companies. You mentioned 2021. Why now, all of a sudden, this activity is coming back public? All that stuff.

Kohn: Maybe it helps to reset what the company was and what the company is today. When we took the company private, I like to take private transactions in 2011, a long time ago. It was a media business at the end of the day. That's what Hef cared about; he cared about the magazine. In fact, when you go back and look at the merger agreement, which was publicly filed, there are two things that he wanted when we took the company private. He wanted to run the magazine until he died, and he wanted to live in the mansion until he died.

You're looking at the evolution of the business till about 2017, when I took over as CEO. It was a media business, which generated the bulk of the revenue, and then it was a licensing business. They offset the media losses by licensing out the masthead or the Playboy trademarks in consumer products. What we pivoted to and because I don't believe that you can really be a media business by definition, selling advertising if you're trying to be a brand, and I always viewed this company as the original lifestyle brand. 

The first product this company ever made was a pair of cuff links. It had casinos, it had hotels, it had a whole host of things. That doesn't sound like a media company; that sounds like a lifestyle brand. The focus was really to shut down or pivot the company away from media, which I thought would continue to be challenged moving forward. Especially in some of the areas, we were in with the proliferation of the Internet. And really focused the company back on its roots as a lifestyle brand, and all-around consumer products in digital experiences, and that's what we've done.

When you look at the business today, it's a very different business than when I took over back in '17. This is a business today, the large majority of revenues, 90-plus percent, come from consumer products. I think we're just getting started. We're also in the process of pivoting or changing the model from licensing to that of owned and operated. I think there's been a shift in how consumers buy D2C or e-commerce.

Therefore, licensing is a less efficient model for that, and we can own a lot more of the spend. That $3 billion of consumer spend, the challenge with licensing is you're getting pennies on the dollar for that, $0.02, $0.03 on the dollar for that. If we pivot and we own that, not only can I drive the lifetime value of the customer up and the average order size because I can tell you more products, but I can drive my revenue up. When you look at that, there could be a 20x increasing revenue just if you model it out and actually an increase in EBITDA by 5 or 6 times as well.

Sciple: You can just recapture some of that spend. There's lots of different directions I wanted to go off here. Maybe let's stick with Playboy here. You talked about this transition the company has gone through. I think on the call, you said historically, Playboy is the content site, now it's a shopping site. Talk about the progress you've made along that and where Playboy fits into this overall family of brands that you've developed over the past year and half or so.

Kohn: I think Playboy is the hero of the brand at the end of the day. It is one of the top three or four largest brands in the world. What's so interesting about Playboy is Playboy can go high and it can go low, in price points to consumers. It can be mass, it can be masstige, or premium, and it can be luxury, and there's a history of that. Honey Birdette is a luxury brand, it's a very high price point lingerie business that is obviously experiencing phenomenal growth and I think will be a billion-dollar business for us. Then Yandy and Lovers tend to be more mass-market overall.

I think we have a really interesting portfolio of brands, and what we'll end up doing long-term with Lovers and Yandy is we're working on right now, creating a subbrand and leveraging that Playboy masthead to turn those businesses into more private label products. But the growth for the company is around consumer products and digital experiences. When I think about an ecosystem that couples both virtual goods with physical goods, I get really excited because that allows us, long term, to not only drive the current revenue but superior margins as well.

Sciple: When you talk about the shift to shopping customers, selling consumer products, sexual wellness, all those things, it sounds like a different type of customer than would have historically been the subscriber to the magazine, that sort of thing. Maybe gender is different, demographically different. How do you think about your customer today versus what it may have been in the past?

Kohn: Yeah. When I took over, we were probably 95% male-female. What we announced in the first quarter of this year was that 55% of our customers were women, which is great. We have 75% of our workforce actually at Playboy today are women. It's great to see that. Very different than when we took over. The numbers we announced yesterday, I'll just give you this. Our traffic in the second quarter only grew about 9.6%. But what's so interesting is that our shopping customers grew 70%. We've made this transition of our audience to that of coming to us for content to now that of coming to us for product. I think that will continue to evolve and accelerate moving forward.

Sciple: Yeah, one of the things you talked about on the call I wanted to drive into a little bit more is how you're doing that from a marketing point of view. You talked about focusing on influencer marketing and a quick turn. Talk about your marketing strategy and what you're doing to try to make that, I guess, mind shift among your customers that you're trying to capture.

Kohn: We benefit because the brand is extremely popular and hot on Gen Z and with Gen Z, and I think it really relates to a lot of the causes that we have fought for, for the last 70 years of the company's history: equality, LGBTQ+ rights, civil rights, etc. This company has been at the forefront advocating for equality and for free speech. When you think about that, we have a number of influencers.

I hear all the time about the number of people on TikTok just organically wearing this brand. We saw this hoodie challenge develop organically. A few weeks ago, we got into it, and then there's influencers, Playmates, the former adult stars, the Bretman Rocks, and others that we work with. We launched a T-shirt with Bretman Rock in June, geared around pride. It's sold out before he was even able to post on his Instagram and his social media all that, and so we have many of those coming.

We have a subbrand called Playboy Labs, which is really our collab. We've done things with Steve Aoki and others in the past. You'll start to see a more consistent level of product drops with influencers moving forward. But what we benefited from and what is so interesting about HB or Honey Birdette as well is a lot of this is organic. It's people that are going out and buying the product and wanting to wear the products.

Sciple: You talked about that hoodie, that thing that popped up on TikTok. Are you implementing a print-on-demand-type model? How are you doing these quick turnarounds whenever you see things emerging on social media or what have you?

Kohn: It's a combination of both print on demand and then our basics that we have in stock all the time, and that is continuing to evolve your report in a great digital e-commerce team. They've only been on the job for really three to four months now. But people who have run big businesses, and so it's a combination of both. And then we'll continue to do at playboy.com, over the coming months we will continue to evolve the product offerings we have. More of a combination of both drop culture, but with everyday-on products, really geared around lifestyle, and the four categories we've talked about before, which is apparel and accessories, sexual wellness, gaming and lifestyle, which are home goods and other things, and then beauty and grooming category.

We have a very successful fragrance business in Europe. We just brought it to the United States. That's a licensing deal, but we're now developing our own beauty and cosmetics line, which is right now in the formulation and design phase, and that will be launched next year.

Sciple: You talked about some of these brands moving into the lingerie market, really particularly aggressively the Honey Birdette acquisition. I want to talk about what's going on in space right now. You've seen Victoria's Secret pull away from its Angels program, really run away from the more, I guess, overtly sexual advertising. Look at Honey Birdette, very the other side, the other side of that coin. So what do you make of what's going on in the market and why your approach during the opposite of what some established players are doing has some room for success?

Kohn: I wouldn't say that we're going opposite. I think that without getting into disparaging Victoria's Secret, they've lost their place in the market. It's a highly fragmented market. There is a way to be sexy without objectifying. I think if you look at what's happened to Playboy and what the content team, the marketing team have done over the previous three years, look at the diversity in talent that we work with. It's a very different Playboy than it was back in the Hef days. I think it really speaks to what's happening in society overall.

Honey Birdette, obviously very sexy lingerie, comes out of Australia. Eloise, who's the founder of the company, has just moved to the United States. Obviously in Australia, your diversity in talent that you work with is different than what it can be in Europe and in the United States, and so I think you'll continue to see it, but again we're not scared of sexy. I think it's a question of doing it in the right way that's not objectifying and that's really owning your own sexuality.

What's so great about both companies together. Honey Birdette is almost 100% female. It's a company founded by women for women, and Playboy, when you look at it today, 75% of our workforce -- and this is before the Honey Birdette acquisition -- are made up of women.

Sciple: Absolutely. One of the things I wanted to talk about, we've talked a lot about private label trend of doing direct-to-consumer at this, this growth area for the business, one thing you talked about on the call is really significantly increased your long-term revenue margin rate from $300 million by 2025 to $600 million, so I'd see that obviously great to see that number increase so much.

On the other side of this is why is it surprising you so much of the growth that you're seeing, what was the biggest surprise that took place to see this huge increase in your guidance?

Kohn: The guidance we gave, $300 million and $600 million after being public for six months, really speaks to the stuff that we have in our pipeline today, in the pieces that we've assembled with the acquisitions that we've made, so we'll be launching, and we talked about this yesterday on our earnings call, Playboy or Playmate Lingerie. Moving forward, leveraging the Honey Birdette skill design team and sourcing Titan team.

We just have a lot more arrows in our quiver moving forward as we made that transition from a licensing business to that which had been owned and operated. 

Look, I think there's a lot of upside to that number. When you look at it, that number is based on a 20% growth on D2C and the single-digit growth in the licensing business, and that doesn't include if we decide to take back more categories, which we have the option to do, that are already licensed out, and it doesn't include other acquisitions that we might make in the future.

I feel very good about where we sit. I think the growth prospects for the business today are actually greater than we were in public. We just have to say extremely focused as a team, and then on top of that, some of the digital revenue streams that will be adding here over the next six months to a year, geared around membership and NFTs and blockchain, I think long term will allow us actually accelerate our growth and actually enhance our margins.

Sciple: Yeah, so I want to talk about some of the new product offerings. Why are you so excited about NFTs, if you view this as a fad or something that really has a lot of staying power, and if so, why?

Kohn: Look, I think NFTs are getting drilled through multiple different cycles. I don't think it's a fad; I think it's here to stay. You have to think about it as the intersection of content and community, and so you look at what Topshop has done, it's really really interesting. We have one of the most valuable archives in my opinion, we have 10 million pieces in our archive. We have a 5,000-piece collection, we have unbelievable influencers that we work with that have huge audiences and adult stars and Playmates, etc. We can bring this together in a cohesive ecosystem.

NFTs, we've talked about this yesterday, the dial-ups era of the internet right now. But it's really gaining notice as well, and I think this brand, of all brands I can think of, works so well at that intersection of digital and physical. We can host a live Halloween party in Las Vegas, and we can couple that with a virtual party online where you would have to be a member to attend. We can sell you virtual goods for your avatar coming to our party, and we can sell you physical goods as well. 

This brand is really, really well positioned as consumers want more and more lifestyle-driven offerings, but it doesn't have to be physical offerings, in place it can be virtual offerings as well. Look what Travis Scott did on Fortnite, a year-ago with that concert where he had 27+ million people tune into it. That is the future. I think NFTs are really leading to the decentral of the artists' community.

Sciple: You mentioned that collision between community and content. One area that makes sense to me is you have people that are very engaged in this space, and this is an area where you can market to them and get paid to do so. How do you think this is just a way to get exposure to this younger audience?

Kohn: Well, look, I think we have exposure to the younger audience, but it's the people that we work with, and I think it's also that when you look at younger people, they tell you they are obviously younger than I am. It's not about what's hanging on your wall, it's about what's in your digital wallet. You look at social media in general, you look at Snapshot, Instagram, etc., why is the camera taking over? Well, because there's value in what you're associated with. There's value in what you're posting online because it defines you to a much larger community.

When I grew up, it was my 10 friends or 15 friends; that was your community. Today, you look at young people, their communities are huge, and they have thousands of followers because digital allows you to do that.

I think we have some of the most iconic IP in the world. This is 70 years of Americana, but more importantly, it's also the influencers that we work with today, and creating this cohesive ecosystem I think it will not only drive our digital sales but our physical sales as well.

Sciple: You mentioned earlier this revenue guidance doesn't account for future acquisitions, it's all organic that you're trying to project into the future. But obviously, you have a background in private equity, there's folks on your management team from Match Group, IAC. These are folks who have done deals in the past. As you're looking for potential acquisitions or to invest capital to bring assets back in-house that are licensed out, what are you looking for? What are the criteria that they jump out to you as "this is something I want to invest in"?

Kohn: Look, it's putting the pieces together that allow us to accelerate growth. We've done that with the acquisitions to date. The E&E team is unbelievable at design and sourcing. That expedited and accelerated our growth or launch of Playboy Lingerie by a big margin. Not only that, but they have designs that have never come out of Australia that we can leverage moving forward.

Moving forward for other acquisitions, we're open to it. We have $85+ million of cash on our balance sheet today. I would see things in the digital world coming into light moving forward as we look to build out that ecosystem. But again, we have all the pieces we need to achieve the numbers that we've put out there today.

But I think there's ways to accelerate that. There's ways to move some of our licensing partners to JV partners, where we can book that revenue and run that e-com where we can grow our consumer base even more, which should lead to acceleration of revenue because the larger base I have the more LTV I can drive a lifetime value of that customer or I can drive long term.

Sciple: Go ahead, Ben. Sorry, finish.

Kohn: Just speaking to Lance and the rest of the team, what's so exciting for me is I love to surround myself with people that are much smarter than I am. The level of talent that we have brought in and are starting to continue in our pipeline is just awesome to see. That's what's so exciting about going public. Not only now do we have the capital to do what we needed to do to transform this business, but the level of talent we're getting is night and day from where the company was a few years ago.

Sciple: Ben, we've talked a lot about the direct-to-consumer business. You mentioned opportunities to transition these licensing parts of the business over to maybe joint ventures, and that introduces China outside of the U.S. Very different brand in China than it is in the U.S, a different business model as well when you look at licensing. Just talk about compare and contrast this China business, international business to what you're building here in North America right now.

Kohn: China is its own ecosystem, OK. They've never really seen the magazine or let me say this, they've never seen it legally in China. The company went to China 20+ years ago, and it was really Americana at the time and has really become almost an own Chinese business or China business within China. It's largely menswear today. It is all licensing. We have three primary licensees and then three what I would say are smaller licensees in China.

But what's so interesting about China is the consumer demand for the brand. Last year, we did $1 billion of e-commerce revenue in China, or let me say that our partners did $1 billion of e-commerce revenue.

When you think long term about how you aggregate revenue, I think there's a way to change that business model. Now, it's not going to happen overnight. These are partners that have been long-standing partners of the company for 15+ years, and we want to make sure that we include them in this, but they're manufacturers as well. I think there's a way to actually aggregate that e-commerce revenue long term.

The business is growing in China. We're just entering the women's category. We just did a kids deal. India is a huge growth opportunity for us. We'll do India, learning from the mistakes that the company made in China over the years and the way we're structuring those deals. We've signed a deal to open Playboy beer gardens here, we've signed a deal with the gaming partner to launch Playboy Rummy in 2022 in India.

We just signed last night a deal to relicense our U.S. iGaming rights. I can't tell you who the partner is yet but I am very excited by that and especially the growth and iGaming in the United States moving forward. But China, I think, can double in size over time, and I think we can change the business model in China over time as well.

Sciple: I want to talk about Playboy Kids just because that just blows my mind that there's a Playboy Kids line. What Playboy Kids products are out there? No. 2, is Playboy Kids going to leave China? What's the deal there?

Kohn: I don't know if we'll leave China. I'll tell you a funny story. Back when all of us could travel and life was normal, I was on the Bund in Shanghai in a car coming in from the airport with my head of licensing. Coming across the street at the stoplight was a little kid wearing a Playboy sweatshirt. I didn't think we have Playboy Kids at the time. He needed to go relieve himself on the tree on the Bund side of things. I looked and said, "Wait, do we have a licensing deal for Playboy Kids?" He says, "No, that's all counterfeit."

One of our licensing partners thought there was a huge opportunity for Playboy Kids. We're going to open their first store. They're obviously doing e-com but open physical store in Shanghai this year, and it's an opportunity.

Again, the brand is very different over there than it is here. Over there it's been a fashion brand. That's what it's been for 20+ years. Obviously, in the United States, you have the history of the media and the magazine, which make a difference. I don't see Playboy Kids coming to the United States, but what I will say is very encouraged by the Gen Z audience that we do have and them loving to wear the brand.

Sciple: Maybe the last couple of questions. You mentioned the gaming side of the business. You've talked about doing more in-person experiences, such as the Playboy Plane. What should we be looking for as far as those types of activities?

Kohn: The paint job on the plane looks amazing. We're going to be using it for our influencer activation coupled with the big Bunny launch. We just had a great live experience in partnership with Tau Group last week in Vegas for our Midsummer Night's Dream party. You should expect to see more live experiences coupled with virtual experiences moving forward, all geared to what we've talked about with membership. But I think this brand is best when people can experience it, whether that be physical or virtual, and I think that would be part of our strategy moving forward.

Sciple: Who do you say is your biggest competitor?

Kohn: This is one of the hardest things to answer. There's competitors in the product categories that we're in. Would you say in lingerie Victoria's Secret is a competitor? Sure. It's a huge business. So is La Perla, so is Agent Provocateur, etc. But as a brand, I can't think of another brand that is a competitor to us for everything that we play in.

On the product side, yes, but this brand is so unique, and this is why I think this brand is really priceless and worth multiples of our market cap today. Give me another brand that sells products in 180 countries that generates over $3 billion today in spending that's valued where we are. I just can't think of one. Especially for one that can play in the number of categories that we can play in. From spirits to gaming to hospitality to clothing, I just can't think of that.

Now, as a team, we have to be really, really careful, and we have to stay extremely focused on our priorities and making sure that we deliver and execute on what's in front of us. But the roadmap long-term really gives us endless growth possibilities.

Sciple: Since there's no direct comparison as a brand, what's a brand that you admire, whether it's a competitor or not, that maybe you think Playboy should be included in the same sentence as this brand?

Kohn: Well, I think so highly of Nike. What Nike has done in their transition as a business model is unbelievable. I even go back to Ralph Lauren, and say what Ralph did, Ralph was a business that was a little dated. It's become very relevant. They have live experiences in the Polo restaurants, etc.

But more importantly, it was a business that had been licensed out. They took all that back in-house over a multiyear period, and look at our e-commerce business today. Alice Delahunt has done just an unbelievable job there on e-com. She had been at Burberry. But again, I think Nike is the pinnacle in what they've been able to do. I would love one day to be included in the same sentence, but that's a pretty high aspiration.

Sciple: Hey, maybe you're in the running with them on Instagram followers or something like that. You can compete on at least one of those fronts.

Maybe the last question for you. If we look out five years from now, what's the biggest change that this business has undergone, and what are you most excited about?

Kohn: You look out five years, I think it's just continued to execute on what we've outlined already. I think that change from a media company to a valuable lifestyle brand is the single biggest change. I'm really excited by this combination of virtual and physical coming together in this community, and I think this is a brand that has historically had membership. This is a brand that has historically had a really vast community.

I think when I look at the influencers that we work with coupled with the products, long-term, I want to have a significant portion of our revenue coming from recurring revenue streams like we have with our licensing business, which is a quasi-SaaS business at the end of the day. I think this brand has the possibility to do all of it. We just have to, again, stay focused as a company and that's the biggest thing for our team right now.

Sciple: Get that dollar share in the market to match the mind share among consumers.

Ben, I'm so excited to continue to follow the work you're doing. Thanks so much for spending time with us, and hope we can talk to you again soon.

Kohn: This is great. I appreciate it. Thank you.

Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear. Thanks to Tim Sparks for mixing the show. For Ben Kohn, I'm Nick Sciple. Thanks for listening, and Fool on.