Playboy made the announcement in response to increased competition from adult subscription services on the Internet, as well as from other men's print publications, such as FHM and Maxim, which have innovatively filled their websites with features that make them a great supplement to their magazines. Playboy has also become increasingly dependent on its licensing and entertainment businesses, and it's hoping that this move will give the publishing division, well, a helping hand. In its second-quarter earnings report, Playboy posted a loss in the publishing division of $2.3 million, in contrast with an overall profit of $4.6 million.
There's one problem, though. Playboy's announcement would be great news if it were still 1995. While I commend the company's decision to produce an online edition, I can't help thinking this is too little, too late. Playboy has essentially sat back and watched for the past 10 years as adult content on the Internet has eroded its revenue and made it difficult for the company to expand its subscriber base. Rather than take the obvious step that would have kept it on the forefront of the adult industry, Playboy has historically used the Web page it does have as little more than an online store and an e-advertisement for its multitude of products.
A bigger problem is that Playboy has traditionally positioned itself as a more "classy" approach to adult entertainment. While its contemporary subscriber base may represent cognac drinkers and construction workers alike, much of its success as a brand depends on its ability to retain its brand image. The move online is not likely to diminish this image, but it is not going to bolster it, either. Had Playboy gone online 10 years ago, it could have had the opportunity to define "classy" adult online entertainment. But by waiting until now to bring its flagship product online, the company is entering an online adult market already stigmatized by the seedier pornographic content available.
Its tardy entrance into the online market is unlikely to have a strong impact on Playboy's financial future. Nevertheless, the startup costs involved in producing an online edition are minimal, and there is always the likelihood of making some profit with it. That makes the decision better late than never.
Fool contributor Tarek Sultani is partial to a glass of cognac from time to time. He does not have a financial interest in any of the companies mentioned in the article.