The Motley Fool recently interviewed Christie Hefner, chairwoman and CEO of January 2007 recommendation Playboy
The Motley Fool: Many people are familiar with Playboy the brand, but can you give a brief description of Playboy the company?
Christie Hefner: Playboy is a content-driven multimedia and entertainment company consisting of two main business groups. The media group encompasses publishing, television, mobile, and online; the licensing group is our global consumer products and concept store business, and now also our location-based entertainment destinations such as the Playboy Club Casino at the Palms Casino Resort in Las Vegas and the recently announced Playboy Mansion Macau.
TMF: Your Playboy Mansion venture in Macau -- where you will be putting up a small amount of money for a nearly 50% interest in the project -- sounds a lot like what Disney did with Hong Kong Disneyland. I'm sure that few people would compare Playboy to Disney, but how are the two of you similar?
Hefner: Playboy and Disney are both brand-driven international entertainment companies; one is the premiere entertainment brand for adults and the other for children. Both companies also understand the value of "bringing the brand to life." Disney does that via its theme parks; we do it through multifaceted entertainment destinations that include gaming.
TMF: Playboy.com has been around for ages, but Playboy didn't publish the magazine in digitized form until 2005. What took so long, and what have you learned since then?
Hefner: In fact, digitally, Playboy has always been ahead of the curve. From television to online to wireless, we have always been early adopters and are one of the few print-based media companies to have profitable businesses on a wide range of platforms. Playboy was the first national magazine to go online when we launched onto the Internet back in 1994. In 2005, we were the first in the men's magazine category to add a digital edition. We partnered with Zinio for a digitized version of the magazine for consumers who prefer to access and read the magazine online, but want the same look and feel of a print version. We did that as soon as we felt the technology was ready to provide a good experience for the reader. Last year, we partnered with Bondi to produce a digital archive of the first 50 years of Playboy magazine.
TMF: Your ad base is growing, especially with tobacco and liquor companies that can't market to minors. Now that even cereal makers and fast-food companies are coming under fire for advertising on kid-oriented programming, is there an opportunity for growth from the non-sin-stock companies, too?
Hefner: The combination of Playboy in print and online has become very attractive to a wide range of advertisers, including Porsche, Skechers
TMF: Playboy is increasing its online revenue slowly, and other adult entertainment companies such as New Frontier Media
Hefner: Our online revenue doubled from about $30 million in 2002 to over $60 million in 2006. While there are many online sites out there, consumers seek out Playboy content because of its quality and depth. And unlike adult online sites, Playboy.com offers a wide range of unique original content, including celebrity photographer photo sessions, behind-the-scenes videos of Playboy parties, dating advice, long-form interviews, social networking, and e-commerce offering a range of upscale products for men and women.
TMF: The Playboy brand is iconic, and now there are about two dozen international editions of Playboy worldwide. Can you explain why licensing revenue is relatively small, given the brand's global reach?
Hefner: Remember, as licensors we only report the percent of wholesale sales that accrue to us. Our licensing business is already significant and growing tremendously. Annual retail sales of Playboy consumer products last year totaled more than $750 million, and the group's operating income nearly doubled in the past two years ($10.6 million in 2004 to $18.9 million in 2006). We expect 20%-25% year-over-year growth in 2007. We now have men's and women's products sold in over 130 territories and eight stand-alone Playboy concept boutiques, with another opening in September in London on trendy Oxford Street. We also are very careful about how we use the brand.
TMF: So where do you see Playboy in three to five years?
Hefner: I see great growth from our global licensing and digital businesses leading to an even larger worldwide audience and significant income growth.
