Earnings Call: Playboy's Hefner: The Brand Will Get Us Through; So Will Deep Cuts And Restructuring

This story was written by Tameka Kee.
Playboy's saving grace is the power and iconography of its brand. So said CEO Christie Hefner during the company's Q3 earnings call, in which she acknowledged that Playboy (NYSE: PLA) is facing challenges on all frontsfrom dwindling print circulation and ad revenue, to the push to revamp its digital property, to an overly competitive adult entertainment market in the U.K., and the credit crunch that's hindering the development of new properties. But it's the brand that will get them through the coming quarters, even if they have to auction branded antiques and artwork to do so. Hefner laid out the company's battle strategy, which includes tons of cost cutting measures for dealing with a "weakening global economy" that will produce a "weak ad market in print and online, and softer consumer spending."

Meanwhile, the long-awaited Playboy.com revamp is slated to launch in Q109 (pushed back from the Q4 launch Hefner alluded to back in Q2). Hefner said it would be the "glue" between all of the company's divisions: media, events, retail, and venues like the Palms. More after the jump.

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-- Cost-cutting details : Playboy has eliminated a total of 140 positions this yearor about 17 percent of its workforceincluding the 80 or so layoffs it announced just weeks ago. CFO Linda Havard said the cuts would amount to a $5 million headcount savings, most of which would be realized in 2009, though there may be a slight (positive) impact in Q4.

-- The global cuts hit the corporate (HR, administrative, etc.) and media (editorial, productions, marketing and circulation) divisions, as well as the DVD business the company's trying to get out of. Havard also said managers would forego incentive compensationthough it's unclear whether that's just for the coming quarter or indefinitely. All told, Playboy is aiming to add $7 million in savings to its previously stated goals of $12 million in magazine-related cost reductions phased in from 2005 - 2007.

Print and digital publishing : The cost reductions offset a decline in Q3 print publishing revenues, but Bob Meyers, EVP and President of Media said that the company couldn't support double-digit losses. "We've seen significant declines in circulation and ad revenues, and we want to evolve the print model to balance the costs ... We've lowered paper manufacturing costs, the staff reductions, the outsourcing of certain functions, and next year we'll have a special summer double issue that will incorporate July and August in one package."


By Tameka Kee
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