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July 11, 2002 07:56pm
Playboy's New Strategies Drive Sales
Source: Reuters/Variety
by: Bob Tourtellotte

(LOS ANGELES, CA) -- Adult entertainment company Playboy Enterprises Inc.'s home video unit has seen steady gains in sales in the nine months since it was restructured, company executives told Reuters.

Faced with declining sales last year, Playboy hit the pause button on it's video unit and spent several months revamping it with three new product lines for an increasingly fragmented audience.

The unit also began shopping for a smaller distribution company, ending a distribution pact with Universal Studios, a unit of giant Vivendi Universal. Universal had a large video business of its own, and Playboy felt its videos weren't getting enough attention.

The result was a 30-percent year-over-year sales boost in the 2001 Christmas holiday season and another 30 percent hike in the first six months of 2002, Playboy said.

"We had the best fourth quarter we've had in years. It surprised all of us. In the first quarter, we kind of watched and held our breath to see if it would hold, and it did," said Tony Borg, sales and promotion director at Playboy Home Video.

The division makes up a small part of Playboy's total sales but its improved prospects come as good news for the company, which has struggled in recent years with a loss-making online unit and a mature business at Playboy magazine.

Playboy's widely traded Class B shares were near annual lows on Thursday, off 2 cents at $12.80 on the New York Stock Exchange ( news - web sites), along with a recent rout in media stocks.

Home video revenues, which had fallen 19 percent in 2000, regained their footing in the 2001 fourth quarter, pushing total video revenues for the year up 11 percent to $9.6 million, out of total Playboy sales of $291 million.

The 2001 jump was on 11 new titles, compared with 21 titles shipped in 2000 and 16 titles in 1999.

Playboy declined to give projections on future sales, but current shipment plans call for the video unit to release 46 titles in 2002, according to Borg.

A Video Take Two

In June last year, Playboy had two product lines: its main Playboy Home Videos with Playmate and celebrity features, and the Eros line of movies with erotic stories and nudity.

Industry watchers said the videos were too similar with little variety within each product line.

Playboy changed its strategy by developing new product lines to cater to each taste.

Under the new strategy, the Eros line and its movies, and Playboy Home Video remain basically intact with features like the "Women of Enron" video/DVD debuting on July 16, closely following the "Women of Enron" issue of Playboy magazine.

In addition is a third group of videos from Playboy TV channels with adult stars like Juli Ashton, and a fourth brand, Playboy Exposed, which uses footage of live events and amateurs to capitalize on the reality TV craze.

Despite the four-fold rise in titles over 2001, Playboy has held the line on costs.

In October, Playboy signed a new distribution pact with Image Home Entertainment Inc..

"We're a bigger fish in a smaller pond," said Leshtz. "We get a lot of time, attention and nurturing to our account."

Image can focus on product placement within video and music stores, shelf space, re-orders and, greater service to the account.

Playboy also revamped pricing to make its videos and DVDs more profitable for retailers.

Finally, the unit is benefiting from the booming DVD market with a product mix shift from 70 percent video/30 percent DVD in late 2000 to about 75 percent DVD/ 25 percent video currently, Borg said.

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