from www.ft.com – Hugh Hefner has had a busy week. The octogenarian Playboy founder has been promoting a documentary that charts his life battling censorship and the religious right.

Playboy and Penthouse ThumbnailBut he also found time to reveal to his 300,000 Twitter followers that he was planning to take the adult entertainment company private. “If I can satisfy my minority shareholders, I think taking Playboy private can help reinvigorate the brand,” he wrote. “That’s how we began.”

Mr Hefner’s $5.50-per-share offer values Playboy at $185m. The Playboy founder, who controls 70 per cent of the votes, would need to pay $123m for the shares of the company he does not own to take the company private.

Mr Hefner continues to see value in Playboy, which, like other adult brands, has suffered from the availability of free pornography on the internet. The inability of producers and publishers to prevent free adult entertainment sites from carrying pirated material has caused serious concern in Los Angeles, the unofficial capital of the US adult entertainment industry.

“Playboy, like every adult entertainment company, is experiencing the wrath of the free sites,” says Steve Hirsch, founder and chief executive of Vivid Entertainment, one of the biggest porn producers and distributors.

“The sites have hit every company out there. When you go online and can watch movies for free, it’s very difficult to compete with that.”

Playboy has a different business model from the likes of Vivid, thanks to its flagship magazine, which has been titillating readers for decades, and a licensing business that slaps its bunny logos on everything from shirts and jewellery to men’s underwear.

However, magazine sales are down. Playboy’s average monthly circulation of 202,000 in 2009 was the lowest it has been for 30 years. Advertising revenue at the magazine has also tumbled, falling more than $20m to $51.4m for the year.

Yet Playboy remains an attractive asset and brand, judging by the interest shown in the company by Marc Bell, who owns Penthouse, Playboy’s main rival.

Mr Bell [pictured] is the founder of Globix, a one-time publicly traded internet service company, and also owns FriendFinder, an online dating site.

Hearing of Mr Hefner’s proposal to take Playboy private on Monday, he quickly convened a meeting with his partners to discuss an idea he had considered sporadically for the past seven years. “Do we want to make a run at it?” he recalled asking his team. “It took all of five seconds to say yes.”

Bankers not involved with the deal drama triggered by Mr Hefner’s bid to buy Playboy have laughed off the Penthouse owner’s higher $210m offer. “This guy has no chance,” one said.

But Mr Bell insists his interest is real and legitimate. When interviewed this week, he dismissed concerns about the easy availability of free pornography on the internet. “It’s not a concern,” he said.

FriendFinder is a collection of websites, including AdultFriendFinder, that help people find partners for casual sex. But the company has other interests too. “We own BigChurch.com, the largest Christian dating site in the world,” Mr Bell told the Financial Times.

He says he fell into Penthouse by accident as a creditor when the company was placed into bankruptcy protection. But now that he is in the adult entertainment industry, he believes it is ripe for consolidation. Playboy, he says, is a “very classy brand … but online, it has no presence. You go to any country and you ask: ‘What’s Playboy?’ They’ll tell you what it is. You ask the same person, ‘When was the last time you went to a Playboy site?’ Never. That’s the opportunity.”

If he gets his hands on Playboy, he would have to address the damage being wreaked on the adult entertainment industry by free sites. “DVD sales are down across the industry by 40 per cent,” says Mr Hirsch. “With all the pirated content and the free sites that are out there – plus an economy that’s been struggling – you have real trouble.”

Mr Hirsch said technological advances would be one way to beat the free sites. “I think ultimately all adult movies will be produced in 3D,” he said. “They really lend themselves to 3D. But I don’t think people want to watch an adult movie wearing a pair of 3D glasses. Eventually we will have 3D sets that don’t require glasses.”

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.