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Playboy refocusing on clubs

Good move especially when it didn’t work the first time.

from – In the three months since Scott Flanders [pictured] took over for Christie Hefner as chief executive of Playboy Enterprises Inc., he has come to a simple conclusion about its magazine, TV and digital media businesses:

Tough way to make money.

So in the coming months, Flanders will be placing his bet on two long overshadowed operations: product licensing and Playboy clubs.

In an exclusive interview this week, Flanders outlined his new plan to turn around a struggling Chicago icon that flirted with the sale block shortly before his arrival.

Flanders said he can significantly boost revenues from licensing the famous Playboy brand on apparel and other consumer products, especially in emerging economies overseas.

But the biggest upside, in his view, can’t be found in the tired magazine, hard-core sex videos or Playboy TV channel that were his predecessor’s focus. Instead, he sees the future in a throwback to the company’s past: Playboy clubs.

Flanders is pursuing joint ventures with proven operators to launch new nightclubs around the world and, he hopes, restore the company’s financial luster after a string of losses.

Playboy presently has just one club in operation — at the Palms Casino Resort in Las Vegas. But it’s going strong despite the recession, he said.

Flanders wants a rollout numbering in the “double-digits” over the next few years, he said. That will include new venues opening in Mexico within months, in Miami next year and in Macau during 2011.

Playboy will supply the rabbit-head logo and attendant cachet, he said. “Exploiting our brand will increasingly become our core business.”

Still controlled by 83-year-old founder Hugh Hefner from his mansion in Beverly Hills, Playboy hired Flanders after showing the door to an interim CEO who spoke openly about selling the company. Flanders’ outsider status — he formerly ran newspaper chain Freedom Communications Inc. — made him a bold pick at a company headed by the founder’s daughter since 1988.

“I’m sure Hef will say, ‘Let’s see what this guy can do,’ ” said analyst Steve Marascia, director of research at Capitol Securities Management in Virginia.

The new club-and-licensing strategy “sounds good,” Marascia said. “But that’s a real change. What if somebody else’s club is hotter? Where will they get the capital to build all these clubs? Looks like they’re going to trade one set of challenges for another.”

In fact, similar challenges nearly sunk Playboy in the mid-1980s. At its peak, the company owned or licensed dozens of clubs frequented by one million “key-holders,” but the operation aged badly. Around the same time, its highly profitable casinos fell to a hostile regulatory environment, and indiscriminate licensing put the brand on car air fresheners and other cheap products.

Over the past decade, Playboy’s licensing effort has moved upscale, becoming a consistent moneymaker. Flanders this week promoted licensing guru Alex Vaickus to the new post of president, with instructions to grow. “We under-resourced licensing and treated it as a nice-to-have ancillary business,” Flanders said. “We believe licensing could be a lot bigger for us.”

Vaickus also is charged with unifying the media operations that even today rarely work together by using the same content across all platforms, Flanders said.

Playboy has no plans to shut the magazine, but has hinted at drastic cuts in frequency, circulation and pages. Playboy TV has room to grow, Flanders said, and the company’s subscription Web sites have held their own against piracy and competition from free sites.

Still, Flanders leaves no doubt about where Playboy will be looking for action. “There is no segment of our business that will grow as rapidly as our location-based entertainment,” he said.

The night life beckons.


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