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Scott Flanders needs to cut Playboy losses, revive the brand; Doesn’t Think Bunny’s in Long Tern trouble

from What tempts a man to leave the top job at one business, and take another at a loss-making company a third of the size? Let’s call it the Playboy effect.

“Yeah, well, my male friends are just . . .” Scott Flanders searches for the right words. “They think . . .”

I help him out. They think you spend your life surrounded by pneumatic Bunny Girls?

Flanders grins. But before I can ask what his wife thinks, he cuts me short. “My wife was the single biggest proponent behind me taking this on. It was tough for me. I had never resigned from a job before — every other business I have run has been sold. But she saw I was excited by the potential.”

Flanders is cradling a martini, discussing the move that raised eyebrows last year. After half a lifetime working his way through big American companies, he threw in the top job at Freedom, a Californian media group, to jump to Playboy Enterprises, the entertainment empire founded by Hugh Hefner and based on its 57-year-old glamour magazine.

Freedom, which runs eight television stations and 34 newspapers and is privately owned, was mired in debt but had revenues of almost $734m (£450m) in 2008. Playboy has a third of that, and is shrinking fast, propped up by licensing income from the famous Bunny brand. Some believe Playboy, listed since 1971, is in deep, long-term trouble. Flanders does not. Why?

“Because I think it is the most undervalued media brand there is,” he says and takes another sip of his drink.

We are sitting in the cocktail bar of his London hotel. He drinks martinis; I drink whisky sours. He calls it “interview oil”. Flanders has flown in from Chicago to cast his eye over possible sites for a new Playboy casino, part of his masterplan for reviving the business.

Until recently that business, split into publishing, entertainment and licensing arms, was run by Hefner’s daughter Christie. Flanders is the first non-Hefner to take the reins. Aged 53, stocky and sandy-haired, he is a quietly-spoken organiser with glacial blue eyes and a well-hidden, ruthless streak.

He lists the late Mirror Group chief Robert Maxwell and Sumner Redstone, owner of Viacom, as two former bosses and, more recently, he has been a favoured Mr Fixit for the powerful Blackstone investment group. Reaching an equilibrium with 83-year-old “Hef”, who still holds 70% of the voting shares at Playboy, hasn’t been too difficult, he says.

And Playboy, which slid to a $156m net loss in 2008, needs radical change. “Hiring me is a statement by the board that they are ready for that.”

But what will Flanders do? Before Christmas, stories leaked that he was negotiating to sell the whole business to Iconix, the branding giant. Then the buyer walked away. There are rumours that private equity is also circling.

Flanders does not deny it, but says: “Hardly a day goes by when we don’t get enquiries from someone who has a great idea about how to capture value from the Playboy brand, and that includes broad interests in buying the company.”

Iconix is the model Flanders may now use to rebuild Playboy. It is a branding specialist with a tiny head-office staff that licenses out a cluster of big names to manufacturers.

Flanders says he is now seeking “partners” for every segment of the Playboy operation. He has already contracted out all of Playboy’s loss-making magazine, except editorial content. He promises it will be in profit by next year and that a decision to shrink to 10 issues a year will be reversed. He is also increasing the number of deals with partners producing international editions.

Recession has knocked the magazine’s circulation down to 1.5m in America, however. Flanders says the key there will be persuading consumers to pay more for the title than its current $5.99 cover price. “Magazines are going to have to pass on more of their costs.”

Next, he wants to license a string of Playboy clubs, modelled on its operation at the Palms in Las Vegas, where the resort owner runs a Playboy-branded casino that turns over $100m a year.

Playboy closed its last casino club in London in 1981 and has long harboured ambitions to return — its London venue was its most profitable. But doubts over gambling laws dissuaded it. Playboy opened a shop in Oxford Street three years ago, selling branded clothes and homewares, but closed it last year. Flanders says a Playboy club is a more logical option.

“Now I’ve got the magazine on a path to profitability, I have no higher priority in 2010 than securing a Playboy club for London. It’ll be the sexiest fun you can have with your clothes on.”

Meaning? “Gaming, dancing, food and adult beverages.” And lap-dancing? Flanders looks appalled. “Of course not, that’s not our brand. This is couples-friendly, that’s what differentiates us.”

Well, up to a point. Playboy jumped into hardcore pornography a decade ago, buying first Spice TV, then Club Jenna in America. To some, it’s been an uneasy mix. And while its hardcore investments made money for a while, free porn and online movies have now destroyed its market.

Flanders says he has no qualms about any of the current content produced by the Playboy group. He has even taken one of his daughters to a Playboy magazine photo-shoot.

Others contend that he will sell the hardcore side soon. Playboy has large debts that must be refinanced in 2012. A rival like Friendfinder, which owns Penthouse magazine and plans a New York listing this spring, may be one possible buyer.

Flanders chooses his words carefully. “I think the pressures of the industry may take us in the direction you suggest, but I’m not going to hasten that … because, as I have said, I have no issue with the content. If it’s successful and it provides an aspirin to the headache that is life for many people, I am loath to deprive them of it.”

Such fancy talk will only impress Playboy’s investors if he can show real progress on profits. Flanders’ experience of licensing deals — he trained as a tax lawyer at Coopers & Lybrand — suggests he might.

The only son of a General Motors executive in Indianapolis, Indiana, Flanders started in publishing 30 years ago, hired by a tax client to help expand his computer book business. That became part of Macmillan, and Flanders swiftly rose to head its American computer publishing arm. There he had to deal with five different owners over 14 years.

One was Maxwell, who bought Macmillan in 1986. For all the damage to Maxwell’s reputation since, Flanders says he found him “a visionary, the first to see the globalisation of media that was coming”.

Flanders later hit the headlines while restructuring Columbia House, an established direct marketer of CDs and DVDs, which was under assault from online competition. He says “streamlining” is too polite a term for what he had to do. “I was the chainsaw guy. Headcount declined from 5,500 to 2,500 — we went from three operating facilities to one — but it needed to be shrunk.”

That caught the eye of Blackstone, which bought into Columbia House, and later asked Flanders to head Freedom in 2006, after it bought out a raft of long-term investors.

And then Flanders jumped to Playboy. Was he offered more money? No, he grins. Nor was it because Playboy’s Chicago base is close to Indianapolis. He just liked the challenge, and he enjoys working with entrepreneurs like Hefner. “Schopenhauer said genius is invisible to those who have none. I want to be the exception to that.”

Freedom’s problems since Flanders left — it filed for bankruptcy and is now in negotiations to restructure its debt, while operating normally — suggest philosophy had little to do with it. But Flanders’ articulate, low-key approach makes him different to most American chief executives.

Other media bosses say he plays his cards close to his chest. “Scott is unusual, in that he will listen and absorb. He’s very good at making you feel comfortable,” says David Pecker, boss of American Media, which is taking on Playboy magazine’s business operations. “But while we were transacting, he was also negotiating with Iconix, and you’d never know — that’s what I love about him.”

Playboy’s shareholders hope Flanders’ skill for treading softly while acting tough will pay off, especially if Hefner, the “chief creative officer”, allows him free rein. But will he?

Some want Flanders to sell Playboy Mansion, Hefner’s home in Los Angeles, which is owned by the business and worth an estimated $40m. Flanders pulls a face. “Sure, Hef’s ready to move into a condo on Wilshire any moment. Ha, ha.”

There is another possibility: using it as a template for a string of global Playboy Mansion entertainment venues. He simply needs to find the right partners. “The Playboy brand is one of the true iconic brands built in the last 50 years. It’s just been under-monetised.”

Anyway, it’s time to go, so we finish our drinks. As we part, Flanders makes a little speech. “Please exercise all poetic licence to make me seem as substantive and articulate as possible. I promise I will not come back at you for that.”

Then he laughs. For a moment he looks like the bookkeeper with keys to the brothel — and that, as he says, is harder work than anyone thinks.

The life of Scott Flanders

Vital Statistics

Born: December 26, 1956

Marital status: married, with three daughters

School: Ben Davis High School, Indianapolis

University: Colorado, and Indiana University School of Law

First job: tax adviser at Coopers & Lybrand

Pay: $875,000 plus 75% bonus target

Homes: California, Colorado and Indiana

Car: white Audi A8

Book: Barbarians At The Gate

Film: Sideways, starring Paul Giamatti and Thomas Haden Church

Music: U2

Gadget: BlackBerry

Last holiday: “Christmas skiing with the family at our Colorado holiday home”

Working Day: THE chief executive of Playboy Enterprises wakes at his home in Newport Beach, California, at 5am. “I do a couple of hours of emails, then work out for 30 minutes,” says Scott Flanders. “Then I’ll drive the 50-odd miles to Playboy’s office in Glendale.” He meets Hugh Hefner every three weeks, “to keep connected”.

Flanders’ priorities are people and strategy. “Hiring and firing is the most important thing I do. Firing is the least fun, but most necessary.” He has reorganised executive responsibilities and now has six executives reporting direct to him. “But I’m disrespectful of hierarchies, and run it as a partnership.”

He doesn’t like to work late. “But you don’t even get started at 10pm in the club business,” he says.

Downtime: SCOTT FLANDERS relaxes by reading. “The best thing about travel is it forces me away from my BlackBerry.” He loves biographies and business books. “I’ve just finished Lords of Finance by Liaquat Ahamed — terrific book.”

He also likes to play golf. “I played Augusta National for the first time last year. Got round in 93, which I was happy with.”

Flanders puts his money into property. “I bought our Newport Beach home in 2006. I’ve spent a lot on a home in Colorado that I don’t go to often, and I have a home in Indiana, where I grew up.”


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