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Video-on-demand growth fuels Playboy profit

Chicago- Shares of Playboy Enterprises Inc. jumped the most in nearly three years Tuesday after the Chicago-based company said it swung to a second-quarter profit on rising revenue from video-on-demand and a new club in Las Vegas.

Second-quarter net income was $1.9 million, or 6 cents a share, compared with a loss of $3.3 million, or 10 cents a share, a year earlier. Wall Street had expected the firm to break even on a per-share basis, according to Thomson Financial. Sales rose 6.5 percent, to $85.7 million.

Shares of Playboy added 53 cents, or 5.2 percent, to $10.81, on the New York Stock Exchange, their largest gain since November 2004.

Chief Executive Christie Hefner [pictured] shifted Playboy’s cable-television strategy to offer video-on-demand adult content on a subscription basis, letting viewers pause, speed up and play back scenes.

Licensing, the firm’s smallest but fastest-growing unit, posted a 22 percent jump in revenue, to $11.2 million, largely because of fees from the Palms Casino Resort in Las Vegas, higher royalties from consumer products and the sale of some original art.

“Licensing continues to be a healthy area of growth,” said Michael Kelman, an analyst at Susquehanna Financial Group in Bala Cynwyd, Pa.

“This quarter’s results underscore our confidence that our domestic TV business has now stabilized,” said Hefner. “With that major profit contributor back on track, we believe growth in our international TV and digital businesses, plus continued strong performance in our licensing business, will continue to drive operating and net income growth.”

Revenue at the entertainment unit increased 9 percent, to $51.8 million, bolstered by video-on-demand and sales at European cable networks. Domestic TV sales rose 4 percent, to $21.6 million.

Playboy’s U.S. magazine sales declined 5.9 percent, to $19 million, as circulation dropped 8 percent and advertising revenue fell 3 percent. Overall, the publishing division’s loss widened to $2.3 million from $1.8 million.

“We know publishing is not a growth business,” Hefner said. “We’re ahead of the curve in terms of identifying growth that is not print-centric.” Playboy won’t consider spinning off the magazine or selling it, she said.

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