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With Playboy U, Playboy Fights Slump With Web Site

CHICAGO — Playboy is heading back to school to boost the bottom line. Riding a wave of renewed popularity among consumers around the globe, Hugh Hefner’s Playboy empire is set to launch a sexy social networking site dedicated solely to college students, its latest online venture as it tries to reinvigorate its stagnant finances.

The launch of Playboy U, which has similar features to those found on Facebook, comes as Playboy’s 54-year-old magazine continues to lose money and readers.

To compensate, Chicago-based Playboy Enterprises Inc. is embarking on a one of its biggest expansion efforts in years.

“This is one brand that is relevant to 18 through 81-year-olds,” said Scott Stephen, executive vice president of operations for Playboy’s entertainment division. “We’re looking at this as a way to introduce and escort someone through their adult life.”

Playboy has cozied up to collegians before, featuring parties, promotional events and pictorials of student bodies from across the country. Now, executives hope Playboy U will help build brand loyalty among young consumers.

Backed by a hit cable TV show featuring Hefner’s three girlfriends, a Sirius radio channel and the adoration of young Hollywood stars who are again flocking to parties at the Playboy mansion, the company is trying to grow its licensing business and online presence and build an international fan base that includes a surprising legion of female fans.

Thanks in part to those initiatives, Playboy is gradually returning to profitability after years of operating in the red.

Last year the company eked out a $2.3 million profit, its second-best since posting a $47.6 million loss in 2000. So far this year, Playboy has earned $5.7 million.

But growth has been slow as Playboy wrestles with other struggling units, like its domestic television business that facing increasing competition and losing favor to other video-on-demand offerings. (Playboy executives said they’re working to stabilize the TV unit by offering their own on-demand lineup.)

“They definitely haven’t had the blowout kind of success that you would expect a big brand like Playboy to have,” said Rick Munarriz, a senior analyst with the investment advisory service The Motley Fool. “The brand seems to be having some kind of renaissance around the world yet, financially speaking, it’s not really contributing to the top and bottom line.”

The latest statistics compiled by the Audit Bureau of Circulations show the magazine’s average paid circulation has fallen to just under 2.9 million readers, less than half of the 6.25 million readers who bought the magazine during its heyday in 1974. During the first six months of the fiscal year, the magazine unit lost $4.7 million, 15 percent more than it lost during the same period last year.

Playboy executives said there are no plans to eliminate the publication, even as the company turns its attention to other parts of the bunny empire that include Playboy-themed casinos, clubs and apparel. Next month, Playboy will open its ninth retail store, stocking jeans, jewelry, T-shirts and cosmetics.

After resurrecting its night clubs last fall with the Playboy Club at The Palms Casino in Las Vegas, the company is building “location-based entertainment venues.” A 40,000-square-foot Playboy Mansion in Macau will open in late 2009 and Playboy is eyeing similar projects in London, Atlantic City, Eastern Europe, Mexico and the Caribbean.

Executives declined to say how much they’ve invested in Playboy U, saying only that the effort is “sizable” and that the advertising-supported online community may ultimately bring in revenue.

But when and how long that will take is anyone’s guess, especially as more companies flock to compete with industry heavyweights Facebook and MySpace for the attention of fickle young people. The Web site has managed to get 2,000 members from 500 colleges during early beta tests.

“It’s a very lucrative market,” said Michael Kelman, senior media analyst at Susquehanna Financial Group. “The college kids, they’re going to be better-educated and have higher disposable incomes. (But) it’s been a very, very tough audience to grab.”

The site bars nudity but leaves little to the imagination with pictures from the mansion’s “Midsummer Night’s Dream” party and message topics such as “What Do You Think About Penis Enlargement” and “How Many People Have You Slept With? To Lie or Not to Lie.”

The site has instituted a college-only policy, which bars anyone without an e-mail address ending in .edu from joining. And Playboy U says it will boot any university faculty, staff or alumni or other non-students that it discovers on the site.

In many ways its format is similar to Facebook and MySpace _ people choose to “friend” each other, can post videos and photos or leave messages on a “wall.” But users can also access university-specific pages that list campus events while viewing individual profiles of Playboy U members throughout the Web site.

“Your little brother can’t get in. Your little sister can’t get in. Nor can your mother and father,” Stephen said.

It’s that exclusivity coupled with the Playboy cachet personified by Hefner that Adam Gibson, a 24-year-old public relations major at West Virginia University, likes most about the site.

“They do a really good job at blending in the Playboy lifestyle with the student,” said Gibson, who promotes the Web site to his classmates. “There’s a level of exclusivity to it. And I think that keeps it cool.”

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