Playboy plans major changes as losses plague business

With the advertising market remaining tightfisted and consumer spending slow, Playboy is under loses and planning to implement drastic changes.

The changes may include cutting its circulation and reducing the publication frequency, said Jerome Kern, interim chairman and chief executive of Playboy Enterprises Inc.

The company might raise the price of its $5.99 flagship monthly, and is also planning to merge its July and August issues into a single edition to be able to save on printing and distribution costs.

The company posted a loss of $13.7 million, or 41 cents per share compared with a loss of $4.2 million, or 13 cents per share, in the same period an year ago. U.S. revenue went down 16 percent to $13.5 million while advertising sales at the print and digital unit plunged 26 percent.

The company, which has already said it would be open to discussions about an outright sale, expects the ad sales to be down 39 percent in the current quarter.

Though officials at Playboy are hopeful that the magazine’s bottom line will improve this year from 2008, Kern said that the performance is not acceptable and they definitely need changes to keep going.

"It is clear that this company cannot continue to sustain significant losses in a business that now comprises less than one quarter of the company's revenue base," Kern said. "As a result, we are looking at making radical changes to the magazine business model, from lowering the rate base, to increasing prices, to reducing frequency."

Since last October, the company has laid off 25 percent of its staff members in an attempt to cut costs.

Between 2002 and 2008, Playboy lost about 600,000 readers and is now struggling to stay afloat in the digital age.

Hint of a new Playboy CEO
Kern, who took charge from Christie Hefner, daughter of founder Hugh Hefner, earlier this year, also acknowledged the need for a new CEO.

In the upcoming board meeting, the selection of a CEO is slated to be the major topic of discussion. "I'm not sure when a decision will be announced, but I'm confident that there will be a full-time, not interim, CEO hosting the next earnings call in August,” Kern said.