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NEW YORK — Hugh Hefner may as well have been sitting on a throne.<br><br>In fact, he was sitting at a table on the third floor of Henri Bendel on Wednesday night, diligently signing copies of a coffee table book filled with 50 years’ worth...



NEW YORK — Hugh Hefner may as well have been sitting on a throne.

In fact, he was sitting at a table on the third floor of Henri Bendel on Wednesday night, diligently signing copies of a coffee table book filled with 50 years’ worth of Playboy photographs. The line of fans — and the fact that Hef will appear in Ecko Unlimited’s spring ads — testify to his aura. Not to mention the larger, intangible essence of an idea named Playboy, which is more able to generate excitement (and cash) than a 50-year-old magazine of the same name.

This story first appeared in the December 5, 2003 issue of WWD.  Subscribe Today.

Playboy is celebrating its golden birthday in its January issue — at 318 pages, it’s the largest in 15 years — and Hefner was in town for a colossal party Thursday night at which Pamela Anderson was due to give the toast. But the more interesting anniversary may be the first-year one of editorial director James Kaminsky, who was poached from Maxim in fall 2002 and promptly began much-needed renovations under the very watchful eye of Hefner.

This week, Kaminsky said he’s only 60 percent of the way through a gradual overhaul of the magazine that he always expected would take two years. But the consensus among Playboy insiders past and present is that he’s done a good job — the writing is sharper, newsstand sales are up and ad pages are multiplying again, thanks to the anniversary issue — and that these gains are all ultimately modest ones.

Despite Kaminsky’s bravado at the outset (“I would not be doing my job correctly if [growth] did not happen,” he said at the time), there haven’t been any flashes to suggest Playboy the magazine is a sleeping giant ready to start selling a million copies on the newsstand and reclaim its former glory. Although Kaminsky may successfully rehabilitate Playboy’s aura, its finances have settled into middle age.

“Growth in the long term will come from our electronics businesses,” said Playboy Enterprises chief executive officer Christie Hefner. “Publishing doesn’t have the earnings potential that pay TV in the Eighties did, and online in the Nineties and now does.”

Through the end of September, Playboy Enterprises had revenues of $224.7 million, up from $204 million the year before. Playboy magazine and its ancillary titles accounted for a little over a third of that, with $83.8 million, while the entertainment division contributed $100.5 million and online and licensing operations produced the rest. When it comes to profits, the gap is even wider — the magazine yielded just $2.9 million in operating profits during that span, while the other divisions minted $17.7 million.

Hefner said she expects the company’s online division to gain more traction in 2004 after finally breaking into the black this year, which quite possibly could make the magazine the least profitable of its four divisions.

Is there anything Kaminsky can do to change that? He’s facing a golden opportunity to strike back against his former colleagues at Dennis Publications, whose Maxim and Stuff, along with EMAP’s FHM, redefined the men’s magazine market in the Nineties. FHM’s growth has slowed and Dennis is distracted by its launches, Blender and The Week, which rapidly drain Maxim of the cash it generates.

But Playboy hasn’t been able to mount a counterattack. Newsstand sales are up, but not that much — 4.2 percent in the first half of the year, to an average of 404,228 copies — and incomplete scan data indicates it’s selling roughly 450,000 copies per month now, according to an executive at one of its rivals. Maxim may be declining on the newsstand, but it still sells more than 800,000 every month.

And Playboy’s numbers still largely depend on the abilities of its celebrity wranglers to land just the right C-lister, reality TV star or, best of all, a wrestler to produce the big sales that balance out the clunkers. Enticing them can be expensive — the magazines’ editorial costs rose $1.4 million through September, in part because of “celebrity expenses.”

Playboy is also about to come under fire from the next wave of men’s books, the trendy consumption handbooks like Cargo from Condé Nast and Vitals from Fairchild Publications (owner of WWD and, like Condé Nast, part of Advance Publications), and other titles in the works by Ziff Davis and the independents. “I don’t perceive them as a threat,” Kaminsky said, “but I think they’re tapping into something relevant. We’re working on a new back-of-the-book that’s been in the works long before I ever heard of Cargo. It’s a a consumer’s guide to buying stuff, everything from cars to travel.”

Other coming attractions in 2004 include a revamped feature well and a new Playboy Forum that bows in February’s issue.

He’s been able to do it all while still finding time to manage up to Hugh Hefner, who’s now a continent away after Kaminsky transplanted almost all of Playboy’s editorial operations to New York from corporate headquarters in Chicago (and Hefner rarely leaves the Playboy Mansion in Los Angeles). Hefner still reads every inch of copy, sources said, but doesn’t interfere with stories, preferring to send Kaminsky memos with comments after each issue. He’s more concerned with protecting the magazine’s anachronisms — the centerfolds, cartoons and its look and feel.

If there’s anything holding back Kaminsky’s efforts, it’s the “classic” design that appears to have never met a Macintosh. But it’s not entirely his fault — art director Tom Staebler and photography director Gary Cole go back decades with Hefner, and wield enough influence that they were able to stay in Chicago after their colleagues decamped to Kaminsky’s headquarters in New York. “Those guys tend to deal now with Hefner rather than Kaminsky,” said a source close to the magazine.

But their work walks a very thin line between kitsch and retro cool, and the former is not particularly conducive to selling ads. Playboy will actually end 2003 up in ads, thanks to the 50th-anniversary issue and its buildup — the company expects to end the year up 11 percent in ad revenue and eight percent in pages, according to government filings. While the new issue contains a sea of liquor and tobacco ads, largely absent are fashion, grooming, watch and automotive brands — the staples of GQ and Maxim alike.

Noticing this, the company replaced publisher James Dimonekas in June with former New Yorker publisher Diane Silberstein, who said electronics, automotive and grooming are at the top of her wish list for 2004. She’s raised 2004’s open page rate four percent to $140,000 a page (Maxim’s is $167,000), and while advertisers are excited about the changes, she said, the big selling point remains, as always, Playboy’s 3.2 million circulation reach.

So what’s next? While Playboy executives are fond of pointing out that the Bunny is the most recognized brand among upscale Chinese, the reality is that Playboy has a market capitalization of only $450 million, a founder who controls the voting shares and has assumed substantial debt. Its interest payments, amortization and other debt service payments turned the $20 million operating profit Playboy earned through September into a $500,000 net loss.

Playboy floated a $115 million public debt issue in March to reinvest in the magazine, finance the online operations and expand its licensing business — including designer apparel sold at Henri Bendel and Selfridges in London, and a Playboy concept store in Tokyo. The company still had $25 million left to play with at the end of September.

“We’ve been very fortunate,” Christie Hefner said, “that money has been there for us whenever we’ve needed it. I’m sure that will be the case as we go forward.”

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