Playboy Enterprises Inc 1 Company Background A branddriven

Playboy Enterprises, Inc 1

Company Background A brand-driven international multimedia entertainment company CEO: Christie Hefner since 1979 • Property in 2002: ØRevenues fell 1% to $66. 1 m ØNet income rose 24% $9. 4 m Company’s six industry segments: -Publishing -Catalog -Entertainment -Licensing(product marketing) -Online -Gaming 2

• Publishing: – The world best selling men’s magazine. Globally 15 m readers – 25 yrs ago franchise publishing in 18 countries (Asia: Japan, Taiwan) • Entrainment: 50 – Playboy TV movie channels available in 113 m U. S cable – More than 20 networks with 50 countries – DVD and home videos available in 200 countries – Top video sales in Billbords 3

• Licensing: – Brand name, Rabbit head logo, one of the most recognized trademarks in the world – Trademark for worldwide manufacture, sale and distribution of a variety of consumer products – More than 100 countries selling playboy brand products • Online – Majority owned subsidiary of PEI – Provide No. 1 lifestyle and entertainment for men on web – Playboy. com, playboy cyber club, playboy store, playboy auction, playboygame. com etc. 4

Mission Statement Playboy is committed to maintaining its position as a worldwide leader in entertainment while holding true to its image of sophistication and prestige. PEI is a preeminent international media and entertainment company with a worldwide recognized brand many windows of opportunity to expand the Playboy franchise and develop other related entertainment franchises globally by leveraging Playboy’s strengths of publishing, brand management, and marketing. 5

External Audit Opportunities 1. Supreme Court ruling enabling sexually explicit channels to air via cable operators during all hours. 2. No other large brandname company offering online betting 3. Adult “pay-per-view” is projected to be a billion-dollar business within the next five years. 4. Culture is generally becoming more comfortable with sexy provocative imagery. 5. Advancements in technology allowing expanded production capacity cost effectiveness. 6. Pornography makes up 35% of all online paid content. 6 7. Less competition in global markets.

External Audit Threats 1. A severe advertising downturn hitting all media companies in 2001, affecting ad revenues. 2. More conservative advertisers typically shy away from nude pictorials. 3. Faces competition from mainstream men’s magazines such as MAXIM on one side, and hard-core pornography publications such as Penthouse on the other. 4. A majority of pornography on the Internet is free of charge, easy to find, and more revealing in its offerings. 5. Increased opposition from family focus groups and women’s rights organizations such as NOW (National Organization for Women) and WAP (Women Against Pornography). 7

Internal Audit: Strengths 1. Remains # 1 men’s magazine with a monthly circulation of nearly 15 m readers throughout the world. 2. Playboy is one of the most widely recognized brand names and logos in the world. 3. The Playboy name holds an image of sophistication. 4 The entertainment division is the company’s most consistent and profitable units, earning $25. 2 m in 2000. 5. Online gaming ventures to account for 5 -10% of Internet revenues in 2001. 6. Purchased 3 XX rated television networks worth $70 m 7. Product diversity—offering licensing, entertainment, 8 Playboy online, and magazine publications.

Weaknesses 1. Playboy mansion in Beverly Hills growing more and more invaluable to the business, requiring $4 m in maintenance costs per year. 2. Online operations yet to return a profit, expected to post an operating loss of 15 -20 million for 2001. 3. Magazine circulation has slipped for 20 years, down to less than ½ of what it was in the 70’s. 4. Company considered conservative in its market. 5. As a female CEO, Christie Hefner has been resistant to the industries shift to more explicit content. 6. Gender bias. 9

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SPACE Matrix 12

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Grand Strategy Matrix 14

Strategies have been used so far: • Playboy has been using a combination of different strategies in different period of time. -Market development ü Playboy’s large variety of products have been successfully distributed globally. i. e. entered China market in 1988 thru licensing (mainly fashion apparel) - Diversification in industry segment ü Catalog, entrainment, Video programs, publishing, online, games 15