Hef should have his way with Playboy shareholders

By Rob Cox
July 12, 2010

No executive satisfies his desires to a greater degree than Hugh Hefner. For half a century the 84-year-old founder of Playboy magazine has cultivated the image of a man who lives life to its libidinous fullness. So it’s reasonable to expect that Hef, now in his twilight, will succeed in having his way with yet one more constituency — his shareholders.

Hefner is offering to buy the 66 percent of the nudie-magazine empire not in his clutches, thereby closing his smoking jacket on public markets and taking the company private. At a 40 percent premium, Hef’s entreaty of $5.50 a share doesn’t look terribly bare, particularly considering Playboy’s $51 million of losses in its last fiscal year.

But the price is closer to Playboy’s initial offering price in 1971 than its all-time high of $32 reached 11 years ago. That performance reflects the steady decline of Playboy’s brand of adult entertainment, or looked at another way, its failure to keep up with sliding standards in decency. Given the efflorescence of seemingly limitless, and free, Internet pornography, Playboy’s relatively tame offering looks downright quaint.

That is presumably why Playboy’s arch-rival in the upper shelf of the magazine racks, Penthouse, is staking out a possible counter-offer. Its parent, FriendFinder Networks, is an adept operative in the online porn and social networking business — if not enticing enough to have fulfilled plans last year for an IPO.

Under new management, Playboy might just achieve its stated goal of “enhancing connection to the 18-34-year-old target market” — the demographic Hef reached successfully in December 1953 with the first issue’s swimsuit snapshots of Marilyn Monroe.

Ironically, though, that’s unlikely to happen because Hef doesn’t appear keen to take Playboy down-market. Playboy’s board warned investors that Hefner’s concerns about the brand, the magazine’s editorial direction and its legacy mean he’s not interested in selling to anyone else.

He has the votes too. The company’s Class B shares — its most widely traded and abundant form of capital — carry no say. Hefner owns 69.5 percent of the voting Class A shares. As Playboy’s annual report made plain in March, Hefner may choose to do things other shareholders don’t agree with.

What Hef wants, he usually gets. It won’t be any different with his company.


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Hey, if he wants to swallow those kinds of losses to his grave, more power to him. There is something to be said for having a legacy that lasts all one’s life… not selling out at the last minute for a chance at one last winner

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