De-Hefnerizing Playboy (PLA)

Playboy Enterprises Inc. (NYSE: PLA) has announced that Christie Hefner is stepping down as Chairman & CEO of the company.  Her two-decade reign over the magazine publisher and adult-oriented media and entertainment will come to an end on January 31, 2008.

This might be good for the company as it will bring in a non-Hefner asCEO, but the change may change for the sake of change rather than aninstant cure for a bad business model.  But there are still somefundamental issues with this company over other media companies whichare going to be tough to overcome. 

Playboy finds itself in a place where the magazine business is alreadyawful in a softening economy and at a time when the Internet is takingaway the lion share of eyeballs.  This is the case of most old mediacompanies. Now people can getenough porn or nude photos online for free or near-free that they justdon’t have to pay for a magazine.

Jerome Kern will serve as interim non-executive chairman, while the company searches for a replacement.

Playboy shares closed at $1.75 on Friday and its 52-week trading rangeis $1.03 to $9.81.  Its market cap is now a paltry $58 million. 

The adage is that all empires fall sooner or later.  This empire hasbeen fighting barbarians for years.  The question is if a new CEO willbe able to fight off the invaders.  It won’t be an easy task.

Christie Hefner was not one of our 10 CEO’s To Go for 2009.  She was considered, but the issues of the Hefner ties could have possibly kept her in whether times were good or bad.  But more importantly, a new face here faces the same hurdles.  Those hurdles eventually become the size of a wall.

Jon C. Ogg
December 8, 2008