Playboy reports first quarter profit

MUMBAI: Adult entertainment brand Playboy has reported net income for the first quarter ended 31 March, 2006, of $0.8 million.

This compares to a net loss in the prior year quarter of $13.1 million. First quarter 2006 operating income totalled $3.5 million.

Playboy posted an $800,000 profit on revenues of $82.1 million, two per cent down on this time last year.

Playboy chairman and CEO Christie Hefner said, "The continued strong performance of the Licensing Group and growth of the newer digital media businesses of international TV, online and mobile validate not only the appeal of the brand but of our multi-platform business model. However, these promising and fast-growing businesses cannot yet offset the negative trends in our larger domestic TV business."

"Given the changing dynamics of the domestic TV business combined with the challenges in the publishing industry, it is clear that we need to realign our cost structure to perform satisfactorily in this new environment. We are confident that we can make the changes necessary to improve our performance and position ourselves not just for the second half but for 2007 and beyond," Hefner added.

"We expect the weakness in publishing and domestic TV results to continue. These trends, together with the expense of reducing our cost structure, will likely result in a substantial second quarter loss, making it clear that we will not meet our initial earnings projection of $0.67 to $0.70 per share for the year. However, we expect a number of positive developments in the second half including VOD product launches, the opening of Playboy at the Palms and improved advertising sales," Hefner said.

"With these initiatives and a realigned cost structure, we believe that we can deliver a 50 per cent improvement in second half 2006 earnings per share compared to the $0.24 EPS we reported in the second half of last year."

The Entertainment Group reported first quarter 2006 segment income of $7.9 million compared to $11.9 million last year, primarily reflecting weaker performance in domestic TV. Increases in online, international and other business revenues were nearly offset by lower domestic TV revenues, resulting in a one per cent increase in the Group's first quarter 2006 revenue to $51.2 million.

Lower cable pay-per-view revenues for both Playboy TV and the movie networks reflected the continued migration of programming from linear networks to VOD platforms where the company is not yet fully represented and its programming faces more competition. The company said that it also expects future domestic TV revenues to be unfavorably affected by the reduction of channel space on the DirecTV platform. In the international businesses, expansion of the company's UK package of TV networks was primarily responsible for the revenue growth. Online benefited from the acquisition made last fall, which was responsible for the increase in first quarter subscription revenues.

For the first quarter, the Publishing Group reported a segment loss of $2.3 million in 2006, versus a loss of $0.4 million in the prior year. Lower advertising and news stand revenues for Playboy magazine were primarily responsible for the 13 per cent decline in first quarter 2006 revenues to $23.5 million from $27 million last year. The company said that it expects to report a 16 per cent decline in advertising revenues for the second quarter as compared to the year earlier period.

First quarter 2006 segment income for the Licensing Group rose 18 per cent to $4.3 million from $3.6 million in 2005 on a 25 per cent increase in revenues from $6.0 million to $7.4 million. Increased royalty income from European licensees was the primary contributor to the revenue and profit growth.

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