Bunny Hops: SVOD Boosts Playboy

Playboy is learning to hop to a new tune. The adult programmer today reported 2nd quarter net income growth to $1.9 million, compared to a net loss of $3.3 million in the 2nd quarter of last year. Revenues also increased, up 6% to $85.7 million from $80.5 million a year ago. Domestic TV revenues, which includes its VOD and PPV business, reported revenues of $21.6 million, up 4% over last year. Operating income also increased to $3.8 million in the 2nd quarter, compared to last year’s operating loss of $1.2 million in the 2nd quarter.

The Chicago-based company’s turnaround was attributed on today’s earnings call to gaining (at long last) a better understanding on how to market and program its adult subscription video-on-demand business — at the same time that Playboy’s traditional pay-per-view business is receding faster than Hugh Hefner’s hairline. CFO Linda Havard commented on the call to analysts that the quarter’s results are all the more impressive given that "we are incurring increased VOD distribution and carriage agreement amortization expense that we didn’t have last year."

Company chairman and CEO Christie Hefner commented in today’s earnings release that "our domestic TV business has now stabilized as we continue to execute on our SVOD and VOD strategies. With that major profit contributor back on track, we believe growth in our international TV and digital businesses plus continued strong performance in our licensing business will continue to drive operating and net income growth."

She also confirmed that Playboy TV will relaunch on Labor Day with a new look and feel to sharpen its appeal to cable subscribers.

Hefner commented on this morning’s call, "For the past year and a half, we’ve discussed the challenges we’ve faced in terms of reduced market share in our domestic TV business." (CableWorld examined this trend in December’s "XX on Demand" story.)

"The downward slide appears to have been arrested as domestic TV revenues have now flattened," she continued. "The growth in Playboy TV and VOD revenues was a result of a solid increase in the number of consumer buys, indicating the success of the work we’ve been doing in terms of programming, marketing, and customer interface."

Playboy TV has been stepping up its programming, she noted, in order "to differentiate that network by adding new branded programs and presenting a mix of long- and short-form content. The evolution will continue and is designed both to capitalize on subscription video on demand, and to respond to the changing viewing habits of consumers."

The TV brand will be freshened on Sept. 3, she added, a Labor Day renewal when "all three hours of Playboy prime, which is 8-11pm Eastern time, will reflect this new look and attitude. We believe that these changes will both increase Playboy TV’s appeal as a compelling economic value for consumers and encourage operators to market the network as a subscription or FVOD (free video-on-demand) product."

Hefner also addressed how SVOD has changed the way Playboy approaches its TV business.

"[We] have been absorbing what it means to deliver the adult product in this new methodology of VOD, with the different shelf space, the different consumer interface, as compared to the years of experience and extractability of linear adult channels," she commented. "The team that we have in place on the programming and VOD and marketing side, have, as you would expect them to, learned from the early months of performance and data, because one of the advantages of VOD is, candidly, you get better and more specific actionable data, what works, and we have been responding to that."

"On the Playboy (TV) side, I think that what we are doing in terms of the evolution of the channel, is really—as much as anything—in anticipation of what SVOD, as it continues to be rolled out, represents for it," she continued. "It really represents sell-in and a sell-through opportunity. The sell-in is to engage the distribution partners to in fact communicate to the consumers that Playboy is a subscription option. And we think differentiating the network as much as we can with more brand-driven programming and with a mix of programming that will be compelling will help us in that regard. And the sell-through is indeed to make it a compelling subscription option."

Havard noted that some of Playboy’s cable affiliates offer its linear channels—including the recently launched Spice digital networks suite, which rebranded in November to incorporate new brands such as Jenna Jameson’s ClubJenna—in tandem with its VOD product, while other cable markets are phasing out the linear brands to focus on Playboy’s subscription VOD offering.

Playboy doesn’t break out its Playboy On Demand statistics, Havard noted on today’s call. "We don’t give the home counts anymore because they’re not altogether accurate," she said. Playboy’s SVOD service, which launched on Cablevision in Oct. 2002, has since been picked up by cable operators including Comcast, Canada’s Rogers Cable and smaller U.S. cable operators including Mid-Hudson Cablevision.