LOS ANGELES — Two high-profile adult entertainment companies this week announced staff cuts and restructuring. Both Playboy Enterprises and Zivity blamed a slumping U.S. economy for their budgetary crunches.Playboy said in an October 16th SEC filing that it will shutter its DVD division and transfer its distribution focus online.
“We will also respond to changes in how consumers access content and advertisers use media,” Playboy Chairman and Chief Executive Officer Christie Hefner wrote in a memo explaining the changes to employees. “Thus, we will continue to deliver more of our content digitally, using our assets across multiple distribution platforms and adding more a-la-carte offerings. Given the declines in the DVD market, we will exit that business in phases over a few months to concentrate on selling that content online.”
In addition, the company plans to eliminate 80 staff positions nationwide. Twenty-five of the positions were vacant at the time of the announcement.
“To further reduce our cost structure, we anticipate consolidating space in Los Angeles, subletting our Santa Monica facilities and moving those employees to Media Tech,” Hefner wrote in the employee memo. “We expect to significantly reduce travel and entertainment, as well as premium and overtime…. [T]he management incentive plan will not pay out, and all of us will forgo profit-sharing payments.”
The company indicated it expects the moves to reduce costs by about $12 million annually; the figure is 20-percent more than the $10 million Playboy previously predicted it would need to cut. A net operating loss is projected for the third quarter of 2008, the company said.
However, Hefner does not believe all is bleak in Playboy-land.
“Unlike many other companies that began in print, we have profitable television, online and mobile businesses, which have domestic and international growth potential,” she wrote. “We have seen strong profit growth in our licensing business, and we expect that growth to continue. This fall, the largest fragrance company in the world, Coty, will begin a global launch of Playboy fragrances, backed by a television and print campaign. Playboy at the Palms continues to perform well, in spite of a generally weak Las Vegas market, and we are building out our even larger project in Macau. With a record number of localized editions of Playboy around the world, we have never had higher magazine sales overseas, even while the U.S. edition remains the best-selling men’s magazine as it approaches its 55th anniversary. We will launch a marketing campaign next year to highlight the re-launch of Playboy.com and the integration of our magazine and online businesses.
“The company is well-positioned to weather these difficult economic times,” she continued. “Our balance sheet is strong, our debt level is reasonable with a below market interest rate of 3-percent, and we have a solid cash position of more than $25 million and access to a $50 million revolving credit agreement. Our goal is to return the company to solid profitability in 2009.”
Zivity, a startup social network that describes itself as “a community-powered showcase of female beauty,” announced on the same day that it has cut its staff of 22 by one-third, to 14.
Zivity co-founder Cyan Banister described the across-the-board staff cuts as a preventative measure to ensure the company remains fiscally competitive in a shrinking capital market. The company has raised a total of $8 million in venture funds over the past year.
Zivity’s website remains in private beta, although Banister predicted it will go live during the first quarter of 2009.
