Playboy Plans to Double Asian Licensing in 3 Years

March 17 (Bloomberg) -- Playboy Enterprises Inc., publisher of the namesake men's magazine, plans to double Asian licensing revenue in three years as it cracks down on counterfeits with a new partner and expands in the region.
The Chicago-based company earns about $10 million a year in Asian licensing fees, Chief Executive Officer Scott Flanders said in a March 15 interview. Counterfeit sales are generally assumed to be “many multiples” higher than genuine licensed sales, especially for the best-known brands, Flanders said.
Playboy has sought partners to operate its cable, magazine production, nightclub and merchandise units as it aims to boost licensing revenue, part of a restructuring plan that Flanders has said will deliver a profit next year. IMG Licensing Worldwide will handle licensing in Asia under an agreement announced last month.
IMG, with a staff of 250 in Asia compared with the four part-timers Playboy was deploying, will patrol counterfeiting and ensure that current licensing partners fully pay fees owed, Flanders said. It will also help expand Playboy's branded goods into South Korea, Indonesia and India, and into new categories such as fitness clubs and small electronics.
Flanders was interviewed at a Dana Point, California, conference hosted by Roth Capital Partners.
More Leverage
The agreement with IMG will give Playboy more leverage to combat counterfeiting, said Rich Ingrassia, a media analyst at Newport Beach, California-based Roth.
“If you're just Playboy complaining to the government, you're not going to get as vigorous a response as IMG, because they're representing a wider swathe of the retail sector,” he said.
Fakes extend beyond merchandise to standalone stores in China, Ingrassia said, “right on the street, with the bunny ears and everything.”
About 300 licensed single-brand Playboy stores operate in China selling men's clothing and other merchandise such as leather goods, while women's gear is sold through department stores and elsewhere.
Time is critical for Playboy because investors could demand early repayment of a bond, Ingrassia said. The company has a $115 million bond with a March 15, 2012, put date, 13 years before the debt's 2025 maturity, according to Bloomberg data. Investors and board members will have “only so much patience,” unless the company can demonstrate progress after posting losses the past two years, Ingrassia said.
Playboy had $240.4 million in revenue last year, including $36.8 million from worldwide licensing. The shares gained 19 cents, or 5.3 percent, to $3.78 at 4:15 p.m. in New York Stock Exchange composite trading. They gained 18 percent this year.
The company spends a “seven-figure” amount on copyright defense every year, Flanders said. There is an upside to the fakes, he said, noting that the cheaper impostors appeal to a broader audience.
“It's often reaching a demographic that would not buy the licensed product,” he said.
--With assistance from Serena Saitto and Shin Pei in New York. Editors: Margot Slade, Cecile Daurat.
To contact the reporter on this story: Lauren Coleman-Lochner in New York at [email protected].

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