Playboy to share Net wealth with IPO

The company intends to sell a minority portion of its Playboy Online unit, which operates Playboy.com, in an initial public offering of common stock. Playboy intends to file a registration statement with federal regulators later this year and will offer the IPO in early 2000, depending on stock market conditions.

"We believe the sale of a minority piece of this business to the public will create the currency needed to continue to build a top-flight senior management team and to make acquisitions and alliances, allowing us to grow this business even more aggressively going forward," Playboy Enterprises chief executive Christie Hefner said in a statement.

The company also said it intends to create a separate site for Spice, the X-rated cable TV network Playboy recently acquired.

Playboy has made strong strides on the Net in recent years. The company's Playboy.com--marketed as a "destination site" for men--offers pay-per-view content, chat rooms, e-commerce sales of food, wine, and cigars, and is one of the few successful monthly subscription-based sites on the Web.

Playboy's expanded Net efforts come amid more sluggish performance in its flagship magazine. Ad revenues fell in the 1980s and its circulation base slid from 6 million in 1972 to 3.15 million in 1977.

"Playboy is arguably the strongest brand in the adult content space, both online and off," said Aram Sinnreich, an online content analyst at Jupiter Communications. "They've been one of the few successful sites in leveraging subscriptions. While it's a minority of their revenue, it's a consistent part of their revenue."

Analysts credit Playboy with creating a content site that keeps frequent users returning. The company also has begun courting women to its online sites.

"They have been pretty innovative in establishing an online presence. It's not just their core [magazine]," said Matt Page, director of Internet consumer research for Strategis Group. "They're developing sort of a portal, by trying to be many things to many people."

Playboy is not alone in its quest to capitalize on Internet mania. Many other media companies are considering a spin-off for their online operations. Time Warner, Disney, and Microsoft all have weighed their options for spinning off their Internet businesses.

Time Warner, in June, said it was considering taking some of its Internet assets public. It later decentralized its online operations, perhaps clearing the way for a Net IPO. Disney also is preparing to spin off its Net properties, while Microsoft continues to ponder a tracking stock for its online offerings.

"As for spinning off the online unit, that's something that a lot of traditional media companies are considering to take advantage of the bull market in technology stocks," Sinnreich said. "That's clearly what the story is here. It's no big surprise. It's not a bad idea."

But the capital markets have become increasingly wary of Net companies with big promises, and recent Internet initial public offerings have not enjoyed the same success as their predecessors last year.

"I think it's a little late," said the Strategis Group's Page. "I think if they'd have done this a year ago it would have been hot in terms of getting capital."

Still, analysts believe Playboy has a strong management team and understands the Web, making it an attractive IPO.

"They've got the content. They've got the brand. They've got the staying power. What else could you want?" Sinnreich said.