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Playboy pins hopes on clubs, license deals in Asia

By KELVIN CHAN,AP Business Writer

POSTED:
LAST UPDATED: 04:26 a.m. HST, Dec 27, 2010



MACAU — February marks the start of the year of the rabbit in the Chinese lunar calendar.

It may be an auspicious sign for Playboy Enterprises Inc., which opened a nightclub in Macau last month as it seeks to expand its business by licensing the trademark bunny head logo on lifestyle products in Asia, its fastest growing region.

The company, founded by Hugh Hefner in 1953, also plans to open a Playboy Mansion in 2012 in Macau, a former Portuguese colony on the southern coast of China, and has been busy cutting deals to sell Playboy-branded merchandise across Asia.

Its namesake magazine, which is banned in China and defunct in Indonesia due to violent backlash from Muslim hard-liners, has struggled with competition from the Internet, losing readers and advertisers. Playboy Enterprises hasn't turned a profit since the third quarter of 2007 and last month reported that losses widened to $27.4 million in the most recent quarter.

The renewed focus on Asia is something of a do-or-die move for the company as it tries to transform itself from the publisher of a magazine synonymous the world over with centerfolds of bare-breasted women into an entertainment and lifestyle brand.

"It's our biggest and fastest growing market, and obviously there's a mass appeal," said chief executive Scott Flanders. "I think we're more popular even in Asia than we are in the U.S. We're more of a fashion brand. We're more like Louis Vuitton."

Playboy had been trying to open a club in Macau for a long time, Flanders said. The company finally managed to reach a deal with Sands China Ltd., a unit of casino operator Las Vegas Sands Corp., which is led by billionaire Sheldon Adelson.

The 12,000-square-foot (1,115-square-meter) club opened Nov. 20 atop the Sands hotel-casino, staffed by 18 Playboy "bunnies" wearing an updated version of the signature outfit of bunny ears, fluffy cottontail, corset and cuffs.

The bunnies — from the U.S., Australia, Estonia, Hong Kong and Macau — serve drinks and chat with customers. The club, decorated with black tile and dark velvet curtains, features private gaming rooms and offers sweeping views of the neon-lit Macau skyline.

The club aims to attract the wealthy, high-spending Chinese who flock to Macau, the only place in China where gambling is legal.

"We want people to come in, whether they're local or from Zhuhai, Shenzhen, Hong Kong or Guangzhou," said Reggie Martin, the club's general manager, naming several of the surrounding cities.

Macau returned to Chinese rule in 1999, although it has retained its own legal system. It has become the world's biggest gambling market since a casino monopoly was broken up eight years ago.

Martin said the club is aimed at men and women, gamblers and non-gamblers.

"It's by no means even close to being a gentleman's club," he said. The menu features a few localized specialties such as bunny dim sum — Playboy bunny-shaped shrimp dumplings — at 4 pieces for 80 Macau patacas ($10).

The Playboy Mansion that is set to open in another Sands development will sprawl over 30,000 square feet.

Playboy owned and operated more than 30 clubs around the world starting in 1960. They started losing money in the 1970s, and the last closed in 1991. This time around, Playboy is merely collecting a fee for licensing the use of its name on the venue, Flanders said.

Clubs have also opened this year in Las Vegas and Cancun, Mexico, and there are plans for others in Miami and London. Flanders said the company would love to open one in Singapore, which opened its first casinos this year.

By 2011, Asia will account for 34 percent of licensing revenue, double what it was two years ago, Flanders said. By 2012, Asia will bring in $20 million in licensing revenue, he said.

"Asia could be a growth area to Playboy since the U.S. is a mature market and Europe is becoming a mature market," said Steve Marascia, director of research at Capitol Securities.

Marascia said the clubs will help raise the brand's profile in Asia.

"Potentially, as more people in Asia become aware of Playboy, they may want to buy the products offered by (the) licensing unit," he said.

Towels, bedsheets and handbags carrying the familiar bow-tied bunny logo are among the popular items sold in Asia, Flanders said. In Japan, tennis shoes and socks sell particularly well.

Symptomatic of the long-term decline in Playboy's fortunes, its stock has fallen from a high of $32.19 on April 30, 1999, to a low of $1.25 in November 2008. It now trades at just over $5. Its recent gain has been helped by Hefner's offer earlier this year to buy the rest of the stock that he doesn't already own. The board of directors is still considering the offer.

The company tried to open a club in Shanghai but plans fell apart in 2004, ostensibly over a disagreement between investors and local officials.

However, last month it inked a five-year, $50 million deal with Chinese company Glory Rabbit, which plans to open at least 2,000 Playboy-branded retail stores in China. A 2,500-square-foot store Playboy store also opened in Taiwan last month and IMG, Playboy's licensing agent, is working on deals in Japan, South Korea and India, Flanders said.

The efforts could be paying off, analysts said.

"It appears IMG is making progress in Asia and increasing sales of Playboy's products," Marascia said. "This could add revenues to Playboy's balance sheet."






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