Taking stock of Playboy legacy as Hugh Hefner tries to buy back rest of company

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By Elizabeth Fraterrigo
Sunday, July 18, 2010

The stock certificates for the initial public offering in 1971 featured -- what else? -- a seductively posed bare-breasted woman positioned over the name Playboy Enterprises Inc. Serious investors snapped up the stock, and the novelty factor also prompted the purchase of a lot of single shares, priced at $23.50.

Even then, Hugh Hefner -- founder of the company's flagship publication, Playboy magazine -- had second thoughts about taking his company public. It meant increased scrutiny and a loss of control of the business he'd built from scratch. But the stock offering came on the heels of the company's dizzying success over the previous decade and seemed to portend only further triumph as Playboy assumed a ubiquitous place in the American landscape.

Nearly 40 years later, Hefner -- who remains the company's chief creative officer and still owns most of its voting stock -- issued a proposal last week to purchase the remaining shares of his once far-flung empire and take it private, in an offer that puts the company's value at about $185 million. He is concerned, he says, about Playboy's legacy. But he won't reclaim that legacy without a fight. On Thursday, FriendFinder Networks, which owns rival Penthouse magazine, announced a competing bid of $210 million.

Hefner's effort to regain full control of Playboy Enterprises follows more than a year of downsizing, outsourcing and talk of selling the company. Taking the company private would give him the chance to watch over Playboy magazine and the company he has said he intends to pass on to sons Marston and Cooper.

But Hefner, 84, is not your average octogenarian taking stock of his life: He has always been keenly interested in his own historical significance. The collection of scrapbooks in which he meticulously documents his existence numbers more than 2,000. More than anyone, then, he must know that his legacy extends well beyond the continued publication of Playboy magazine or the proliferation of the rabbit-head logo on T-shirts and watches and casinos. We are living in a Playboy world, and the irony is that the changes Hefner helped usher in have made it more difficult for Playboy to continue to prosper.

More than half a century later, we are far removed from the world in which Hefner first pitched a magazine promising "diversion from the anxieties of the atomic age." He had little money to get his new venture going, only a modest bank loan and the investments of friends and family who provided cash in return for stock in what was then called HMH Publishing Co. It wasn't much of a company. Just a young guy in his Chicago apartment with a typewriter, a cache of letterhead, and a sense that there was more to life than marriage, fatherhood, and some corporate job to support the wife and kids.

For Hefner, like many others, the much-touted domestic bliss of the postwar years was illusory. He crafted a magazine he thought he might like to read, a diversion from adult responsibilities with a well-heeled bachelor as its hero. He filled its pages with Playmates -- the girl next door, who wanted to have sex! -- along with irreverent humor, topical articles and features on expensive liquor, sports cars, penthouse furnishings, attire: all the things money could buy in an abundant postwar society. By the end of the decade, Hefner's guidebook to the good life reached more than a million readers each month.

In 1960, springboarding off the immense popularity of the magazine, the first of dozens of Playboy Clubs opened. Millions bought membership in the nightclubs, where young women outfitted in skimpy satin "bunny" costumes with rabbit ears and cottontails waited on customers. Executives soon set their sights on more distant horizons. By the early 1970s, in addition to running nightclubs, resorts and casinos, Playboy produced films, published records and books, and owned a modeling agency, movie theaters, a limousine service and a line of Playboy products. The 1971 stock offering generated cash to finance these many ventures.

But the hope that everything the rabbit touched would turn to gold was soon dashed.

Playboy had cheered -- indeed, had helped propel -- the nation's transforming social and sexual norms in the 1960s. By the 1970s, a thriving singles scene had replaced the familial orientation of the '50s. Sexual conservatism had given way to sexual permissiveness. Consumption had become a national pastime. In 1972, Playboy's circulation peaked at 7 million. In this new cultural climate, however, Playboy was no longer all that special. The changes that fueled its explosive growth now hastened its decline.

Even as feminists lambasted the objectification of women in Playboy's clubs and in the magazine, the Playmate appeared quaint, the bunny, passé, in comparison to raunchier stuff found on newsstands and in movie theaters. The image of the playboy in his penthouse, so hip in the 1960s, also seemed outdated. And who needed a magazine to learn how to live the good life? Americans were already pursuing it with abandon.

In the latter half of the decade, Playboy lost circulation to more graphic upstarts Penthouse and Hustler. Playboy Clubs, many in declining urban areas, lost money, as did other troubled undertakings. As the company posted losses, its stock price slumped to a few dollars a share. Thus began a long process of corporate belt-tightening. But the company often still failed to report a profit, even as it continued to publish a top-quality magazine.


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