Playboy Enterprises Inc. hasn’t had any luck attracting a buyer, but the slumping adult entertainment company had no trouble seducing its new chief executive.
“It was irresistible,” incoming CEO Scott Flanders said in an interview Tuesday. “It’s hard to envision a job I wouldn’t have left for this opportunity.”
Flanders, 52, is defecting from Freedom Communications Inc., a newspaper publisher and television station owner where he has been CEO for the past 3½ years. He will take the helm at Playboy July 1 under a four-year contract that includes a starting salary of $875,000, with annual raises of $25,000.
As a long-term incentive, Flanders is getting 150,000 shares of restricted stock and 1.2 million stock options that won’t fully vest until July 2013, unless the company is sold before then.
Playboy announced Flanders’ hiring Monday, filling a void that opened six months ago when Christie Hefner decided to end her 20-year stint as CEO of the company founded by her father, Hugh Hefner 56 years ago. The Chicago-based company’s interim CEO, Jerome Kern, then indicated Playboy would be willing to listen to buyout offers.
But apparently no one was willing to pay a price enticing enough to get a deal done, even with Playboy’s current market value hovering around $100 million. The company’s shares fell 3 cents Tuesday to close at $2.94.
As CEO, Flanders said he will listen to any serious bidders, but stressed he is more interested in attracting business partners to license Playboy’s bunny logo and other assets.
Licensing accounted for about 14 percent of Playboy’s 2008 revenue of $292 million, which Flanders believes barely taps the potential of a world-famous brand created by the elder Hefner, who remains Playboy’s chief creative officer and largest shareholder.
Flanders thinks the 18-month-recession will make it easier to lure new partners because “more companies are more open to new opportunities in times like this.”
Still, Flanders knows he will have his hands full as long as the economy is sagging.
Like other owners of print publications and broadcast media, Playboy’s revenue has been plummeting as more advertising shifts to the Internet and the recession crunches marketing budgets.
With revenue falling more than 20 percent during the first three months of the year, Playboy suffered a first-quarter loss of $13.7 million. That followed a $156 million setback last year.
Flanders has been dealing with some of the same challenges at Freedom Communications, whose 33 daily newspapers are anchored by The Orange County Register in southern California.
“What has been happening at Playboy is endemic to every media company,” Flanders said.
Besides his media background, Flanders also has connections to deal makers.
He was CEO of the music-and-video mail order service Columbia House when it was bought in 2002 by the private equity firm The Blackstone Group. Flanders left Columbia House after Blackstone sold the company Bertelsmann in 2005. Blackstone and the Providence Equity Group are currently two of Freedom Communications’ biggest shareholders.
Playboy unsuccessfully tried to persuade Providence Equity to buy the company for $300 million, according to recent report in the New York Post.
Flanders said he was unaware of any possible talks with Providence Equity or any other private equity firm.
“That has not been part of any discussions that I have had,” he said. “All the talk has been so far has how we can build and monetize the Playboy brand.”