Is Playboy selling itself? Company reportedly in talks with Iconix

Playboy Enterprises's (PLA) shares soared more than 60% after Bloomberg News reported that the pioneering adult publisher was in talks to sell itself to Iconix Brand Group (ICON), the owner of Candie's and London Fog clothing brands. The news may sit well with investors now, but if it really happens, it could mean the end of Playboy magazine as we know it.

News that the Chicago-based company may be seeking a suitor is hardly a shock. Longtime CEO Christie Hefner, the daughter of company founder/icon Hugh Hefner, was forced out after failing to stem losses at the flagship magazine. Bloomberg reports that the board has been looking for a buyer since June, when it hired Freedom Communications CEO Scott Flanders, to replace Christie Hefner. Both Playboy and Iconix declined to comment on reports of a possible sale.

However, something seems amiss about this rumored deal. Iconix, a so-called brand management firm, owns a portfolio of arguably un-sexy clothing labels. Playboy's publishing and television operations don't really seem to fit the mold. Producing high-quality fashion bearing the Playboy logo is a far cry from producing high-quality smut, and I can't help but wonder: Would such a deal mean Iconix will try to sell Playboy's publishing and TV operations? Could it mean the end of Playboy magazine? And what about Hef? Will he stay on as an adviser to the new management or retire to the Playboy Mansion -- which the company owns -- and live out his golden years in hedonistic bliss?

These and many other questions are prompting investors to temper their initial enthusiasm about a possible deal. Shares recently retraced much of their earlier gains, notching a more sober 27% increase, at $3.62. Interestingly enough, Playboy's stock is still cheaper than the magazine's cover price.

No matter how everything plays out, it seems certain that Playboy's decline will be studied by generations of business school students to come. Playboy used to be a formidable force in the publishing world until the Internet and free online pornography arrived. As the competition flooded in, the company failed to differentiate its product. Now, it's struggling to stay afloat.

No Longer a Cultural Force

"Following a second-quarter loss of $9 million and a 15% drop in revenues, the company's listing flagship brand now seems officially desperate for advertisers, for subscribers, for publicity -- for anything," writes my colleague Bruce Watson in a recent post on the company's desperate attempt to boost newsstand sales by putting Marge Simpson on the cover.

But perhaps the saddest part of this business school case study will be the rise and fall of Hugh Hefner. Before he became a Viagra-popping womanizer, Hef was an important cultural force. He published literature -- that's right, people really did read Playboy for the articles -- from the likes of Vladamir Nabokov in the magazine's glory days. Hefner funded the legal defense for friend Lenny Bruce, a comic whose battle against obscenity charges paved the way for the likes of Howard Stern.

Then Hef got complacent. Only in the last 10 years or so has his reputation truly devolved, chasing after women young enough to be his great granddaughters. If only he used that energy to save Playboy instead of filming episodes of "The Girls Next Door," then perhaps his iconic empire would have a better shot at surviving.

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