The main activities of this division are special editions, books, calendars and the licensing of international editions of Playboy magazine. Playboy magazine has been the men magazine leader, during the 1970s. However, over time the magazine has progressively lost his dominant position and market share to other men magazines that focus on a modern men image, also including general interest topics but much less nudity than Playboy. The Playboy Entertainment Group is a division of Playboy Enterprises that includes Playboy TV and Playboy Online, which is the fastest growing revenue source for the company.
The Entertainment segment develops, produces, acquires, and distributes various feature films, magazine-format shows, Web-based entertainment experiences, and DVD products. Lastly, the Licensing business represents about the 10% of the company revenues. The related operations consist in licensing the Playboy name, the Rabbit Head design and other images, trademarks, and artwork, for various men’s and women’s apparel, men’s underwear and women’s lingerie, accessories, cigars, watches, jewelry, fragrances, and home fashions.
The company’s trademarks, which are renewable periodically, include Playboy, the Rabbit Head Design, Playmate and Spice. This segment makes even more evident how the main asset of the company is its image, the power of its brand and the iconic status that it embodies. In order to contextualize the company’s problems and be better able to assess its strategy we are going to use the five forces analysis to get better understanding of the external environment in which the company operates.
Then, we will discuss what the resources and capabilities of the company are and how they can be utilized in the best way. Five Forces Analysis According to Porter’s framework, the profitability of an industry can be considered as determined by five forces of competitive pressure. These five forces of competition include three sources of “horizontal” competition: competition from substitutes, competition from entrants, and competition from established rivals; and two sources of “vertical” competition: the power of suppliers and power of buyers (Grant, 2007). Competition from Substitutes
The level of competition deriving from the availability of substitute products is particularly evident in the Entertainment business. As previously mentioned, the internet has provided a new source of substitute competition that has proved devastating for a number of established industries. Travel agencies, newspapers, and telecommunication providers have all suffered increased competition from internet-based substitutes. In particular, the main problem for Playboy concerns the availability of free adult material through websites based on sharing among users.
Thus, it has become very easy to download both soft and hard pornography. Since the pornographic products are not really differentiable, the internet has brought boom in the industry of sexuality. The spread of high-speed Internet connections, that could be considered as a strong opportunity for this industry, have simply allowed people to download free movies more quickly, and allowed amateur moviemakers to upload their creations easily. Moreover, the internet has provided also another instrument to obtain these products for free: the peer-to-peer servers.
The software allows directly exchanging files regarding any kind of content (music, videos, documents, films) without paying any kind of fee. Thus, the only reason for a consumer to still subscribe a contract with Playboy is given by the loyalty to the brand and by the fact that the widely recognized brand still guarantee a certain level of quality and service in the entertainment. Threat of Entry In the Publishing and Entertainment business the threat of new entrants is pretty high since the principal sources of barriers to entry are quite weak.
First of all, regarding the Publishing industry, the capital requirements to start the business are not so prohibitive to represent a serious barrier. Furthermore, economies of scale can be considered as an advantage for established companies within this sector. However, the requirement of materials and the cost of the artistic and printing operations are not so relevant to justify a real concern about this issue for firms which aim to start the business. Moreover, the fact that the products are minimally diversified represents an advantage for new companies aiming to operate in this sector.
So, it is possible to state that the threat of new entrants for the Publishing business is absolutely relevant. Furthermore, regarding the Entertainment industry the threat of new entrants is considerable and, in a certain sense, even more crucial. The entry barriers in the entertainment sector are even weaker since the internet has introduced a series of instruments that almost nullify the capital requirements and all the possible sources of absolute cost advantage owned by the established firms.
Moreover, given the low possibility of differentiation of the products, new entrants to such market do not have to spend heavily on advertising and promotion to gain levels of brand awareness similar to that of established companies. Rivalry between Established Competitors Regarding the Publishing business, and particularly the market of “laddy” magazines, the industry is not very concentrated. This sector presents several important players such as Maxim, GQ, FHM, Sport Illustrated, Esquire, Details and Men’s Health, which try to gain market share overcoming each others and so creating a high level of competition.
Within this scenario Playboy still plays a relevant role, even though its retro image is no more able to widely appeal consumers. Playboy’s main competitors, Maxim and GQ, continue gaining market share thanks to the proposal of a new and fresh image of iconic men and ideal lifestyle, a more modern model to follow and trendy status to show. On the other hand, in the Entertainment business the main established competitors are also facing difficulties because of the previously mentioned availability of free contents.
However, more traditional pornographic companies, such as AVN Media Network, Nectar Entertainment and Penthouse are strongly pushing on the issue of quality. They seek to differentiate themselves from makers of inexpensive films by selling with fancier packaging in stores or through slicker Web sites, and by using better equipment and more experienced directors and performers. This approach is creating a certain level of competition for the upper side of the market among those established companies which try to gain though their brand recognition (Richtel, 2007). Bargaining Power of Buyers
we believe that this could be put the brand image at stake.
We suggest that Playboy should continue to capitalize on its brand popularity via licensing. However, the company should do so by seeking out reputable merchandisers and retailers. Playboy should be more selective in choosing licensing partners and collaborate only with those that can convey a consistent high-class, luxury brand image. This can be done by collaborating with more reputable brands. An example would be licensing the logo to Victoria’s Secret and creating a Playboy collection. Another possibility would be licensing to Ritzenhoff, a German high-end glassware producer, which collaborating with
Playboy art directors could create aesthetic high-quality Playboy signature collection. Replacing Hugh Hefner Hugh Hefner is not only the founder and the strategy tailor of Playboy but he epitomizes the ideology and the values of the brand. Hugh and Playboy are synonyms and the brand is loved also because Hefner and his lifestyle are loved and admired by many. However, the time when he will no longer be around for the company is approaching. Obviously, the corporation does not want to ponder upon those gloomy times but we think it is crucial to resolve this issue.
It is a very important point as although Hefner’s successor, like Hugh himself, will not be engaged in the daily business s/he will serve as an ambassador and the public face of the company. Thus, we think that exactly now is the right time for Hefner to announce his ideological successor and personally introduce him/her to the public and to the business. Certainly, Hefner’s follower should be someone who shares the same charismatic personality as the founder but at the same time is able to give a more modern vista of the brand.
Thus, we would suggest that Hefner’s role should be undertaken by his sons, Marston (19) and Cooper (18) who show interest in the company and are already popular in the media (CNN, 2008). This move would bring a fresh perspective to the company and at the same time would allow the Hefner family to continue being associated with the company. This is logical as after all, this is essentially a family business, founded by Hefner and managed by his daughter Christie for 25 years. Conclusion Playboy is one of the most recognizable brands in the world and its logo is probably as famous as the Nike swoosh.
This, however, did not help the company stay out of financial perils. There is not a single reason why Playboy did not manage to maintain its glory and profitability, marking its history till the 70s. Throughout the years, there have been multiple changes in the external environment of the company. According to us the most important one is the social change that occurred, making nudity and sexuality a commonplace. Playboy however did little to change its content and thus suffered loss in relevance, being perceived as outdated in the new cultural environment.
At the same time many emerging competitors acknowledged this shift and managed to capitalize on it at Playboy’s expense. Also technological change happened. The advance of the internet largely affected all businesses. However the music and the publishing industries are seen as the big losers to the fast and free of charge access to data. This time, Playboy tried hard to stay competitive but is still struggling due to the vast and unregulated online competition. This brings us to the conclusion that that relying on brand awareness cannot be the sole source of comparative advantage and profitability.
In today’s dynamic environment Playboy should develop more sources of differentiation and constantly adjust its strategy to respond to shifts consumer preferences and technological developments while at the same time maintaining a clear and consistent brand image. As suggested in our recommendations this means that the magazine should be more adaptable to existing and potential customers by offering different content and strategies for different geographical locations. Appendix 1: Sales EBIT Total Net Income EPS 12/08 292. 15 -165. 91 -156. 06 -4. 69 12/07 339. 84 6. 85 4. 3 0. 15 12/06 331. 14 4. 78 2. 29 0. 07 12/05 338. 15 3. 26 -0. 74 -0. 02 12/04 329. 38 13. 83 9. 99 0. 3 12/03 315. 84 -2. 59 -7. 56 -0. 31 12/02 277. 62 -8. 59 -17. 14 -0. 67 12/01 287. 58 -28. 33 -29. 32 -1. 2 12/00 303. 36 -31. 4 -47. 63 -1. 96 12/99 347. 82 -6. 43 -5. 57 -0. 24 Appendix 2: Exhibit 1: Lena Soderberg on the coverpage of Playboy’s best selling issue ever, selling 7,161,561 copies published in November, 1972. Source: Photoshop News, 2007 Exhibit 2: Playboy. com visitor base compared to fhm. com and maxim. com: October 2008- April 2009 Source: Alexa, 2009
Exhibit 3: Playboy. com visitor base: October 2008- April 2009 Source: Alexa, 2009 References: Alexa. (2009). Website statistics. Retrieved on May 28, 2009 from www. alexa. com Bauer Media. (2008). ABC Magazine Circulation Figures 2008. Retrieved on May 23, 2009 from http://www. bauermedia. co. uk/Press-Office/News/Jan-Dec-and-Jul-Dec-2008-ABCs/ Business Week. (2002). Playboy’s Synergizer Bunny? Retrieved on May 24, 2009 from http://www. businessweek. com/bwdaily/dnflash/may2002/nf20020524_7212. htm Business Week. (2003). Playboy Survives Its Midlife Crisis.
Retrieved on May 20, 2009 from http://www. businessweek. com/bwdaily/dnflash/aug2003/nf20030820_1555_db014. htm Business Week. (2008). Christie Hefner Is Leaving Playboy. Retrieved on May 24, 2009 from http://www. businessweek. com/bwdaily/dnflash/content/dec2008/db2008128_900186. htm Brandchannel. (2003). Playboy Exposed. Retrieved on May 27, 2009 from http://www. brandchannel. com/features_profile. asp? pr_id=125 Financial Times. (2007). Sales blow for men’s magazine market. Retrieved on May 23, 2009 from http://www. ft. com/cms/s/c851d31e-bd5e-11db-b5bd-0000779e2340 Financial