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Playboy Deal Lays Bare Ongoing Shift to Licensing

Magazine circulation may be shrinking, but the Spanish-speaking population of the United States is growing.

Faced with those trends, Playboy Enterprises Inc. last week struck a deal with L.A. magazine producer Arbol Publishing to publish Playboy Latino. Arbol is slated to launch its version of the magazine in December and will initially publish every two months.

The move by Playboy, a brand that is not as lustrous as it was in its heyday 40 years ago, marks another step in its evolution from publishing and entertainment empire to licensing business.

The flagship magazine hit its peak circulation of 7.2 million copies in 1972, and has more recently seen circulation fall below 2 million. The addition of a Spanish-language version will likely be of incremental benefit.

“It’s very costly to publish a magazine,” said Edgardo Iorio, Arbol’s publisher. “Advertising is a major issue today. It’ll take a year or two to break even.”

Still, Iorio is confident his investment will pay off in the long run. About 15,000 readers have already subscribed and he anticipates that figure will top 100,000 before next year.

Arbol is negotiating deals with retailers to get Playboy Latino on their shelves, but right now the magazine will only be available to subscribers. Six issues are scheduled to print next year but Iorio said he expects the magazine will publish 12 issues a year by 2016. He has hired a dozen people to launch the magazine and said he plans to bring on more once Playboy Latino goes monthly.

“We’re going to start on a small, small scale,” Iorio said.

Playboy Latino, he said, will be more than just a translated version of the English-language magazine – though it will include some content from the flagship publication. It will focus more heavily on popular trends in Hispanic cultures, such as soccer instead of American football.

“Just because a Mexican speaks English doesn’t mean he wants to eat a hamburger,” Iorio said. “It’s more complicated than a language barrier.”

The content will include interviews of Latino celebrities, a bit of humor, current social and political issues – and, of course, pictorials of Latinas exposing it all for the camera.

Neither Playboy nor Arbol would disclose the terms of the agreement, but Iorio said his company made a substantial investment and will pay Playboy royalties each month.

Shifting focus

Playboy Enterprises was taken private by founder Hugh Hefner in 2011. That year, it relocated its headquarters to Beverly Hills from Chicago amid a restructuring that saw its staff cut by 75 percent and its focus shift to licensing under new Chief Executive Scott Flanders.

The deal with Arbol comes about four months after Playboy Enterprises announced it had completed key financing initiatives that would allow the company to enter into more licensing agreements.

In June, the company said it had reduced its debt by $35 million since the beginning of the year. At the same time, it replaced old debt with a new $150 million loan and intended to use extra cash to fuel its ongoing repositioning into a “lifestyle” brand.

“By further improving our capital structure with lower cost funding that improves our investment flexibility, Playboy is better positioned to leverage its reinvigorated brand to drive growth in revenue and cash flows through attractive opportunities in global licensing and content, including digital media,” Flanders said at the time.

The deal with Arbol fits with that scheme.

Arbol Publishing produces and distributes four other Spanish-language magazines, each with monthly circulation of more than 2 million. Iorio had the idea to launch Playboy Latino about three years ago but it wasn’t until last year that Playboy agreed to the new venture.

“There’s a void for Spanish publications,” he said. “Playboy was very attractive to us because of name recognition. It’s the most effective and revolutionary publication in this country.”

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