Playboy Reaches Outsourcing Deal With AMI
Playboy Enterprises Inc. (PEI) announced that it would outsource most operations of its namesake magazine to American Media Inc. with a goal of restoring its profitability by 2011.
News of the agreement comes following speculation that PEI was in talks to sell the magazine. The company slashed its rate base 38 percent to 1.5 million effective in 2010 and combined its January and February issues, but admitted that further dramatic steps were needed to stem its losses.
Playboy is on track to lose about $8 million in 2009, according to the parent company. Under the agreement, it expects to reduce that loss to $5 million in 2010 and become profitable in late 2011.
Under the agreement, AMI will be paid fees to handle Playboy’s production, circulation, ad sales, marketing and support services, while PEI will continue to handle the editorial content.
PEI will take a $2 million fourth-quarter restructuring charge related to the elimination of about 25 jobs, some of which will be transferred to AMI, according to the deal announcement.
Playboy will join AMI’s stable of men’s titles, including Men’s Fitness, Muscle & Fitness and Flex. AMI’s other titles include Star and Shape.
“By joining forces with American Media, we will be able to significantly reduce our cost structure and leverage the economies of scale related to manufacturing, distribution and marketing that are available to this large, multi-title publisher,” PEI chief executive officer Scott Flanders said.
