We all know what Playboy is.
In fact, try to imagine a time when you didn’t. Almost impossible, isn’t it? Whether you read the magazine or not, you grew up with an awareness of its existence. Perhaps you even had a subscription, or maybe you just picked up an issue every now and then to “read the articles.” To this day, Playboy continues to be globally ubiquitous. Unfortunately, ubiquity doesn’t always translate to prosperity.
Just how bad a situation Playboy found itself in as recently as 2008 might shock you. “The company was losing about a million dollars an issue,” says Scott Flanders, the man Hugh Hefner brought on board to take control of the business after daughter Christie Hefner stepped down as CEO in December 2008. To make matters worse, Playboy’s stock had reached a new low earlier that spring, trading at just under a dollar a share, and was at risk of being delisted from the New York Stock Exchange. To say Flanders had his work cut out for him would be a hilarious understatement.
Of course, Flanders didn’t fall into this role by accident. A 20-year veteran of the media industry with a resume listing a plethora of titles including president of Macmillan Publishing, chairman and CEO of Columbia House Company, and CEO of Freedom Communications, Flanders possessed the skill set and experience to hit the ground running—a consensus the Playboy search committee came to after a painstaking selection process that lasted six months and vetted more than 180 candidates. “The board expected me to deliver a wholesale turnaround strategy for the media business,” Flanders says. “Hef was very dissatisfied with the trajectory of the business when I came in—he made it very clear to me that it was my job to reverse that trend.”
Saving Playboy meant more than revamping its flagship magazine. Way more. Over the years, as the company adapted to meet the demands of a digital age—and an evolving consumer— it had expanded its brand to include TV, video, web, and radio properties, as well as a licensing business for consumer goods like apparel and cosmetics. But with a global workforce of just 585 employees, it had spread itself too thin and lacked the in-house expertise to dominate in all those markets simultaneously. “Playboy saw itself as a global media enterprise when in fact it was sub-scale in every one of those segments,” Flanders says.
In the time between Christie Hefner’s departure in 2008 and Flanders’ first day in July 2009, a grim notion had permeated Playboy’s board and led it to decide that the company needed to cut its losses immediately. The solution: scrap the magazine and sell the mansion—two of the brand’s most iconic assets, which together formed the very foundation of the empire.
Certain of this, Flanders—acknowledging that he’d been hired to do something drastic—acted accordingly, disregarding the board’s recommendation. “My first two decisions were that both the mansion and the magazine were critical to maintaining and driving the relevance of the brand in the future,” he says. “I realized that, while we needed to [stem] those losses, the magazine was still the cornerstone of the brand.” He viewed the mansion as being almost equally important to Playboy’s image. “I went to some of the parties and saw how valuable, how desired it is,” Flanders says. “We want to be a mainstream lifestyle brand that’s experienced through both print and digital content, but also through the experiences we deliver—and that includes parties at the mansion.”
Now, with the magazine and the mansion on his back, Flanders needed to figure out another way to turn a profit, and time was running out. So he turned to what had always worked for him in the past. “[My best ideas] don’t come to me when I’m at the office,” he says. “I’ll get on the stationary bike and not even put on headphones, and as monotonous as that may seem, there’s something about it that frees my mind for kind of random connections. I’d say that’s when I do my most inspired thinking.” A former marathoner, Flanders is a self-professed exercise enthusiast. “The most fascinating thing about Scott is that he’s got this tremendous sense of work–life balance,” says Kristin Patrick, Playboy’s chief marketing officer. “He makes it a point to work out every day, and encourages all of us to do that, too.”
Flanders soon hit on the realization that, while Playboy’s consumer licensing business was far more profitable than its media properties, it accounted for just 13% of the company’s business model. Seeing his opening, he began selling off chunks of the media operation and focusing on partnerships to develop the licensing model. “It was clear to me that we needed partners who could operate those businesses more efficiently and effectively than we could,” he says. And with that decision, everything began to fall into place.
Three years later, from an operations standpoint, Playboy was a new company. “When I came in, the media business was around 87%, and consumer licensing was about 13% of the business model,” Flanders says. “In the third quarter of 2012, licensing was 74%. of our business.” And who’s driving the majority of those profits? Women—a discovery that led to a partnership with cosmetic giant Coty that, since the fall of 2009, has built Playboy an astounding $200 million bath-and-beauty business. On the apparel front, bringing in agency powerhouse IMG has caused profits to multiply tenfold in China alone; and Flanders has even bigger plans for Asia this year.
The kicker is that Playboy is now doing with a lean 165-person staff what it couldn’t do three years ago with an organization almost four times the size. And by bringing all the personnel together in a swank, new Beverly Hills office—and taking the company private for the first time since the ’70s—Flanders has brought Playboy back full circle, returning it to its debonair roots without sacrificing the magazine, the mansion, or the integrity of the brand.
Financially, Flanders’ mission has been a success: One year after his hiring, Playboy had gone from a deficit to a $10 million profit, and in 2012 the company quadrupled that. Flanders has preserved an iconic piece of Americana for the next generation. Now we’ll all have to wait a little longer to find out how the story ends.
At the end of the day, it’s always been about the original playboy Hugh Hefner.
“One of the popular misconceptions is that Hef spends all of his time with his girlfriends,” Flanders says. “The U.S. print magazine continues to be developed and edited in house under Hef’s leadership. He still spends an important part of every day working on the magazine; he’s still involved in every pictorial selection, and in the selection of the articles. He’s an active editor-in-chief, even at 86.”
Playboy’s founder also played a key role in the brand’s rejuvenation by initiating its shift to the private sector in 2011—a move that gave Flanders the freedom he needed to execute his strategies. “Being unburdened of our status as a public company gave us the ability to accelerate the changes that needed to happen,” he says. “If I were to credit a single person for facilitating the turnaround, indirectly, it would have to be Hef.”