Playboy: Teaching an old bunny new tricks

Can Playboy Enterprises successfully retool its image and its business model?

It's a whole different world since Hugh Hefner's ground-breaking magazine with nude centerfolds helped usher in the so-called Sexual Revolution of the 1960s.

In recent years, with a rapidly changing culture and the availability of sexual content nearly everywhere on the Internet, it appeared the whole once-hip "Playboy Lifestyle" marketed by the company had become as passé as an old Rat Pack movie.

So, Playboy is facing twin challenges: to remain both culturally relevant and financially viable in a fast-changing world.

As a recent Wall Street Journal report pointed out, that job has fallen to Scott Flanders, who became Playboy Enterprises' CEO in 2009 and is the first chief executive from outside the Hefner family. He has brought in changes that are apparently rattling some long-time employees, including taking the company private, moving it to Los Angeles from Chicago, cutting staff by 75% and outsourcing a considerable part of its business.

In 2011, Playboy closed a deal with Luxembourg-based "adult entertainment" giant Manwin, which took over the operation of Playboy's TV and online businesses. Vintage Playboy centerfolds and covers now adorn pricey designer T-shirts from fashion's Dolce & Gabanna. Both moves, according to the WSJ, are part of Playboy's efforts to reposition its brand as less smutty and more aspirational.

Perhaps an even bigger deal in the works is a partnership with Apple (AAPL). The Journal says Playboy has put together its first iPhone app, containing no nudity but instead "featuring lifestyle tips, articles from the magazine and, of course, photos of beautiful women."

The company's licensing revenue has soared from $37 million in 2009 to $62 million for the year ending in September. But as the WSJ points out, "the revenue stream is often uneven." The digital and TV content Manwin controls is reportedly not generating enough revenue. And the closing of the Palms Casino's Playboy Club has taken away an additional $4 million in annual licensing payments.

Standard & Poor's, according to the WSJ, believes Playboy is performing below expectations and recently warned it might downgrade the company's credit rating.

Flanders himself has come under fire. He underwent sensitivity training after a female employee filed a complaint against him for verbal abuse.

But he told the Journal it wasn't a matter of abuse but of straight talk. Playboy, he said, was a company that "required radical change financially, but also culturally" when he came on the scene -- and that he told employees "in very direct language" that "they were part of the problem."

As for his company's prospects, Flanders told the WSJ that Playboy would be "well-positioned to pursue a public offering" toward the end of 2014.

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