So the big move from Playboy Enterprises (NYSE: PLA) has come, not in the form of a transformative deal as I have been exhorting them to do, but as a restructuring. It is closing down its DVD division, and is on a quest to reduce its cost structure by approximately $12 million on an annualized basis, “20 percent more than its previous estimate of $10 million, in light of current economic and media conditions,” it said in an SEC filing late today. The company says it wants to get to profitability next year. As part of this restructuring, it will eliminate about 80 positions in the company, 25 of which were open.
The company will take a restructuring charge of $2 million, and will take reserves of about $4 million against archival material and a receivable. The resulting $6 million in charges against operating income for Q308 is expected to result in a net loss for the quarter, it said.
CEO Christie Hefner sent out a memo to employees, outlining the changes at the company, and it’s pasted after the jump. From the memo: “We will also respond to changes in how consumers access content and advertisers use media. Thus, we will continue to deliver more of our content digitally, using our assets across multiple distribution platforms and adding more a la carte offerings. Given the declines in the DVD market, we will exit that business in phases over a few months to concentrate on selling that content online.”
“To further reduce our cost structure, we anticipate consolidating space in Los Angeles, subletting our Santa Monica facilities and moving those employees to Media Tech. We expect to significantly reduce travel and entertainment, as well as premium and overtime….the management incentive plan will not pay out, and all of us will forgo profit-sharing payments.
Memorandum to All Playboy Employees
From Christie Hefner, Chairman and Chief Executive Officer
October 15, 2008
Dear Fellow Employees:
During the employee meetings earlier this year, I outlined the challenges facing the media industry and our company, including increased competition for consumers