Chicago-based Playboy Enterprises announced Tuesday it will outsource all Playboy magazine functions excluding the editorial product and cut about 25 jobs, moves it hopes restore the magazine — expected to lose about $8 million this year — to profitability in late 2011.
American Media Inc., the nation’s fourth-largest consumer magazine publisher, will assume responsibility for production, circulation, advertising sales, marketing and other support services of both Playboy magazine and the company’s other domestic publications, according to a release from Playboy.
“Our goal is to focus our resources on what we do best, which is to create compelling content,” Playboy Enterprises CEO Scott Flanders said in the release. “At the same time, we were looking to partner with companies who can manage the operations of the magazine more effectively than we can as a stand-alone publisher.
“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.”
Under terms of the contract, AMI will be paid negotiated fees to perform functions currently done by Playboy Enterprises, with incentives to increase both advertising and circulation revenue.
Playboy magazine is expected to lose approximately $8 million in 2009, but reduce that loss to approximately $5 million in 2010 before reaching profitability in late 2011, the release said. The company also said that the agreement will result in a fourth-quarter restructuring charge of about $2 million due to the elimination of about 25 positions, some of which will be transferred to new job openings at AMI.
The companies will begin working together immediately with a goal of completing the transition by March 2010.
