Playboy's L.A. profits: never mind Chicago - future of the company is right here.

Alexis Fairchild was nervous. Blond and dressed-to-thrill in a tight mini-skirt and clinging boots, she recently showed up for an audition at the offices of Mystique Films Inc., a low-budget film factory in Playa del Rey owned by Playboy Enterprises Inc.

"I've done a lot of modeling and I want to get into the movies," the 23-year-old from Denver explained.

Fairchild walked into a studio office where the vice president of production and an assistant directed her to read some lines from a script. Less than two minutes after the videotaped audition, she was thanked and told that they might be in touch.

But probably not right away. Very attractive but not enough acting experience was the verdict.

Playboy may be headquartered in Chicago, where the magazine is published and was founded in 1953, but it's in Los Angeles where most of its profit-generating action is centered.

The company cranks out movies, operates cable and satellite television divisions and produces a variety of TV programming for U.S. and overseas markets. Even the magazine has a major presence here, doing everything from editing articles to operating Santa Monica photo studio where many of the centerfolds are shot.

And of course, L.A. is home to publisher Hugh Hefner, who began the empire 44 years ago in Chicago, but who lives at the Playboy Mansion in Holmby Hills with his second wife, Kimberley, and their two young sons, Marston, 7, and Cooper, 6.

In a recent interview, Hefner was garbed in his trademark attire: a pair of black silk pajamas and crimson smoking gown. "I'm still wearing them," said the company's chairman emeritus. "Once I found out that I could get away with it, I kept wearing them."

Playboy has evolved significantly since Hefner's swinging bachelor days, and the company's multi-faceted entertainment group is the focal point of that change.

"It's what Wall Street analysts and many inside the company believe to be the driving force," said Richard Rosenzweig, executive vice president of Playboy Enterprises.

Indeed, the Beverly Hills-based entertainment group had fiscal 1997 revenues of $74.7 million and operating income of $18.2 million. Those margins dwarf Playboy's publishing division, which had '97 revenues of $137.7 million but operating income of only $8.4 million.

The entertainment group is also growing far more rapidly than the publishing business, which has stayed flat for years. The $74.7 million revenue figure for '97 is up from $51.7 million just three years ago.

"The real growth is going to be in the entertainment division," said Dennis B. McAlpine, an analyst at New York-based Josephthal Lyon & Ross. "It's pay-per-view, cable, and the emergence of international cable networks."

Much of the success comes from a simple enough formula: Make cheap, sexy movies that can be sold throughout the world and recycled repeatedly as markets open up.

At first, Hefner wasn't easily convinced.

"There was some initial resistance," said Tony Lynn, president of the entertainment group, who was hired by Playboy Enterprises Chairwoman Christie Hefner and is credited with much of the turnaround.

For years, Playboy's entertainment side was mired in either theatrical releases that bombed (remember 1971's "MacBeth," directed by Roman Polanski?) or adult-oriented trifles like the "Playboy Stripoff" cable show that Lynn says "were perishable and had no afterlife."

"I was able to persuade (Hefner) because we were not in the theatrical business and we knew we had the ability to reach a much broader array of networks that exist today than existed previously," said Lynn, a former MGM-Pathe Communications executive.

Hefner is aware of the tilt to the West Coast and the effect technology is having on reshaping Playboy.

"There was a point in time, long ago, when we were convinced that the Playboy Clubs and the resorts and the casinos were going to be the tail wagging the dog," he said. "I think the secondary sources of income will increasingly be the major sources of income."

The entertainment group covers an array of areas including:

* Worldwide television: Cable and satellite hook-ups are key to Playboy's global strategy.

"We feed our satellite networks in the United States from L.A.," Lynn said. "We look to build a state-of-the-art digital playback and uplink facility to feed all of our networks around the world from Los Angeles."

The new facility, Lynn said, will likely be in Playa del Rey or the South Bay.

This year, Playboy launched a Latin American network in partnership with the Cisneros Group of Companies in Mexico. The Latin American networks have the potential to reach 70 million TV households.

"The reason why we have been so successful in countries like Venezuela and Brazil is that the Playboy brand has huge awareness," said Lynn.

Almost all the Playboy programming for overseas ventures in Latin America, Europe and Asia is produced in Los Angeles.

* Impulse Films: The movie production company, which uses production facilities throughout Los Angeles, is a wholly owned subsidiary of Playboy.

Impulse produces about a half-dozen adult-oriented films a year for Playboy's worldwide TV and cable operations. Playboy invested $30.7 million in 1997 for original programming for its U.S. and international networks, 20 percent more than in 1996, according to company filings. Impulse has budgets of about $2 million per film.

* Mystique Films: The company churns out 90-minute movies for less than $500,000 a film. "We use young talent from the American Film Institute, USC and UCLA film schools," said Dick Rosetti, a former Fox Television movie executive who is on his way to becoming the Roger Corman of eroticism. "We give people a chance."

* AdulTVision: Playboy buys edited versions of X-rated movies for TV distribution here and overseas for its AdulTVision channel. The programming was created to compete with Spice Entertainment Co.'s Spice and Adam & Eve pay-per-view networks. These channels had been undercutting Playboy TV in the pay-per-view marketplace. "AdulTVision was created to protect the flagship brand and it is doing that," said Lynn. "It is profitable and in Latin America, quite profitable."

* TV production: Playboy has deals with a number of independent producers for original series programming like "Night Calls," a live call-in show for U.S. viewers that is expanding to Great Britain and Latin America. Michael Trikills, who produces "Night Calls," also produces the Playboy Video Centerfolds for sale in video stores and the video profiles of such stars as Pamela Anderson Lee.

Mike Boyar, who runs a New York-based investment firm that bears his name, is bullish on the direction of the entertainment group.

"That's where they will be making the lion's share of their revenues," he said. "In 10 years, they could have a film library worth $200 million."

And Playboy can expand easily because it has no long-term financing obligations and only $4.5 million in short-term borrowings.

"They don't have tremendous needs for external financing and they have virtually no debt," said Stuart Halpern, an analyst with Furman Selz LLC.

Halpern believes the company's core business will be the entertainment group because of advances in program distribution.

"There is tremendous growth potential in Latin America, Spain, portugal, Japan, Scandanavia, Britain and Germany," he said.

All of which offers bottom-line potential.

"If you look at each one of the company's businesses, as if you were a purchaser," said Boyar, "you would pay significantly more than what the market value is."

Playboy in L.A.

* Videos: Video centerfolds are produced and marketed out of Los Angeles. Video programming for Playboy's TV networks is also produced in L.S.

* Films: Playboy operates two film companies, Impulse and Mystique, which produce low-budget adult-oriented films for domestic and international distribution.

* Magazine: Most of the centerfolds are shot at Playboy's Santa Monica photo studio, as are pictorials of celebrities. The Playboy Interview is commissioned out of the magazine's Beverly Hills offices.