Turning a Page For Playboy.

Chairman and CEO Christie Hefner leverages the company's familiar brand as she forms alliances and uses technology to tap into new global markets

PLAYBOY is intertwined with the sexual and pop consciousness of America over the last half century. Like Coke and Marlboro, the Playboy bunny has proven to be a popular brand that is easily exportable around the world. Founded by Hugh Hefner, the company for more than a decade has been run by his daughter, Christie. While not as high profile as her father, the company's CEO and chairman is the force pushing Playboy's businesses into new media and new markets.

Supported by its print magazine, Playboy has successfully dodged the dot-coin bullet. While Playboy.com is far from profitable, Hefner sees new online alliances with Sportsline.com and Ladbrokes' eGaming Ltd. as the key to tapping lucrative new markets and complementing other electronic ventures.

Hefner oversees policy, management and strategy across the diverse multimedia empire that Playboy has become. She joined the company in 1975 and worked in a variety of the company's businesses before being named president in 1982. In 1988, she was elected chairman and CEO of the New York Stock Exchange-listed company.

During her tenure, Hefner has restructured operations, eliminated unprofitable businesses and pushed for Playboy's expansion into electronic and international markets. Her vision for the future is a complete one, leveraging off the Playboy brand and utilizing the technological innovations that the new millennium has brought. Playboy is a Chicago-based company, but it has a significant West Coast presence and a facility in Beverly Hills. The company is positioning itself to be a larger player on Los Angeles' entertainment scene.

Question: Into what new strategies of advertising, marketing and distribution are you going to be taking the Playboy brand?

Answer: I think that one of the really critical decisions that the company made was leveraging to become a bigger publishing company. The Playboy Channel is the biggest, most profitable business that we have, and at the same time, it has the most value yet to be created over the next three years. We're in front of 20 percent of the analog cable homes, and 100 percent of the digital homes. So, as cable goes digital, we're going to get into all kinds of systems. At the same time, we've taken our franchise and brand asset and chosen to leverage them into new electronic media. That choice has put us in position to have much more growth at higher margins than if we'd launched new magazines instead.

Q: What sort of margins are you looking at exactly?

A: A good publishing company runs a 10 percent margin. We believe that we can sustain a margin over 20 percent on the television side.

Q: You seem to be pursuing two different angles by getting into online gaming as well as your recently announced "Instant Access" video-on-demand service. Is that too much to bite off?

A: Actually, they're all related in an interesting way. The growth of usage of the Internet created the opportunity to take Playboy online. That led to online gaming. It's a $3 billion business. No one with a brand name is in it. It's legal in many countries outside the U.S., and we have partnered with a topflight U.K. company to operate it out of Gibraltar, which is a very well-regulated environment. We will launch next month with sports betting and follow quickly with casino games online, tournaments, parimutuel betting, poker games and really original entertainment in all the countries in Europe and Asia and Latin America where that's legal.

Q: What about video-on-demand?

A: On one hand you have interactivity online, which is what you need for online gaming, and on the other hand you have increased interactivity with the television, which is what you need for video-on-demand. It's really the next generation -- from subscription to pay-per-view. Because we create nearly all our content and own it, we can package it in many different ways for the consumer.

Q: The first thing you think of when you think of Playboy is the magazine, but with so much else going on, is that something that will be overshadowed over time?

A: I don't think so. I think that it will remain the heart and soul of the company. It reaches 15 million readers every month through the U.S. and all the international editions, which is a huge number. It really is the flagship; it really does define the Playboy lifestyle and the idea of Playboy's connection to pop culture.

Q: No danger of the glossies being phased out by the Internet?

A: I think quality entertainment magazines like Playboy will coexist with the electronic media. I think that we've been in it long enough to say that with confidence. There are certain sorts of publications, like a TV Guide, that are going to have trouble justifying their existence in a world where everyone has electronic guides, but I don't see that Playboy magazine will either be less popular or less important to the company. Frankly, the new businesses help us. We're selling a lot of subscriptions to the magazine online and using the magazine to promote subscription to the Playboy Cyberclub online.

Q: Speaking of the Playboy lifestyle, is our society getting more liberal?

A: I think that we're clearly in vogue right now. Playboy videos are sold in Blockbuster; Playboy advertisers include Hilton and Ralph Lauren and Evian. We are sort of in the mainstream of society at the same time that we retain our, you know, fun sexiness that is distinctively Playboy. I think that in ways, America has caught up with the rest of the world.

Q: What is Playboy's presence in Los Angeles and what is the importance of L.A. to the company?

A: I am very committed to Los Angeles, and it's a result of that that we have the very large presence and headquarters space that we have here. They're about 130 employees on staff. We have the production facility, the photo facility and, of course, the mansion facility. We're very committed to L.A. because we feel it is the entertainment capital. We've produced 1,600 hours of original programming over the last decade, and that's the lifeblood of our networks all around the world. And those are produced here -- we're not running off to Canada.

Q: What about Playboy Entertainment Group and your vision for it?

A: We have our own production facility, which comes at a time when the convergence of what's possible online and what's possible on TV -- especially reality TV -- creates all kinds of creative opportunities. Through prior relationships from when we first acquired Spice (cable channel), we've cut a new deal to have a digital facility for uplink broadcast, playback, online TV 24/7 on a stage that's 150 by 120 feet. So we can ramp up four shows continuously. Playboy TV, a la the CNN newscenter in Atlanta, will be able to be live any number of hours in the day that we want it to be, with an anchor cutting to any number of the places or shows where we have cameras. Television will provide the core entertainment, with the Internet as a supplement.

Q: How did you develop your Internet strategy?

A: We launched the site in 1994, which made us the first national magazine to go online. Other magazines were licensing their product through a bigger service provider, like AOL. We didn't do that because I felt from the beginning that the idea of the world of Playboy online was a very big idea, and we didn't want to give some other company creative and commercial control over it.

Q: What about IPO dreams?

A: We did announce an IPO in the period of time when the investment bankers were telling everyone who had traffic that you were crazy not to spin off your online company and, frankly, I couldn't get good people to come work for me without options in a dot-com company. So we said we would do a spin-off and we proceeded to file papers and were getting ready to do that when the market crashed.

Q: Is an IPO something that you would consider again?

A: As the CEO of a publicly traded company, you have to always say you'll do whatever creates the greatest value for shareholders. What we're in the middle of doing now is a private placement to bring incremental money into Playboy.com from strategic investors, not from the public.

Christie Hefner

Title: Chairman and Chief Executive

Organization: Playboy Enterprises Inc.

Born: Chicago, 1952

Education: B.A., Brandeis University

Career Turning Paint: The day in 1975 that my father suggested I come to work for Playboy instead of going to law school. He made me an offer I couldn't refuse.

Most Admired Person: Katherine Graham, chairman of the Washington Post Co.

Hobbies: Tennis, skiing, piano, theater and travel

Personal: Married; no children