Unlikely Bedfellows.

Playboy Enterprises and the Cisneros Group pair up to bring video erotica to Latin America and beyond.

SHOWS SUCH AS "CLUB WILD SIDE" AND "Sexcetera" may not translate easily into Spanish. But Chicago-based Playboy Enterprises and the Cisneros Group, the Venezuelan media giant, are betting that video erotica will translate into a major presence in Spanish-speaking households.

Now heading to TV screens in the United States is Playboy TV en Espanol, a 24-hour channel aimed at the fast-growing Latino market and featuring dubbed versions of its regular English-language programming.

The channel is the latest offering from a partnership that began in 1996 when Playboy and Cisneros teamed up to offer two services in Latin America--Playboy TV and AdulTV. That risque fare now reaches some 5 million homes via either cable or satellite. Last December, the partners took a US$100 million step to expand their activities, forming Playboy TV International to create channels worldwide under the bunny banner. That company is distributing the new U.S. service as well.

For Playboy, the partnership could pump life into the aging bunny brand and help offset the decline of its flagship magazine. For Cisneros, it provides a vehicle for international expansion. "Playboy is a very well known, worldwide brand that dominates the genre and gives us an opportunity to expand globally," says Jay Scharer, chief operating officer of Cisneros Television Group in Miami.

In some ways, it is an unlikely combination. Playboy's pipe-smoking, pajama-wearing founder, Hugh Hefner, built his empire on nude centerfolds and has never shirked publicity. Privately held Cisneros, which started out in the 1930s as a Caracas bus company, accumulated interests in such staid businesses as mining and baby products. Cisneros' $3.5 billion in revenues bulges compared with Playboy's $318 million.

But over the past decade, both companies have focused on growth through home entertainment. "The future of Playboy Enterprises, as a company, is electronic and international," Chief Executive Christie Hefner, the founder's daughter, recently told Business Week. The entertainment division now accounts for about one-third of Playboy's total revenues, and this year the company acquired its main competition, Spice Entertainment, for $117 million. Among Cisneros' media interests are Venevision, the second largest producer of Spanish-language programming, after Mexico's Televisa, and a stake in U.S. network Univision. It is also a major player in Galaxy Latin America, the satellite consortium that delivers DirecTV south of the Rio Grande.

In Latin America, where a growing middle class has fueled the appeal of such luxuries as satellite dishes, Galaxy competes with Sky, a joint venture between Globo, the Brazilian media powerhouse, and Rupert Murdoch's News Corp. The rivals have invested heavily in soccer programming. But it is Galaxy, through Playboy and Cisneros, that has ventured further into soft porn. "We'd like to think we're so far ahead that we have staked out the territory for ourselves," says Tony Lynn, president of Playboy Entertainment Group in Beverly Hills, California.

According to Lynn, Playboy TV and AdulTV which are available through subscription and pay-per-view, are among the most profitable channels that the Galaxy system carries. "We have been able to get very attractive deals for the carriage of Playboy TV, some of which is attributable to the connections that Cisneros brings to our venture," he says. Cisneros also snapped up a rival porn channel in Argentina through its acquisition of Imagen Satelital.

Lynn contends that the Playboy brand has lost none of its luster in the region, where sexual license may be more of a novelty than in the jaded United States. "In Latin America, Playboy has never gone out of style," he says. "It has continued to represent what it always represented--all things American, all things aspirational," Lynn Says. David Leibowitz, an analyst and managing director at Burnham Securities in New York, agrees: "This is still a brand to be reckoned with."

Under the agreement negotiated last year, Playboy TV International, in which Cisneros has an 80.1% stake and Playboy the remaining 19.9%, will own the networks in Latin America, Japan and the United Kingdom. Playboy has an option to increase its stake to 50% over the next 10 years.

The deal did not close as expected in the second quarter, putting a dent in Playboy's earnings for that period. But at press time, a company spokeswoman said the parties were very close to a final agreement. And they have gone ahead with Playboy TV en Espanol.

The channel, to be hosted by Spanish-speaking models, will use the existing Galaxy feed for most of its programming and Playboy's U.S. sales force for its marketing. "Our costs are minimal," Lynn notes.

In San Antonio, Texas, where the population is 55% Latino, Paragon Cable plans to offer the channel this fall as a pay-per-view option at $6.95 for a four-hour block. "We're hoping to bring in new users," says Deborah Alcoser-Rodriguez, Paragon's pay-per-view manager.

Although Wall Street analysts are bullish, the lingering recession in Latin America could affect the progress of the Playboy-Cisneros venture. In Cisneros' home country, the Venezuelan government recently laid off 30,000 oil workers.

Another variable is whether Playboy can remain under Hugh Hefner's control arid shareholder discontent over meager profits and his renewed bachelor lifestyle--the company last year spent $4.3 million to run the Playboy Mansion. Some would like to see an aggressive operator like Murdoch in charge.

But for the time being, Playboy sees no limits to its partnership with Cisneros. "We have a game plan to launch networks around the world as fast as we possibly can," Lynn says. "With Cisneros' investment in this venture, we have the cash to launch as many as we see fit." Together, they plan to make that bunny hop.