Bunny Redux

In almost every issue, Playboy magazine has run a full-page house ad asking the slightly rhetorical question: "What Sort of Man Reads Playboy!" The answer assures advertisers that the Playboy reader, in his quest for the good life, spares no expense. In a way, the same has been true of Playboy Enterprises, Inc., the haphazard corporate empire spawned by the magazine that Hugh M. Hefner founded with several hundred borrowed dollars in 1953. Over the years, PEI has spent millions to give substance to Hefner's sensate fantasies; today Playboy Enterprises include hotels, clubs, movie, record and book publishing businesses and a second magazine, OUI, which was launched three years ago to compete with Bob Guccione's Penthouse. Financially speaking, however, the good life has of late proved to be elusive for PEI: on sales of $204 million in the fiscal year ending June 30, 1974, the company suffered a drop in profits of nearly 50%, to $5.9 million. Recently ended fiscal 1975 was certainly worse. Though results for the full year have not yet been tabulated, the company reported net losses totaling $743,000, the first deficit in its 22-year history, for the middle two quarters.

Ax Man. Inflation and recession are two reasons for the slump: the company's printing and paper costs have skyrocketed, and guests are spending less at the hotels and clubs. But the troubles also reflect Hefner's habit of plunging into new ventures without doing any in-depth advance planning, then losing interest but still insisting on making all the big decisions himself. As a result, PEI is saddled with businesses ranging from modeling agencies and limousine services to bar trinkets, for which it is only now beginning to develop a coherent marketing strategy. Recognizing that the operation must be trimmed down and reorganized, Hefner has now called in Victor Lownes, 47, a longtime crony and PEI's second largest stockholder. Officially, Lownes is director of Playboy Leisure Activities, a new division that includes the hotels and clubs, where losses have been glaring; unofficially, he is Hefner's ax man.

Lownes, a graduate of the University of Chicago, met Hefner at a party in 1954 and later gave him the idea for the Playboy clubs. Personally, he is an ultra-Playboy whose life-style even Hefner envies. As head of PEI's highly profitable club operations in England, Lownes has been living in a 42-room mansion near London and riding to work in a chauffeured Rolls-Royce. He skis in the Alps and cruises in the Mediterranean, often in the company of more than one beautiful woman. To support himself in this opulence, Lownes draws not only on his $113,800 Playboy salary, but also on private wealth that he has accumulated by dealing in modern art and starting a hamburger chain in England.

On the job, Lownes is so dedicated to cutting expenses that he is known within the company as "Attila" (or, on more recent occasions, "Jaws"). "We are going to be thin and lean," he vows, sitting in a Chicago office that has neither furnishings nor secretary. Since taking up his duties in Chicago last May, Lownes claims, he has cut $2.8 million out of the home office's $8 million budget for operating the clubs and hotels. Among his moves: he has decided to discontinue VIP, a magazine for key holders, at an estimated saving of $800,000 a year, and he has cut in half the home-office club and hotel staff by firing 50 people, including the entire "Bunny department," which once kept files and tabs on every Playboy Bunny in America.

Lownes is also changing PEI in other ways. Convinced that the company is overcommitted to running all its varied businesses itself, he plans to go for more licensing and franchising deals. He is also loosening the company's grip on clubs and hotels. To boost occupancy and attract more convention business from conservative companies, he has removed the Playboy name from the Chicago and Great Gorge, N.J., hotels and opened all the four hotels to non-key holders. In the 18 clubs operated by PEI, he has encouraged individual managers to set their own motifs and has reduced the home-office take on revenues. In addition, he has repealed Hefner's ban against Bunnies' dating guests, and appointed a woman to run the Denver club.

Lownes has no authority over Playboy magazine, which still brings in well over a third of corporate revenues. Playboy's circulation peaked at 7 million in late 1972; during the past six months it has averaged 5.8 million, one of the greatest reader losses in magazine history. Since that is below the circulation guarantee of 6 million, Playboy has offered to give credits to advertisers; ad revenue in the past six months has run 7.5% below a year earlier. A basic problem, ironically, seems to be the success of the sexual revolution that Hef ner worked so hard to promote--and that now makes Playboy, once so bold, seem curiously oldfashioned. It is outdone in kinky eroticism these days by a swarm of competitors, notably Penthouse, which has done so well that it will raise its circulation guarantee to advertisers from 3.5 million to 4 million in September.

But outside the magazine Lownes has not spared Hefner's personal talismans. The black, $5.9 million "Bunny Jet," a specially outfitted DC-9, has been consigned to a broker for sale, and the Playboy Mansion in Chicago virtually closed. Says Lownes of Hefner, who is 49, "His life-style no longer has the promotional value it once did." But Lownes is convinced that the corporation is still potentially a rich moneymaker. "This company is doing a good business," he says. "If we can only stop pissing away the profits."

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