While Christie Hefner is trying to build Playboy into a serious media company, her dad, in silk pajamas, lounges with his young companions, Brande and the twins, Mandy and Sandy.

Wall Street Follies

Shareholders' complaint: You can't take the playboy out of the mansion. 

ll of a sudden, Hugh Hefner is in the news again. So is his publicly traded company, Playboy Enterprises, whose stock price has climbed nearly sixty per cent in a year. At seventy-three, Hef is convinced that Playboy's recent success is due to him, personally. "These things work in curious and mysterious ways," he said, speaking by phone from the Playboy Mansion West, in Los Angeles. "In part it is because my marriage ended and I've come out to play again. And it has to do with timing: Prince, in a famous song some years ago said, 'Party like it's 1999,' and it is, and we are."

Despite the rising stock price and various new media ventures luanched by Christie Hefner, the company's forty-six-year-old C.E.O. and the boss's daughter, many shareholders remain discouraged by Playboy's financial performance. Last year, on sales of $318 million, Playboy Enterprises had profits of only $4.3 million, less than a third of what it earned in 1980. So what's the problem? Wall Street is generally happy with Christie, who is seen as having turned around her father's company with such initiatives as Playboy Online, Playboy TV, and the Playboy Catalog. (Pamela Anderson pool cues can be had for twenty-eight dollars, and Martini glasses stamped with Hef's initials are eighteen dollars a pair.) In the eyes of some shareholders, the real trouble with Playboy Enterprises may be the top playboy himself. While Christie Hefner is trying to build Playboy into a serious media company, her dad, in silk pajamas, lounges with his young companions, Brande and the twins, Mandy and Sandy. Media analysts feel that Playboy magazines, which Hef oversees, is as dated as he is, a piece of history, like kidney-shaped swimming pools and hi-fi consoles. With 3.15 million aging readers, Playboy's circulation is less than half what is was in the nineteen-seventies.

Although the magazine is only a part of Playboy Enterprise, it is the brand on which the rest of the company is built. On the subject of Playboy, Raymond Perrier, who evaluates brands for Interbrand Group, remarks, "Its values are not relevant. They're embarrassing. They remind you of finding dirty videos in your father's closet."

Hef, whose income from Playboy Enterprises in 1998 was $868,916, may be a liability in other ways. The Tudor-style Playboy Mansion, with its flamingos and peacocks, a swanky grotto stocked with six hundred Japanese koi, and a staff of seventy (including an archivist who has so far assembled fourteen hundred leather-bound scrapbooks documenting Hef's life), is a company expense. Playboy Enterprises spent an astonishing $4.3 million last year to operate the Mansion. That sum is identical to the total profits earned by Playboy Enterprises in 1998.

Shareholders are impatient. "Where else would the editor of a magazine earn more money than the company C.E.O.?" one shareholder at Playboy's annual meeting last May complained. Another shareholder reminded everyone that Hef has not attended an shareholders' meeting since 1987. Someone suggested the Playboy Mansion should be making money: "Run tourists up there and let Hef shake their hands." In Hef's absence, Christie responded: "Playboy was founded on his lifestyle and that's what we are leveraging into new media outlets."

Shareholders of Playboy Enterprises have never had much influence. Hef controls seventy per cent of the voting shares; he elects the board of birectors, and he can veto all decisions. "It's a fiefdom; Christie does what he wants," said a hedge-fund manager who owns about forty thousand Playboy shares.

What Hef wants is not what shareholders want, which is for him to sell his shares. Their thinking is this: If the company were sold to someone aggressive—Rupert Murdoch, say—Playboy could be a giant, worth perhaps four times its current value. But Hef does not intend to sell his shares. "I never started the company because I wanted to be hugely successful as a company," he explained. "For me this has always been from the heart. It has very little to do with money."

And so Playboy's shareholders are waiting for Hef to die, assuming that his shares will then be sold to outsiders. To ward off a takeover, Hef has amended his will: instead of dividing his shares into four blocks, one for each of his children, he will leave everything to his two youngest children, Marston, age nine, and Cooper, age seven. "My estate, in perpetuity after my death, will support Christie and her management," Hef expplained. "Then, eventually, Playboy will come into the hands of my boys." There was no mention of whether any provisions had been made for Brande, Mandy, and Sandy.