When I heard that Penthouse was planning to launch a $250 million IPO, my first response was that it sounded like a great buy. After all, as long as America's stocks of 16-year-olds, hand lotion, and kleenex remain high, it seems likely that Penthouse will continue to do solid business.
Then I came face-to-face with a difficult realization: I'm getting old. You see, when I was a teenager, we didn't have the internet, pay-per-view movies, or a back room at my local video store. We relied on good old fashioned print pornography. In those days, Playboy and Penthouse were the two great porn magazines that were considered mild enough to be sold in bookstores. It seemed like every teenager in my high school knew about and coveted the divine publications.
Then the video revolution happened. Suddenly, everyone with a couple of bucks and a rental card could pick up movies that made Penthouse and Playboy seem quaint. When the internet came along, the stock of available pornography multiplied and magazines seemed positively prehistoric. Penthouse compensated by launching other ventures, including a casino, which met with little success. They also changed their content from the soft-focus pictorials of my youth to hard-core exploitative photography. By the end of 2003, the company had filed for bankruptcy, had shed many of its magazine titles, and was desperately casting around for ways out of its financial morass.
Most analysts are questioning the $20 a share that Penthouse will probably be asking for its IPO. After all, they argue, Playboy Enterprises (NYSE:PLA) commands less than $8 per share, and Hefner's empire has always been a more impressive player than Guccione's dukedom. However, given Penthouse's forward-thinking strategy, its plan to use stock revenues to pay down debt, and its long-term goal of acquiring increasingly mainstream internet sites, it seems that they might be a solid prospect.
Besides, if there's ever a major disruption in the internet, print publications could stage a comeback...
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