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The conventional wisdom is that purveyors of pornography do well in soft economies. When people are unemployed and high gas prices make travel and dinners out expensive, many men choose to stay home with a good book and a pretty girl.
But that hasn't been the case lately. In this weak economy, pornography stocks have been terrible performers. Playboy (NYSE: PLA) reported lousy first quarter results, and its stock has taken a beating so far this year. Shares of New Frontier Media (NASDAQ: NOOF) are down nearly 30% today after that company reported lackluster fourth quarter and full-year results.
So what gives? Have men lost their appetite for pornography, and are now spending their free time doing crosswords and watching The Discovery Channel?
I seriously doubt it. The problem for companies like Playboy and New Frontier is that they essentially had a business selling water in the desert, and now it's pouring. Sites like XTube.com offer free online pornography and in a tough economy free porn is better than expensive porn.
That said, both of these stocks appear to be trading at reasonable valuations right now. If it weren't controlled with an iron fist by Hefner insiders, Playboy would probably be a buyout candidate.
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Reader Comments (Page 1 of 1)
6-03-2008 @ 5:09PM
william lindblad said...
Porn is a highly diverse industry with a lot of small operators, all legal of course. None of these people are listed on stock exchanges but it is a billion dollar business. Playboy is simply past tense.
6-03-2008 @ 5:49PM
frank said...
At these gas prices, i'd rather wack off to the Discovery Channel
6-03-2008 @ 8:04PM
Michael Schneider said...
Christie Hefner, CEO of Playboy recently said the competition on the Internet shouldn't be a big problem since they have always had competition (see recent interview synopsis in the Playboy Channel- left side white label- at http://www.Barrelomoney.com). However, as you write, the numbers tell a story here that these companies are meeting some of the same kids of problems as newspaper and other print media. Playboy does have a unique position though and as CEO Hefner argues the company's licensing division and their Palms club partnership are doing great-- suggesting all is not lost and there are further avenues of growth. At this point Playboy is pretty cheap given their long term potential and the Macau venture coming up but in this environment it is understandable that investors will want to wait for some more encouraging indications that their problems can be handled. It's worth watching. They are always coming up with new ways to generate cash. At some point the stock will get too cheap or the opportunity will just be too attractive.