Iconix could make Playboy work: Kill the mag, take the sex out of the brand

A low acquisition price would give Iconix (ICON) plenty of options. Set the hurdle low, and it isn't too hard to engineer a success, especially if anything of value is strip-mined. Try to "save" all the assets in the Playboy portfolio -- such as the magazine and the Hugh Hefner lifestyle image -- and the better move would be to flush the cash: the same amount of money would be lost, but Iconix wouldn't waste as much time.

If an acquisition were to go through, Iconix likely would be paying for the Playboy brand, not the magazine, according to Reuters. Duh. The prospective buyer, which tends to acquire and extend the value of brands, would be nuts to focus on the magazine at this point. Playboy's guaranteed circulation is down from 2.6 million to 1.5 million, and Reuters notes that it is being squeezed by hardcore titles on one side (e.g., Hustler and Penthouse) and "lad mags" (e.g., Maxim) on the other. Of course, there is no mention of the fact that the magazine business is sprinting into the red, which also imperils Playboy's future.

Nonetheless, those bunny ears are instantly recognizable. They may be past their prime, but just about everyone knows a little of what they mean. There's an immediate sense of nudity, "hot chicks" and a certain level of style absent in the hardcore world. For Gen Xers and after, though, the full experience is lost. Boomers aspire to the Hugh Hefner aesthetic. Younger generations don't seem to be as interested.

In 1972, when Playboy had a circulation of 7 million and was in the business of teaching one how to become a man, the early end of the Baby Boomer generation was in its mid-20s. Today, late Gen Xers and the start of Gen Y are pushing into their 30s, not to far from the Boomers in the 1970s. Attitudes toward Playboy are vastly different.

To revitalize the Playboy brand, Iconix has two choices: it could either treat the bunny as an asset that will decline in value over a set period of time, measuring, effectively, the return relative to a projected "maturity date," treating the investment more like fixed income than equity. Or, it could find a way to make the brand relevant to younger generations as they grow older.

Kelly O'Keefe, a branding specialist at Virginia Commonwealth University, told Reuters, "They [i.e., Playboy] have definitely not ruined (the brand). It's just that it has to be brought back toward the image it once had. He continued, "There is more to this brand than just sex. There is sophistication, there is lifestyle, and there is freedom. And they haven't really done what they might to take advantage of that."

But, how much is a lifestyle brand worth, especially one that appeals to a demographic heading into retirement? Nick Gibbons, an analyst at Gradient Analytics, puts the number at $33 million, explaining that it "doesn't sound astronomical, and would be within Iconix's reach." He also believes that the Playboy bunny ears logo is "past the mid-point of its life cycle."

At $33 million, it might make sense to take a small risk. If Iconix kills the magazine -- or turns it into an online-only affair with low expenses and low expectations -- it could focus on a licensing play, especially through partnerships with the apparel brands in its portfolio. There are also club, liquor and even cigar licensing opportunities.

The best solution available is to take Playboy out of anything remotely related to the sex business. O'Keefe is correct to say that the brand involves "freedom" and "sophistication." It might have a slight chance of winning there, especially if "sexy" is replaced with "provocative." After all, that's why people -- including women -- walk around with bunny tattoos and bunnies on their shirts. You can send a message in public this way. Follow the sex trajectory, and you run out of options fast. The world isn't quite as ready to see the Vivid and Wicked brands worn in the same way yet.

Playboy-as-provocative: slap it on a label and sell like hell. It shouldn't be too hard to clear a $33 million hurdle that way and make a few bucks extra over the next several years. Then, let the bunny die with the Boomers.