What Playboy Can Learn from Nintendo

Posted May 7th 2010 4:40PM by Jeff Reeves
Filed under: Nintendo (NTDOY)

Playboy (PLA) has already cut its staff and cut its office space ... but you know things are bad when Hef starts cutting back on the amount of skin his Bunnies are baring.

According to industry reports, Playboy is planning on a mix of new sites aimed at tackling a tamer market -- and none of them involve nudity. According to Playboy insiders, the company is developing a "free, safe-for-work site" its calling TheSmokingJacket.com, as well as additional subscription content with a slightly tamer feel.

Broadening your appeal beyond a core product is no easy task. But if done successfully, it can forever change the fortunes of a company. Just look at Nintendo (NTDOY) and its efforts to make video games mainstream and not a niche product for pimply-faced teenagers.

There's no doubt that Playboy needs to find a new model. Hugh Hefner's company hasn't been profitable in well over a year due to restructuring charges. And while Thursday's earnings report showed significant narrowing of the shortfall and an earnings report that topped Wall Street expectations, the company is certainly not out of the woods. Sure, shares are up 25% so far in 2010 -- but shares are actually down slightly compared with a short-lived spike in fall 2009 and off more than 50% from May of 2008.

Of course, Playboy's plight isn't exactly unique. Media stocks from Rubert Murdoch's News Corp. to Time Warner are losing ground. But everyone has to admit it's a big shift for the struggling media company in an effort to broaden its base to readers and advertisers leery of Playboy's racy reputation. But will such a move actually result in a healthier bottom line or is it a desperate move to avoid disaster?

Playboy without the nudity sounds to some to have just about the same appeal as non-alcoholic beer or tofu turkey on Thanksgiving. Or more plainly, the product will probably appeal to a small group despite the vast majority of consumers' preference to the real thing. But believe it or not there's actually precedent for businesses that reinvent themselves in an effort to broaden their appeal and evolve with the times.

My favorite example is Nintendo. Some folks don't know it was actually founded in the 19th century as a playing card company -- and stayed that way for the better part of seven decades. But in 1956, the company's founder traveled from Japan to the U.S. to visit the dominant playing card manufacturer of that time. He was disappointed to learn he would be visiting a rather small office, and not an impressive business complex. He realized then that the company needed to figure out a new plan to survive.

Things got rocky for a decade or so. Nintendo set up a taxi company, a TV network and even a food company peddling rice. All failed, and NTDOY was on the brink of disappearing. Then in 1966 Nintendo moved into the toy industry – a natural extension for a playing card company. It's products included light gun games that eventually led to its trademark Zapper, which a generation of kids used to play Duck Hunt and Hogan's Alley on their home televisions. The rest is history.

The most interesting part of the story is that Nintendo has never stopped reinventing itself. The Wii was a groundbreaking console that introduced motion-sensitive controls instead of a typical button and joystick game. Thanks to that product's launch, NTDOY stock soared 330% across 2006 and 2007 while the Dow added a mere 17% in the same period.

Looking forward, Nintendo has a 3D hand-held video game console in development that could change the video game industry landscape all over again. And believe it or not, Nintendo video games may even be coming to a school near you in the near future.

It's innovations like this that make Nintendo a great stock for investors even at this very moment. The company has surged 27% year-to-date in 2010 and shows no sign of slowing down. As it continues to grow and evolve to reach beyond a core audience of hardcore gamers, NTDOY will only grow its market share more – and deliver bigger profits to shareholders.

That's the lesson for Playboy: That true growth always relies on moving beyond a niche product, whether its playing cards or nudey mags. In fact, this is how fortunes are made on Wall Street. Think of Apple (AAPL) and its move away from computers and into innovative personal electronics with its groundbreaking iPod. Think of McDonald's (MCD) and its move away from burgers with a highly profitable McCafe coffee line that has sent MCD earnings soaring.

Though Playboy has always offered plenty of skin to its readers, a time of significant restructuring is the perfect time to try something new for the brand. Because the one thing that's become painfully clear over the past 18 months is that sticking to the old way of doing things at Playboy could mean that the publication's days are numbered.

As of this writing, Jeff Reeves did not own positions in any of the companies mentioned here.

Tags: featured, inthenews, nintendo, NintendoWii, NTDOY, pla, playboy, porn, pornography

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Reader Comments (Page 1 of 1)

5-07-2010 @ 8:56PM

thedude said...

It seems Scott Flanders is just as dumb as Christie Hefner was. Absolutely clueless about doing business in the internet age.

Playboy has got to get on the ball. Their core content was tastefull nudes. Obviously the internet is up to it's private parts in free pornography. My generation grew up readng and subscribing to Plaboy because our fathers read Playboy. The new generation gets all it's content online for FREE.

Calling the new "synergy" TheSmokingJacket is about as stupid as you can get. Fewer teens are smoking and none of them know what a Smoking Jacket is Hugh Hefner is an old coot with no appeal. Naming their new outlet is not going to attract the new hip younger web saavy demographic. Also the name Smoking Jacket would prevent them from marketing their non nude content towards younger readers as the anti tobacco coalition would sue them to bits for advocating smoking. Stupid Stupid Stupid name.

Additional subscription based content is driving people AWAY from Playboy and will continue to do so.

If Playboy is going to succeed they will need to go to an all ad supported program. Create an easily downloadable monthly eMag that people can save as a local copy and view at their leisure.

Have DRM videos that can be downloaded repeatedly but automatically delete after 7 days generating more hits to the site and as such more exposure (no pun intended) to the ads.

Instead of going non nude they should go hardcore, maybe develop a partnership with Vivid Video or something.

They could also continue with the traditional print magazine as a collectors item, as long as they can continue to get celebrities to take it off.

To generate buzz they could incorporate the Mobile Playboy club and set up in "gentlemans clubs" for special events in various cities. Have visiting Playboy bunnies give out free swag ala the Marlboro Adventure Teams used to do.

Playboy is in need of a hostile takeover. Anyone got a spare $10 million to "play" with ?

5-07-2010 @ 9:54PM

Mark Campidonica said...

I agree with "TheDude", except for advocating hardcore content. There is plenty of that in other places. Every woman is unique. Sex, itself, is not. Simply put, there are far more women in this world than positions in the Kama Sutra.

5-08-2010 @ 11:48AM

Kate said...

I don't agree with hardcore photos in Playboy. Believe it or not, that does turns some people off. If people want hardcore, they already have a million sites to visit.

The problem is it's tough for a magazine to compete with the Internet. Magazines that have tired to have an online version (with pay), haven't worked. Internet people are savvy and can find interesting articles, photos and videos for free... with a little searching. We are a spoiled lot who think all media should be ours for free. Do we work for free? Of course not. But that is what we're asking the media to do (sans online advertising).

I have to admit when the NY Times started a pay subsciption to read their newspaper... I stopped. Instead I went to one of the other countless free news services online, where I found equally informative and up to date information.

I understand completely why online companies wish to add pay to view to their online web sites. It cost thousands of dollar to build and maintain online sites.

I've stopped subscribing to magazines (even though subscription rates are super low these days), because I can find what I want online and I get tired of tossing out magazines I forget to read. I went from 30 subscriptions (advid reader) to 3. And I'm debating whether to renew those three.

Playboy has to reinvent it's self. The image of Huge Hefner as the king of barbie land is no longer a viable or sellable image (if not disgusting when you think of a really old guy with young things). I liken Playboy to Pamela Sue Anderson; When young and fresh.. the product had great curb side appeal. After decades of decay, the glitter fades and you're simply left with tired, used goods.