Playboy: Is the bunny a bargain?

Playboy content: $180 million

Sure, Playboy magazine is in decline. But it had a monthly U.S. and foreign circulation of 3.5 million last year, and given its popularity among young males, a key demographic, the magazine is still attractive to advertisers. Based on circulation numbers and revenue potential, the magazine is probably worth $50 million.

Likewise, revenue from Playboy's TV division -- which offers content such as "The Girls Next Door," "Foursome," "Naughty Amateur Home Videos" and "69 Sexy Things to Do Before You Die" -- is struggling as viewers switch to video on demand, where Playboy has less of a presence. But at a conservative six times annual revenue, the division is worth about $130 million.

This brings the total value of Playboy content-producing divisions to $180 million.

The Playboy mansion: $100 million

Hef's company bought the Playboy mansion in 1971 for $1.1 million. Over the years, Playboy has put $14.3 million into the place. The 29-room mansion on 5.5 acres in Los Angeles' tony Holmby Hills area has a pool, a tennis court, a wine cellar, a gym and all the other amenities befitting, well, a playboy like Hef.

Playboy carries the mansion on the books at just $1.4 million, but it is worth far more. John Woodward IV, a Coldwell Banker real-estate agent who has worked in the Los Angeles market for more than 30 years and recently sold three homes near the Playboy mansion, thinks it could fetch more than $100 million. That may seem rich, but Woodward's estimate is $50 million lower than the current asking price on a mansion down the street built by TV director Aaron Spelling, and Hef's abode has much more charm and allure.

Woodward's estimate excludes any commercial value the mansion would have as a museum like Graceland, Elvis Presley's former home in Memphis, Tenn. However, it's not clear a buyer could convert Hef's mansion into a museum, says Jahn Brodwin, who specializes in location-based entertainment valuation at FTI Consulting. So we'll stick with Woodward's original estimate: $100 million.

The Playboy artwork: $20 million

Hef regularly commissioned some of the best contemporary artists to do work for Playboy, including Warhol, LeRoy Neiman, Alberto Vargas and Tom Wesselmann. Hef also used cartoonists Harvey Kurtzman, Will Elder and Jack Davis, who also worked at Mad magazine.

This work has given Playboy a treasure-trove of art, says Jared Green, an art expert with Dallas' Heritage Auction Galleries who has sold several pieces from the Playboy vault. Playboy estimates it has more than 5,000 pieces of original artwork.

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Green says works by Vargas can fetch $40,000 to $75,000 each, while Neiman pieces can go for $15,000 to $200,000. The Playboy offices in Chicago boast a Wesselmann painting that could be worth around $2 million, Green says. Cartoons by Kurtzman, Elder and Davis can sell for $5,000 each. "There hasn't been a lot of it out there, so when it comes out, it gets scooped up," says David Epstein, a collectibles dealer with American Coin Vault in New York.

Increasingly, companies are selling off artwork because it's an asset that's not bringing money in for shareholders, Green says. Don't be surprised if Playboy does the same. "We are not in the art collection business," says Lindeman.

Playboy couldn't put all that art on the market at once. But 5,000 pieces of artwork at a low-end average value of $4,000 each would still put the value of Playboy's collection at $20 million. And this doesn't even include the vault of original manuscripts from famous authors such as James Baldwin, Saul Bellow, Jimmy Breslin, Graham Greene and Hunter S. Thompson.

The next Hef?

That adds up to at least $500 million, even though the company carries an enterprise value of $159 million. That's why there's talk that a buyer may step in with an offer Playboy can't resist. Legally, even Hef has to entertain all reasonable offers on behalf of shareholders.

(Playboy declined to comment on any takeover talk.)

Here are five potential takeover players, according to one industry insider:

• Robert Sillerman, CKX (CKXE, news, msgs): The entertainment company CKX operates Graceland, and it owns the rights to the name and image of Elvis, as well Muhammad Ali. So CKX chief Sillerman clearly has a penchant for unique, high-profile entertainment names and properties. Hef and the Playboy mansion fit that bill.
  

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• Chris Albrecht, Foresee Entertainment: The head of HBO when it produced big hits such as "The Sopranos," "Sex and the City" and "Six Feet Under," Albrecht now runs Foresee, which advises media and entertainment companies on strategy, financing and talent. Given Playboy's weak performance, it could use help from Albrecht, who could serve as the brains behind a partnership that takes it over.

• Berth Milton, Private Media Group (PRVT, news, msgs): Based in Barcelona, Private Media sells adult content and runs a variety of pornographic magazines and Web sites, none of which has the cachet of Playboy. The company is so small that Private Media chief Milton would need to find financial partners to take over Playboy.

• Gustavo Cisneros, Cisneros Group: A media mogul and one of the richest men in the world, Cisneros chairs Cisneros Group, a large, privately held media, entertainment, telecom, beer and travel-resorts conglomerate based in Venezuela. Cisneros Group already holds Playboy TV Latin America, so running the rest of Playboy could be a logical step forward.

• Arnaud Lagardère, Lagardère: French media group Lagardère operates dozens of magazines, book publishers and media production houses around the world. The group's magazine division has reportedly had an interest in buying Playboy magazine, which would make the conglomerate's boss, Arnaud Lagardère, the next Hef.

Of course, it's a stretch to say any of these guys would really replace Hefner, the icon of the Playboy lifestyle. But Hef was a nobody until he founded the magazine; the guy who saves the empire could be nearly as significant.

At the time of publication, Michael Brush did not or control shares of any company mentioned in this column.

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