Another Playboy Hutch Cleaning

Final stage of reshuffling?

Since profits started tumbling four years ago, Playboy Enterprises Inc. has been through more shufflings than a Playboy magazine in a barbershop. Employees at Chicago headquarters are now smarting from still another round of corporate hutch cleaning: the abrupt firing of 70 administrative and editorial workers, including five of the 30 vice presidents. President Derick Daniels circulated a written assurance that "no further planned mass reductions" would occur; understandably, that did not solace the survivors. He called the purge part of a "broad program to reduce administrative overhead and reallocate resources." Added Founder-Chairman Hugh Hefner, 51: "What you are seeing is the final stage of a massive re-evaluation and reorganization."

Pinched by steady losses in circulation to the raunchier Penthouse and the downright sickening Hustler, and weighted down by a crazy-quilt diversification pattern (a movie company, a limousine service, hotels, books, a modeling agency), Playboy Enterprises earned only $2 million on sales of $198 million in fiscal 1976, far below its 1973 earnings peak of $11.2 million. A year ago, Hefner hired Daniels, 48, a vice president of the Knight-Ridder chain. Daniels is a onetime newspaperman (city editor, the Miami Herald) and grandson of the late North Carolina publisher Josephus Daniels, who was Secretary of the Navy under Woodrow Wilson. He was reluctant to take on Hefner's problems but was wooed by the Chief Rabbit's salary offer of $250,000 annually, plus a $225,000 bonus.

In long work weeks that frequently spill into weekends, the workaholic, chain-smoking, immaculately dressed Daniels has trimmed Playboy's bulging bureaucracy ("We had too many chiefs"). He abolished such jobs as vice president for public relations and for personnel, moving those functions to lower levels, and closed an unprofitable Playboy club in Detroit and a hotel in Jamaica. Daniels plans to concentrate on publishing, franchising--and gambling. The company's four casinos in England are its most profitable operation; they earned $10 million last year. Playboy plans a $50 million gambling palace in Atlantic City, N.J. Daniels also wants to license use of the company's trademark, the Playboy bunny, which he calls the "best in the world after Coca-Cola." A first step: Optipatent Ag, a Swiss optical manufacturer, will pay P.E.I, to splash the bunny over its sunglasses.

So far, so good; though profits for the fiscal year that ended in June have not been tallied, Hefner says they were at least double fiscal 1976's. For the first nine months of the year, P.E.I, earned $5.6 million on sales of $169 million. But troubles still abound. Playboy magazine cut its circulation guarantee to advertisers from 5.4 million to 4.5 million, beginning with the October issue. Advertising, however, is picking up; the just-closed December issue boasts 154 ad pages, the most ever (although rates have been lowered).

Playboy Enterprises has long written off nearly all of Hefner's lavish living costs as promotional expenses. The Internal Revenue Service has filed a claim against the company for $7.7 million in additional taxes for the years 1970 through 1972; Hefner's expenses, among many other things, are involved. He has put the 54-room Playboy mansion in Chicago up for sale (asking price: $2.5 million) and moved to a 29-room Xanadu in Beverly Hills; Daniels flies out every other week to brief him, but otherwise they rarely confer on day-to-day operations. There is talk of an eventual successor to Hef as chief. One candidate for the title: his daughter Christie, 24, who is now concentrating on new magazine development and presumably one day will wind up owning a big chunk of Hefner's 72% of Playboy stock, at present worth $48 million.

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