Hot profits ahead
Playboy buys porn nets in bid for rev growth
The revenue potential of these movies is humongous. Since DirecTV started offering Hot Network and Hot Zone two years ago, for example, it has jacked up its profts from $100 million to a projected $275 million for 2001 just on those two channels alone.
Profits like these have caught the attention of Christie Hefner, CEO of Playboy Inc., who had previously kept the Playboy Channel and its sister Spice Network away from X-rated content. She even called Playboy and Spice lifestyle channels rather than adult networks.
Playboy said the three nets it has just purchased reach 36 million cable and satellite households, compared to only 7 million in 1999.
The network is studying pricing strategies: Instead of charging $6-$7 for a pay-per-view movie as it does with the current Spice, which heavily edits the X-rated movies, the real X-rated product could chalk up a retail price of as much as $11 a movie.
That rate, coupled with a big increase in buy rates, could drive Playboy's profits dramatically and help it to negotiate better splits with cable operators, which now pocket 85%-90% of every Hot Network and Hot Zone PPV dollar.
