Playboy adds Spice

Playboy Enterprises’ $100 million acquisition of the Spice adult pay-per-view service in March, a year after the deal was first announced, has made the company the dominant player in the adult pay-per-view market. But the acquisition will also boost Playboy’s $77 million catalog division. “True, the acquisition had everything to do with the Spice Channel and our own entertainment group,” says Herb Laney, president of the catalog division, which includes the Collectors’ Choice Music and Critic’s Choice Video titles. “But for our division, the Spice addition will have a tremendous upside.”

In fact, Playboy began testing a Spice catalog last summer, before the acquisition was finalized, with a mailing to 300,000 house file and rented names. Though he won’t disclose revenue figures, Laney says that the Spice book is “exceeding expectations.” Indeed, circulation for the catalog, which comes out three times a year, has expanded to 1 million, according to Playboy’s annual report, and the company plans to launch Spice Online later this month.

Although both Spice and Playboy sell apparel, books, and videos, the Playboy catalog offers more accessories, such as branded cufflinks and watches. By contrast, the Spice catalog consists largely of softcore adult videos. But the average Spice catalog order of $67 exceeds the $60 average order for the Playboy catalog.

German mail-order giant Otto Versand has strengthened its position in the U.K. catalog market, buying London-based general merchant Freemans from Sears for an estimated $240 million-$320 million. Otto Versand, which operates Yorkshire-based rival Grattan, now commands an estimated 15% of the U.K. catalog market, trailing Great Universal Stores (28%) and Littlewoods (16%).

Freemans, with 1998 sales of nearly $900 million, may have been purchased by Otto Versand at a bargain price, after a 1997 bid of approximately $635 million from Littlewoods was rejected by the U.K.’s Monopolies and Mergers Commission. Freemans had also struggled in recent years, as profits eroded from more than $66 million in 1995 to $32 million in 1998.

“Freemans has been a little lost. But Otto Versand’s control should give it more direction,” says Tony Stockil of London-based consultancy Javelin Group Ltd. “It will be interesting to see how they integrate the two companies, but I think the changes will be imperceptible in the immediate future.”