Playboy Breaks Ground on New $25M Studio By CARLOS MARTINEZ Staff Reporter Playboy Entertainment Group is building a 110,000-square-foot state-of-the-art digital production studio in Atwater Village, where it will consolidate its cable and online services at one location. The $25 million facility near San Fernando Road and Fletcher Drive in Glendale will become the primary production and editing facility for the company’s Playboy TV Networks, which operates The Playboy Channel, said Scott Barton, the company’s director of public relations. Construction is scheduled to be completed by July, on a site that housed a smaller production facility, Barton added. In a joint venture with Directrix Inc., a New Jersey-based telecommunications firm that will manage the facility at 3030 Andrita St., Playboy will consolidate all its television and Internet operations there rather than at the several locations it currently leases, Barton said. “We have our entertainment office in Beverly Hills, our production office on LaBrea (Boulevard) and studios in Hollywood, so we’re all over the place,” he said. The new facility will also house Playboy Entertainment’s flagship Playboy Channel and its sister service, Spice, which operates three separate pay-per-view channels. Other parts of the building will be rented to other tenants, Barton said. Richard Llewellyn, a press aide for Los Angeles Councilman Eric Garcetti who represents the area, said residents generally support a new production facility in the area. “There are production studios in the area already and I don’t think anyone would be opposed to it,” he said. According to Playboy Enterprises Inc. filings, revenue from its Internet and television operations account for about 45 percent of all sales. Altogether, the company’s entertainment unit reported net income of $25.3 million on $101 million in total revenue in 2000, compared to $44 million in net income on $125.8 million a year earlier. Playboy’s online business reported a net loss of $25.2 million on revenues of $25.3 million in 2000. Roger Faherty, Directrix CEO, said, “This facility will eliminate tape and everything will be in the digital format which allows for more efficiency and freedom to create shows.” Playboy plans to install $7.5 million in electronic equipment to produce programming for its Web sites and the Playboy Channel, Faherty said. Dennis McAlpine, an analyst with Josephthal, Lyon & Ross, said Playboy’s plan to build a digital television studio and production offices is in keeping with its efforts to bolster its presence in the cable television market. “They’ve made some big moves, particularly with its acquisitions of Vivid’s pay channels and going into video on demand,” McAlpine said, referring to the $70 million purchase of Vivid Entertainment Group’s three pay-per-view adult film channels last September. McAlpine said that by consolidating its Internet and cable television services in one place, the company would be better positioned to mesh the two together once broadband service becomes more widely available. Aram Sinnreich, online analyst for Jupiter Communications in New York, said Playboy’s consolidation strategy is on target. “They’re arguably the strongest brand in adult online content and they appear to be in a good position to grow that side as well as the television side of the business,” he said. Playboy, which already produces more than 200 hours of TV programming a year at its facilities, plans to ramp up its production schedule, which now includes the mystery series “Sexy Urban Legends” and a live call-in show, “Night Calls 411,” Barton said. “Having this facility will drastically reduce costs for us and allow us to do more things,” he said. Christie Hefner, chairman and CEO of Playboy Enterprises Inc., said the facility will mesh the company’s online operation with its television unit by providing streaming video of its productions for online users on Playboy.com. The company plans to enhance its programming by encouraging viewers to access its Web sites to vote on a show’s direction and to participate in other televised programs. Hefner said the facility, through its online streaming capabilities also will help attract more attention to the company’s e-commerce sites, Cyber Club and the online Playboy Store. Cyber Club, which will also move into the new studio from West Hollywood, charges subscribers up to $60 a month to view archived articles and photos from Playboy magazine. It currently has about 90,000 subscribers. The dot-com bust last year forced Playboy to hold off its plan to spin off its Internet business with an IPO.