Playboy eyes Macau casino - Monday 17th of October 2005

Playboy Enterprises, the company behind Playmates and Bunnies, has set its sights on putting its rabbit-head logo on a casino-equipped entertainment center in Macau.

Christie Hefner, the firms chairwoman and chief executive - and daughter of Playboy founder Hugh Hefner - told analysts the company is talking with potential partners to develop Playboy casinos in Macau and London, "the two markets that have the most inherent interest to us," according to a recording of her comments. "These are very large deals," she said.

She told an interviewer later that "were doing a half-dozen big facilities in places like London and Macau."

Playboy Enterprises currently has no casinos, but a Playboy complex with a casino, nightclub, store, lounge and two-story luxury suite is to open as part of a new tower at the Palms Casino Resort in Las Vegas early next year.

"Macau would be phenomenal market for them to open a casino in," said Robert Routh, a media analyst who follows Playboy for brokerage Jeffries & Co in New York.

Gaming analyst David Leibowitz of Burnham Securities in New York, who recently traveled to Macau, agreed. "The potential for reward appears to be quite large. Macau today is as fine a venue for gaming as exists."

Playboys interest in Macau is fueled by the boom in Chinese tourist traffic and a desire to get in on the bonanza.

Soon after revealing the Palms deal last year, the company announced a licensing agreement for a seven-story Playboy complex in Shanghai featuring restaurants, lounges, a cabaret, disco, spa and boutique. Though news reports afterward quoted city officials as balking at the plan, construction has rolled along and the center is to open around the same time as the one at the Palms.

"We definitely are interested in the China market and have experience there, where our brand awareness and prestige score stunningly high," Hefner told the New York Times last month.

Linda Havard, chief financial officer and executive vice president, told analysts earlier this year that "Shanghai, we all understand, does not allow gaming, but the extraordinary significance of the Chinese market is the explosive growth there in our branded consumer products."

The Playboy brand is already present in Macau gaming halls through slot machines produced under license by a United States manufacturer. Though best known for the namesake girlie magazine that brought nude centerfold models into mainstream American life, Playboy has run casinos before.

In 1966, the Chicago-based company opened a London casino that became one of the most profitable in Europe.

Playboy added others in Britain and also in the Bahamas and on a Caribbean cruise liner and entered the US market with an Atlantic City, New Jersey, property in 1981.

That was the high-water mark because UK rival Ladbrokes that year persuaded British authorities that Playboy had broken regulations against extending credit to gamblers, leading to the revocation of Playboys license.

New Jersey then balked at extending the temporary license it had issued to Playboy and the company folded its casino business in 1984.

The Playboy name resurfaced on a casino on the Greek island of Rhodes 15 years later through a licensing agreement and the company nearly nailed a new London deal then.

But the European ventures petered out quickly, except in cyberspace where Playboy has continued to offer sports betting and casino games through a venture with Ladbrokes and plans to launch a poker site.

Playboy keeps returning to gambling because its original magazine business is stagnant, though its had some success carrying over its soft-porn content onto subscription television channels and DVDs. Now its getting back into gambling purely on a licensing basis, avoiding financial risk, similar to its successful strategy of offering the bunny-head logo to makers of shirts and skateboards.

"We think that the potential value creation with no capital investment for the company is significant," Havard said.

Company officials say they expect to generate US$5 million (HK$39 million) a year from the Shanghai and Las Vegas licensing deals and to be able to keep 80 percent of that as profit.

At the end of August, the company established a new executive post to oversee its latest-generation entertainment centers.

Playboy spokesmen declined to discuss the companys pending Macau venture. Possible locations are likely to include the casino resorts in Las Vegas Sands Cotai Strip project; Sands vice president for international operations Garry Saunders ran Playboys gaming division from 1997 to 2001.

But CLSA gaming analyst Aaron Fischer sees Playboy as a better fit for the HK$8 billion City of Dreams casino resort being developed next to Cotai Strip by Melco International Development and Australias Publishing & Broadcasting Ltd.

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