Online porn isn’t killing Penthouse (and other surprises)

In January, a slew of media outlets (Media Life, alas, included) erroneously reported that Penthouse was going online-only. It was a mix-up, occurring after some reporters misread a poorly worded press release and others just hopped on the story, but it says something about the state of the magazine industry that so many believed it. That was one of the first things Kelly Holland, a longtime Penthouse employee who purchased the magazine earlier this year, had to deal with. Nine months later, Penthouse is still very much in print and has made a number of changes in hopes of drawing more readers (especially Millennials) and advertisers. Holland, owner and chief executive officer at Penthouse Global Media, talks with Media Life about her views on online porn, why she thinks Playboy made the wrong call getting rid of nude photos, and who people often mix her up with (it rhymes with Harry Glint).

 

 

Obviously the world is a different place than when Penthouse was founded decades ago. How do you compete with what’s available widely on the internet now, at no cost?

 

I have a few quips, and then I’ll have a more serious conversation about that.

First, I don’t know that Walmart or any other store has been rendered completely irrelevant [when you can now buy almost anything online].

And by the way, free porn is under a lot of pressure, there’s one company called MindGeek, which is partners with Playboy, that controls about 90 percent of what is thrown into the bucket called free porn. They control hundreds of millions of eyeballs, but they’re having a hard time figuring out how to monetize them. They used to sell all that traffic, but it became clear at some point that people who go to free porn sites do so for a reason, and they aren’t willing to spend money.

So free porn is actually killing free porn, but we’re in a different space where people are willing to pay. People are willing to pay, particularly if it’s a reasonable price, for higher-quality content.

Our content is all shot in 4K, and we don’t go to the traditional well for the girls who are Penthouse Pets. Some don’t do adult content for anyone else.

The way we market is, if you want to see the most beautiful women and the best content available, come to Penthouse.com. There are also some other companies you’ve probably never heard of that don’t have well-known brands that produce great adult content. We believe it’s a space we can carve out.

The magazine at the time I took over was losing about $3 million a year. It had a relatively big staff sitting in offices in New York.

It was unsustainable, particularly for us.

We’re a rare hybrid that’s sort of a 50-year-old startup. We’re now tracking to end our first 12 months somewhere up between half a million and a million dollars, depending on ad revenue. We did it the same way Gannett is anticipating turning around Tribune [tronc], which is economy of scale.

Everyone in New York was laid off, unfortunately. The former parent corporation did that because they were going to close the magazine.

I felt with a new company the last thing I was going to do was shoot the flagship horse in the head. I had a philosophy on how to turn it around. So those offices were closed. The lease was up anyway.

We put on a very lean staff and started relying on outside contributors. And we have a partner in Australia that’s putting out a phenomenal magazine. We outsource, for a monthly flat free, our production to Australia. That’s where we share the philosophy of Gannett, we put production elsewhere-they’re doing the layout, design and part of the editorial content. By doing that, we cut that $3 million of loss and now we’re building our advertising base.

We also softened the content ever so slightly.

There were two agendas.

One was to broaden the advertising base. The second was to drive traffic to our digital space. We can say, “Hey, what you can’t see here on the printed page you can see online.”

We also have Penthouse Letters, which has a circulation close to the original Penthouse. It has about a 50 percent female readership, and it’s an explicit magazine. Ironically, it sits on the shelves of Barnes & Noble with explicit content, but for some reason Penthouse does not.

Then we went back to one of the traditions of Penthouse, including cutting-edge journalism. We brought back Alan Dershowitz to write a column. He was a longtime contributor back in the day.

And we brought back a lot of political editorial. We did a great piece on the mash-up of religion and politics in Utah. They wanted to declare porn a threat to public safety, so we declared Utah a threat to public safety. Utah has a lot of social illnesses. It was a fun article to do-I embrace being the agent provocateur.

We sent copies to lawmakers and also did a girl-girl set called “Sister Wives.”

The unfortunate part is there’s a 60- to 90-day lead time in what you do [as a print magazine]. But early on I was interested in the strange triad of [Donald] Trump, [ex-campaign chair Paul] Manafort and [Vladimir] Putin and the dilemma that would present itself when Trump has access to security briefings. The New York Times came out with something about the same time we were pitching the story, but we did a great piece on Putin and Trump called “Rogue to the White House.”

 

How do Millennials play into it?

 

When it comes to Millennials, you can be in a digital space and essentially be pushed into non-existence in a few days because whatever was trending last Friday is on page eight of a Google search today. Whatever happened two minutes ago on Snapchat is gone. I think that unsubstantial sense has now begun to infiltrate the Millennial psyche.

I don’t want to speak for them, but as I look at where they trend now, it’s as if they want something to hold onto. It may be shorter, but they want something of consequence. So what we found with the [advertising] partners we have is they say things like, “I was walking through the airport and I saw Penthouse magazine and our ad was on the back cover. So I bought 10.”

They’re finding a newfound respect for things that aren’t as transitory, living in a world that’s completely digital. So we’ve had a lot of traction in that space.

If your content is valuable then I think you can make a good case for a business model that’s very profitable in the digital space. We’re still building out the site-we were anxious to exit from the parent corporation and it was a bit early. We’re now on version three, which should launch before Thanksgiving.

And one of our strongest searches is our vault. We’re opening up the 50-year history of Penthouse, and now we get requests for [historical pictorials] on a daily basis.

 

What is Penthouse’s editorial mandate these days? Has that changed over the years?

 

Our commitment is to excellent journalism inside the cover and tabloid headlines on the cover. I would say that it’s a two-pronged attack. To some extent, it’s contradictory.

One is to go back to the traditional values of Penthouse and push the edges both editorially and in terms of pictorials. What keeps me up at night is the likes of HBO, Showtime and Starz.

When you’ve got a rape scene on an altar, holding a dead body of incestuous offspring (“Game of Thrones”) or “Shameless” or Outlander, which had one of the most explicit gay rape torture scenes-what am I going to do?

But those networks have come racing across the divide to us because that’s part of the competitive battle that’s happening with premium cable. We get to sit in a slightly better space [in the adult industry] because our budgets are higher, the women are beautiful and we’re never misogynistic in anything we do. And that makes it palatable to women and more acceptable to couples. We’re something that’s easier to handle aesthetically for women, which works for couples. We’re also very hot, so it works for men too.

 

How would you describe advertising for the magazine? What sorts of cross-platform deals do you offer?

 

We’ve started targeting streetwear brands, Millennial brands.

Another market that has opened that’s very aligned with us-and we completely get it-is the whole cannabis thing. We’ve done a lot of things with Weed.com and continue to open to that market. Our licensing division is in talks with a major player in that space to do edibles and oils that kind of align with us. I feel that market, as it pushes and opens up a whole cultural space, it’s a perfect market for us to align with.

You can take a brand like Penthouse and can continue to reinvent it and keep it fresh because the primary mandate is to be on the edge of those cultural outliers that are breaking down all of the taboos.

It’s interesting to note and contemplate-each of the iconic men’s brands were separated by about a decade, Playboy, Penthouse and Hustler. Playboy came in ’53, penthouse in ’65 and Hustler, I think, ’74. Each was very emblematic of its founder, but its founders were each emblematic of their times. It’s interesting to watch the message through these three men progressing and evolving.

I think of brands as these living things, and it’s always with great sadness when a brand dies or passes away. Playboy is a huge competitor, but my world would not be the same if Playboy wasn’t in it. Steve Jobs wouldn’t [have been] himself if Bill Gates wasn’t there. Playboy is a huge competitor, but I will tell you we poked a lot of fun at the bunny when their CEO at the time took nudity out of the brand. Hefner wasn’t in favor of it, but he’s not in control of the company anymore. We poked fun at it, but it’s also with some sadness-I winced.

 

When the (erroneous) story broke earlier this year that Penthouse was going out of print, what was your reaction?

 

That was very much an outgrowth of the internal chaos concerning this acquisition.

It came down to an incredibly ambiguous and poorly written press release. It said we were closing the New York offices, and that we’re going to launch digital.

It didn’t say they were stopping print, though. So that goes out, and it was incredibly ambiguous. It gets picked up from here to the Ukraine. In 24 hours it’s around the world.

It didn’t surprise me because I understood the power of the brand. The sellers-which is why I was buying the company-never understood that. They never got it.

So I started doing interviews and saying we’re not going out of print. We’re committed to print. One story comes out, and everybody else picks it up. Nobody fact checks. The first story that went out didn’t get it-yes we’re launching digital and closing in New York, but we’re bringing publishing to L.A. On day two it was, “Oh no, we got it wrong.”

On day three, one other thing happens. Keith Kelly at the New York Post, who had people inside Penthouse, comes out with a story.

He said, “Kelly Holland scrambles to close the acquisition of Penthouse and keep the magazine in print.” And I didn’t even address that because it turned out to be absolutely true. Thank god [the deal] closed [laughs].

 

It wouldn’t be the first time, clearly, that a print magazine has decided to go digital only. Has that been a discussion for Penthouse, or can you imagine going that direction in the future? Why or why not?

 

All things have an inevitable path.

Will all magazines go out of print? Perhaps. But I can assure you right now we’re having zero conversations about transitioning to a strictly digital offering. Our conversation is about creating offers on Penthouse.com for both a digital version and a print version. What’s unique to one or the other, but both remain relevant?

So, no. If we get to a point where we can’t make it or break even, or put it in a place where it gets to a point of an unacceptable loss, then it will go digital. But we won’t hide the fact at that time.

In a world that’s so manipulative and disingenuous, I’m so of a mind to be just candid to the point of not being strategic in a way.

If we were to go down that path sometime in the distant future-and it won’t be this year or next-there would be a lot of notice and we would let readers know the financials behind it.

 

As you mentioned, Playboy recently eliminated pictures of nude women from its pages. As a competitor to that magazine, how has that impacted you, if at all?

 

Ironically, it happened at the same time I was going through the acquisition. Through the acquisition and relaunch, it was hard to tell what was influencing what. There was a lot of press about the acquisition. There was a slight shuffle [of readers] in our magazine, for the better.

For Playboy, interestingly enough, their newsstand went up in the first couple of issues after nudity was out. I think that was partially curiosity. I think reality is now setting in and it’s beginning to go down. To their credit, I think they opened up some newsstand they didn’t have. But you still can’t find it at the local grocery store.

We’ve been picking up newsstand because we believe in print and have been more aggressive. I think it’s valid to say people were interested in Playboy’s editorial, but they were also going there for the women.

And I don’t know that anything they’re doing now is unique enough for them to be a destination at the end of the day. They had a strategy, I kind of get it. I know some of their strategies, but I just don’t think they’re all very sound. With the continuing demise, and certainly when Mr. Hefner passes away, it’s unclear what that would mean to the brand.

On the other hand, I feel the pain, looking at this amazing 60-year-old brand that’s now run by bankers and has no clear vision going forward.

If you try to reduce it to an analytical equation, you may win in certain spaces, but for brands you won’t win for any length of time.

 

Do you ever anticipate going in that direction (eliminating nude photos)?

 

You kind of answered it yourself on that one [laughs]. No. Think we’ll stay where we are in terms of the explicitness. The Greeks got it, Da Vinci got it, Michelangelo got it.

There’s the sheer insanity of the whole thing-that anyone let the CEO of Playboy say “nudity is so passé.” I guess what he meant was with the rise of free online porn, “our nudity has been rendered passé.” Now you just compared yourself to free porn.

And even I would not compare a nude layout in Playboy as equal to free porn on the internet. They are two different things completely.

Nudity and art are never passé. If you thought that, than Michelangelo and Da Vinci probably would have said, “The Greeks did this, so why would we do it?” There are reasons to make a case for taking nudity out of the brand, but to say it’s because it’s passé? You lost me with that. History may prove me dead wrong, but I think it was a bad decision and I think it was bad for the bunny.

 

What’s one misconception about Penthouse that you would love to clear up?

 

You addressed it earlier-when I was out raising money for the acquisition, the first question was, “isn’t free porn killing the adult business?”

There’s another one that gets me, though. I’ll meet somebody and they say, “What do you do?” And I saw I own a company. And then I say Penthouse.

And they look at me, and I say, “Yes, the magazine and the channels.” And then they ask me if I bought it from Larry Flynt. I even saw something in print the other day about Flynt owning Penthouse. So I don’t know who gets more irritated by that, Larry or me [laughs]. But that’s our challenge to address that.

 

What’s the most important thing media buyers and planners should know about your magazine?

 

I think that we’re developing a key demographic that everybody wants to get to. Millennials, influencers. But you can’t go directly at that demographic-they’re too sophisticated. They’ve been marketed to since they came out of the birth canal.

The problem is every movement then becomes mainstreamed. Our strategy was not to go at Millennials and try to grab them. Our strategy is to become relevant to them. Through that, we’ve formed partnerships with streetwear brands. I’m going to find someone they listen to and I’m not going to try to buy that person, but I’m going to find out what they want to say. By doing that we’ve been successful.

In terms of our advertising, we’re looking for the same thing. I truly do not expect nor do I court big corporate brands. They’re going to perceive us as a headline risk, Dodge advertising in Playboy be damned. If you are a media buyer and you have clients that are more cutting-edge, culturally relevant and bolder in their approach, then I think there’s space.

We’re also interested in interesting partnerships. We were working with a movie that was coming out about a superhero that’s excruciatingly sexual and explicit. It was an alliance I was excited about-it’s that sort of Seth MacFarlane stuff, where it’s not so conservative that you’re scared to step out. It gets you a certain amount of street cred when you’re able to do that.

 

 

 

 

Tags: kelly holland, magazines, penthouse, penthouse digital, penthouse online-only, playboy, Q&A