Why Hefner Roots For Comcast Bid

Cable World, August 13, 2001 by A.F.

Comcast's potential takeover of AT&T Broadband has at least one fan from outside either company: Playboy Enterprises chairman and CEO Christie Hefner.

Hefner told analysts last week that Playboy's entertainment group would benefit from the takeover because Comcast, in addition to delivering better operating margins, also has higher pay-per-view rates than its takeover target. Adult content such as Playboy's earns a significant amount of its revenue from PPV.

In fact, Hefner said she'd prefer any of the operators that have expressed interest in the deal, such as Time Warner Cable, over AT&T.

"As far as I can tell, every one of the bidders for those systems operates at a higher margin" than AT&T does, she said. Companies that operate at a higher margin have better managers, she added. "We would rather do business with people that are better managers .... I think that would only be a good thing for us."

AT&T spokesman Andrew Johnson countered that AT&T is rolling out advanced services that have higher costs and impact operating margins, but that make services more valuable in the long run.

"We respectfully disagree with Ms. Hefner's misguided opinion," he said.

Jim English, president of Playboy's Television Networks, later offered further reasons why Playboy might like a change of management.

AT&T has taken Playboy's cable network off its analog carriage completely and moved it to the digital tier, English said. (An AT&T spokesman said the move was done to increase parental control of porn.) Out of its 13.8 million total subscriber base, AT&T has 3.1 million digital subscribers, according to its latest quarterly report. That means that Playboy is no longer available to 77.5% of subscribers to the nation's largest MSO.

The loss has been palpable for Playboy. During the second quarter, the company's revenues from domestic television sales fell 8% to $18.1 million, compared with the same period last year.

Comcast, on the other hand, hasn't driven the adult channel from analog completely, English said.

Comcast officials did not return calls before press time.