Rather than becoming merely agency of record, AG Worldwide was tapped as Playboy's chief marketing group. The move comes nearly 18 months after Bob Perkins, the last chief marketing officer, left.
The company's chief marketing spot was "a challenging one to fill because we are in so many different businesses," said Playboy Chairman-CEO Christie Hefner. However, Ms. Hefner and her executives had come to the conclusion that "so much of our success is derived from marketing, we needed to upgrade the marketing talent within each business group."
Ms. Hefner and Peter Arnell, chairman of AG Worldwide, first met late last year. AG presented design ideas for diverse Playboy products, from the online properties to the retail stores to the costumes of casino employees. At the end of the meeting, Ms. Hefner told Mr. Arnell, "This is not about whether we'll work together. It's about when."
What evolved was an agreement that includes not only a fee-based compensation package but also gives AG Worldwide an equity stake in Playboy Enterprises' online division. Playboy.com will be spun off as a separate public entity later this year.
The hiring of AG Worldwide does not preclude Playboy from using other agencies. Since AG will be in charge of such a wide range of projects for Playboy Enterprises, the two companies may tap other agencies for different projects. Currently, Playboy Enterprises uses Kovel/Fuller, Los Angeles, for its Playboy.com advertising and last year's "Year of the Rabbit" campaign. That relationship continues.
The advertising budget to promote the magazine and Web site has rarely exceeded $1 million, say those close to the company. That isn't expected to rise much further since a 5% to 10% reduction in marketing costs was implemented across all the divisions for 2000. The cash portion of the AG deal is not very large, and the equity position will not have real value until after the initial public offering.
"It's very smart on Playboy's part," said one industry observer close to the company. "It's not much of a cash outlay, and in order for the equity portion to pay off, Arnell really has to perform."
AG Worldwide's Surge Interactive will do site design, digital commerce and online branding for Playboy.com. 360, AG's industrial design company, will propose design solutions for Playboy's international retail stores and casinos.
AG also will be involved in developing themed entertainment experiences that are uniquely Playboy. Hugh Hefner, Playboy's ultimate icon, has recently experienced a resurgence of interest, with celebrities once again flocking to parties at the Playboy mansion.
"Playboy is Disneyland for grownups," Mr. Arnell said. "They have the mouse ears and we have the bunny ears. Our job is to get our bunny ears to talk to Playboy customers the way the mouse ears talk to Disney's."
Playboy ended the last six months of 1999 down 5.5% in total circulation, to 3.3 million, while single-copy sales were off 23.1% to 549,117, according to Audit Bureau of Circulations figures. Ad pages, however, were up 10.4% to 709, according to Publishers Information Bureau.