Sex sells, but less than before
The downturn has been hard on smut vendors and strippers.

Playboy, that iconic purveyor of bunnies, hasn’t flashed its fourth-quarter results yet, but the writing is on the wall. Last week, Hugh Hefner’s company announced job cuts. More ominously, it is writing down at least $100 million in assets.

This is troubling because under accounting rules, companies must take assets off the books when they are deemed worthless because they won’t produce revenue. So Playboy is “telling you what financial performance will look like for the next year,” and it is saying it’s going to be bad, says one analyst who follows the company.

Like Playboy, Private Media Group (PRVT, news, msgs), a porn company based in Barcelona, Spain, saw revenue drop in the third quarter. “We are all getting hit. Everybody’s being affected by the recession,” Private Media operations chief Peter Cohen says.

And at Rick’s Cabaret International (RICK, news, msgs), a chain of high-end strip joints, revenue at clubs open more than a year was flat in the fourth quarter, compared with a 14.6% gain in the previous 12 months.

Business at strip clubs in several markets is still strong, though. One of those is New York City, so you have to wonder if bank-bailout money is finding its way into garter belts. Allan Priaulx of Rick’s attributes his clubs’ relative strength to a “flight to quality,” meaning that pole dancer fans on a budget choose high-end clubs like Rick’s rather than take a chance on a dive.

Profit margins are also getting squeezed. Feeling the pinch of the recession, big spenders are pulling back on premium drinks and lap dances. “We don’t have that person who’s spending $2,000 or $3,000 in a night as often as they used to,” VCG Holding (VCGH, news, msgs) chief Troy Lowrie told investors in a November conference call. VCG, which runs about 20 clubs in 10 states, saw revenue fall in the third quarter.

The recession has at least one upside for strip clubs. “There are more beautiful girls that come out in a poor economy,” Lowrie says. “The person that might have lost their $50,000-a-year secretarial job is now a gorgeous entertainer for us.”

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