$500M With Social Site From Penthouse
In what may be a record in the adult-entertainment industry, Penthouse
magazine's publisher says it paid $500 million for a Silicon Valley
company running one of the biggest sexually oriented social-networking
websites.
The deal announced Wednesday for Palo Alto-based
Various adds AdultFriendFinder to Penthouse's portfolio as it expands
further into the fast-growing field of social networks led by MySpace
and Facebook.
"That's where the money is," said Marc Bell, CEO of Penthouse Media Group.
The deal comes as the $13 billion
adult-entertainment industry shifts more resources online amid rising
competition and a plunge in sales and rentals of X-rated DVDs and
related fare.
Penthouse hopes to prosper by gobbling up as
many adult-focused companies as possible, Bell said, with an eye toward
taking Penthouse public. He and his partner, Daniel Staton, bought
Penthouse in 2004 in a bankruptcy court reorganization.
Experts on the adult industry said they could
not recall a deal bigger than the one announced Wednesday. "Likely,
it's a record," says Frederick Lane, author of Obscene Profits: The Entrepreneurs of Pornography in the Cyber Age. "It really underscores the shift from traditional media to new media."
With Various, Penthouse says it will have
revenue of $340 million this year, making it the world's biggest
adult-entertainment company. Lane said the deal is a further challenge
to Playboy Enterprises, (PLA) which Hugh Hefner founded in 1953.
Playboy said it is not concerned about the Penthouse deal because the companies are in different markets.
Now led by Hefner's daughter, CEO Christie
Hefner, Playboy has diversified into non-sexual businesses including
household products as humdrum as shower curtains, and PlayboyU, a new
social network for college students. That site has no nudity,
spokeswoman Martha Lindeman says. Playboy reported $330 million in
revenue and $2.3 million in earnings for 2006.
Various was founded in 1996 by Andrew Conru, an
entrepreneur with a doctorate in mechanical engineering design from
Stanford University. It has about 300 employees and more than 25 online
communities, including non-sexual dating sites for Spanish speakers,
seniors and for Christians. Read FULL
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