Over the past 15 years, Robert Guccione’s once-lucrative porn
empire has fizzled and is no longer the cash machine it once was. As chairman and chief executive of General Media International
Inc., which publishes Penthouse, Mr.
Guccione could havesoldthe magazinefor perhaps half a billion dollars less
thantwo decades ago. But instead he held on, diversified into video and
Internet porn-and still somehow managed to lose money in the sex business.
General Media’s recent filing of its 2001 financials with the Securities and
Exchange Commission shows a rapidly deteriorating income statement and balance
The company now owes $51 million of senior debt, with
all the assets of the enterprise pledged toward that debt. It is paying 15
percent annually-the sort of interest payment one makes to keep the loan
sharks at bay. The balance sheet shows current liabilities of $34 million
and current assets of just $12 million, with a rapidly declining cash
supply of only $2.5 million.Overthe past five years, the company’s
operating revenues have plummeted by tens of millions of dollars. Revenues for Penthouse and its sisterpublications
Forum,Variations, PenthouseComix and Penthouse Letters are down from $60
million in 2000 to $53 million in 2001.
Bythe1980’s, Penthouse had
established a reputation as Playboy’s trashier
cousin and boasted almost five million readers; today, the magazine has a
circulation of 652,000,withadrop of 100,000 in the past year alone. At one
time, the magazine was raking in $20 million a year and Mr. Guccione was living
high on the hog. For the year 2001,
the company reported a net loss of almost $10 million and cash flows that are equally negative. Not only is its bottom line sagging beyond repair, the Penthouse name long ago lost whatever
allure it may have held, even among purveyors of porn.
In addition to Mr. Guccione’s salary of $1.7 million, the company
pays $500,000 to $600,000 annually toward the upkeep of his Upper East Side
townhouse-the place where he lives and entertains, a home which he bought and
renovated for more than $20 million. The company justifies this expense by
claiming the townhouse is used for “business meetings” and “client
entertainment.” There’s also the matter of a $3.2 million payment from the magazine to the parent company for expenses that
are not at all clear; there is no way of knowing how much of that went
toward the operations of the business.
How much longer can Mr. Guccione keep General Media afloat? This
year, the company is required to make an interest payment of about $7.5 million
and an amortization payment of $5.8 million, and it is unlikely that the cash
will be there to do that. The debt is due in just two years; it’s only a matter