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Cybersmut and Debt Undermine Penthouse (Guccione Says Magazine About To Go Under)
The New York Times ^ | April 8, 2002 | David Carr

Posted on 04/08/2002 1:50:41 AM PDT by Timesink


April 8, 2002

Cybersmut and Debt Undermine Penthouse

By DAVID CARR

Bob Guccione, the publisher of Penthouse, fought for decades to introduce pornography to mainstream audiences. In succeeding, he may have built a gallows for his once hugely successful magazine. Pornographic images of every bent are now just a click away on the Web, often at no charge, and Penthouse, which once sold almost five million copies a month, now has a circulation of 650,000.

The auditors of Mr. Guccione's debt-ridden company, General Media, the parent of Penthouse and affiliated enterprises, stated in its annual report that the company would not be able to meet interest and amortization payments of almost $13 million this year on loans that carry a punishing 15 percent interest charge.


General Media's liabilities exceed its assets by $22.3 million, and if it fails to meet its payments on $52 million in debt, its trustee, the Bank of New York (news/quote), "could assume control of the company," the annual report said. Calls to the Bank of New York were not returned.


Mr. Guccione, 71, acknowledges that the run of Penthouse magazine is at an end. There is "no future for adult business in mass market magazines," he said. "The future has definitely migrated to electronic media," he said, adding that he expects to be part of it.


That is a breathtaking acknowledgment for the man who vied with Hugh Hefner and Playboy in the race to cash in on the American male libido. According to Mr. Guccione, Penthouse grossed $3.5 billion to $4 billion over the 30-year life of the company, with net income of almost half a billion dollars.


Jack Manning/The New York Times
Bob Guccione, publisher of Penthouse, says he believes that his brand of pornography may be on the way out. A heavy debt load and failed ventures have not helped matters.

Unable to speak publicly because of the effects of throat cancer, he answered faxed questions from his 45-room, 17,000-square-foot town house in the East 60's of Manhattan, one of the largest private residences in the city. On Thursday, the house was put on sale for $40 million, according to a real estate broker. Some of the $200 million in art work Mr. Guccione has collected — including works by Degas, Renoir and Picasso — have been pledged as collateral against business and personal loans.

For three decades, the effusively decorated house served as a headquarters for Mr. Guccione's far-flung interests. Neither satisfied by nor ashamed of his status as a pornographer, Mr. Guccione sought to wriggle out of the pigeonhole and overreached in the process. His efforts at more general interest magazines — Omni and Longevity — failed. He spent millions on an unsuccessful attempt to develop small nuclear fusion reactors, financing a team led by Robert W. Bussard, a nuclear scientist.

"Those kind of mistakes can be devastating," said Larry Flynt, publisher of Hustler. "The secret to my success is that I stayed away from what I didn't know."

Mr. Guccione's gamble on Atlantic City was probably his costliest. In 1978, he announced plans for a $200 million casino at a site on the Boardwalk. He never received a gambling license, and the four-story steel structure sat rusting for 10 years while an elderly homeowner, Vera Coking, held out and stymied him. Mr. Guccione switched his efforts to a joint venture with Ramada Inn to develop a $140 million luxury club near the entrance to the city. That fizzled, as well, and he sold both parcels, with the proceeds being used to pay down a $28 million loan from Kennedy Funding of Hackensack, N.J. Calls to Kennedy Funding were not returned.

The enormous misstep may have been just one more ill-advised effort to diversify, but the explosion of pornography on the Internet in ever more customized ways may accomplish what the Meese commission on pornography, the Rev. Jerry Falwell and Andrea Dworkin, the antipornography activist, failed to do: the shuttering of Penthouse.

"I'm delighted that Mr. Guccione may be going out of business," Ms. Dworkin said. "The problem is that he is being replaced, quite possibly, by something that is much worse."

Mr. Guccione stumbled into the business to begin with. He was born in Brooklyn and wandered Europe as an artist in the 1950's and 60's and worked as a journalist in London, before noticing in 1965 that Mr. Hefner's Playboy was storming the newsstand there. After a shoestring introduction in England met with spectacular results, Penthouse arrived in the United States in 1969 and was a hit.

Working with his wife and lifelong business partner, Kathy Keeton — a classically trained ballet dancer from South Africa who was a star on the European exotic dancer circuit — Mr. Guccione offered a darker and more overtly political appeal to male readers. In addition to depicting nude women in more explicit poses, Penthouse, "the magazine of sex, politics and protest," as it describes itself, was among the first magazines to recognize the plight of Vietnam veterans. His blithe willingness to use exploitative images of nude women infuriated feminists and conservatives alike.

He published a number of big-name writers — from Harrison E. Salisbury to Stephen King — but over the years, he was most often in the news for persuading famous or infamous women to pose nude, including Vanessa Williams, the former Miss America; Gennifer Flowers; and Paula Jones (twice).

Mr. Guccione's publishing practice of objectifying every body part of a woman save her tonsils, along with his penchant for massive gold jewelry, positioned him as the more transgressive half of the duo of Hefner/Guccione. But he was conservative in his personal habits, choosing not to drink, smoke or use drugs, and he was a devoted husband, according to friends and associates..

In the mid-90's, Mr. Guccione responded to the growing threat from digital pornography by making his magazine even more explicit, depicting various sexual acts. The change did not please newsstand vendors, and what had been a mainstream publication became a magazine whose distribution was often restricted to pornographic bookstores.

The loss of newsstand revenue was critical, and circulation decreased 33 percent from 1997 to 2001, according to the company. The publication was never advertising driven, and the circulation decline led to a net loss of $10 million last year, compared with a net income of $5.5 million in 2000. The company has cash on hand of $2.4 million, down from $6.4 million in 2000.

"In the end, the decision to go hard-core is part of what brought Penthouse down," said Dian Hanson, a former editor of Leg Show, an adult magazine, who is now working on a two-volume history of the men's magazine industry. "Penthouse had a name and a reputation, but when people looked inside, they were shocked at what it had become. Once they went hard-core, they lost a lot of their placement at newsstands. Men's magazines are an impulse buy. It takes a lot more determination to drive to a windowless cinder block building out on the highway than picking up a magazine while you are out buying some milk for your family."

Over at Playboy, the next generation of adult entertainment is being handled by Mr. Hefner's daughter, Christie, but even though Mr. Guccione's daughters and a son work for General Media, he had a very public falling out with his namesake, Bob Guccione Jr., after financing and then closing Spin magazine in 1987. Mr. Guccione Jr. found new financing and began publishing the magazine on his own. The two have not spoken in more than a decade, and Bob Guccione Jr., who now publishes Gear, a men's lifestyle magazine, declined to comment on the relationship, saying only that he wished his father well.

Ms. Keeton died in 1997 after a long fight with breast cancer, a loss that associates say had a profound effect on Mr. Guccione's business and personal life. She is still listed on the masthead of Penthouse as president and chief operating officer.

Penthouse, which had been on a long, slow slide in much of the 90's, seemed to go off a cliff after Ms. Keeton died. With a declining franchise in adult publishing and crippling losses from his attempt to build a in Atlantic City, Mr. Guccione sold off a group of automotive magazines in 1999 to Emap Petersen and used the $30 million in proceeds to reduce his debt. Under the leadership of Ms. Keeton, Penthouse had moved aggressively into digital technologies in the mid-90's, but the explosion in sources of pornography has gradually reduced revenue from electronic businesses. Revenue in the online portion of General Media's business was down 30 percent last year, to less than $10 million.

"Ultimately, given the way that he is going, the company will probably be split up," said Dennis McAlpine, an independent analyst on Wall Street. "Somebody is going to buy off the individual pieces, but the problem is going to be getting clear title to those pieces."

A longtime business associate said that he was still waiting for Mr. Guccione to pull, if not a bunny, something else out of his hat.

"People have counted him out again and again, and Bob always finds a way," the associate said.

By fax, Mr. Guccione manages to sound realistic while still posturing as the unrepentant sophisticate of old.

"As far as our liquidity issues and the auditor's `going concern' opinion, we are not sticking our heads in the sand," Mr. Guccione said. "Although I can't discuss specifics, suffice to say that we are addressing these concerns and expect to be in business for years to come."

But given the scarcity of profits, the ubiquity of a formerly precious commodity and the preponderance of his debts, one of pornography's emperors is a little short on clothes.

"I think it would be shocking for something as large and well known as Penthouse to go down," said Ms. Hanson, the former Leg Show editor. "Porn works on the Web because it is free, and more importantly, you don't have to go into the convenience store and face the smirking young woman at the cash register to get it. Now, you just turn on the computer."


TOPICS: Business/Economy; Culture/Society; Front Page News
KEYWORDS: bobguccione; cyberporn; hughhefner; obscenity; penthouse; playboy; pornography; smut
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My, how times DO change!
1 posted on 04/08/2002 1:50:41 AM PDT by Timesink
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To: Timesink
He spent millions on an unsuccessful attempt to develop small nuclear fusion reactors, financing a team led by Robert W. Bussard, a nuclear scientist.

Yeah, I remember that -- too bad it didn't come off. Omni was great fun when it first came out, although it ran out of steam pretty quickly. I actually have a bit of soft spot for Guccione.

2 posted on 04/08/2002 2:01:55 AM PDT by The Great Satan
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To: Timesink
This wouldn't have happened if Bill was still president.

He may have been pals with Larry Flynt but I still think that Bubba would have offered a government bail out to keep Penthouse from closing their doors and disappearing from the newstands...

3 posted on 04/08/2002 2:06:09 AM PDT by weegee
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To: Timesink
He should write/forward this article to Playboy Advisor.
4 posted on 04/08/2002 2:16:48 AM PDT by GalvestonBeachcomber
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To: The Great Satan
Maybe they can have Hitlary run a pant suite issue to boost sales.
5 posted on 04/08/2002 2:55:01 AM PDT by boomop1
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To: Timesink
In the mid-90's, Mr. Guccione responded to the growing threat from digital pornography by making his magazine even more explicit, depicting various sexual acts.

You'd kind of wish the NYT would detail this - if you've not seen the magazine, it'd be hard to figure out what was going on. And it is correct - it got too weird. And Playboy seems to be doing well in the digital era, go figure...

6 posted on 04/08/2002 3:04:47 AM PDT by garbanzo
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To: boomop1
Then he'd have to change the name to "Wierd Tails".
7 posted on 04/08/2002 3:09:47 AM PDT by uglybiker
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To: boomop1
You could have any pants suit you like as long as it is black and really crusty.

PLEASE NO NAKED PICTURES WITHOUT A LARGE BARF ALERT.

8 posted on 04/08/2002 3:44:54 AM PDT by chiefqc
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To: Timesink
Let me be the first to dance on his grave. Good riddance. Maybe now he can contribute something to society by bagging some groceries.
9 posted on 04/08/2002 5:02:06 AM PDT by Aquinasfan
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To: Aquinasfan
Nobody held a gun to the women's heads to get them to pose, or forced men to buy the magazine. By running a (once) profitable business, this guy did more for society than a whole flock of "public servants" could.
10 posted on 04/08/2002 5:29:17 AM PDT by bleudevil
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To: Timesink
Vera Coking refusing to sell to this developer was an exercise in rights to private property. Her value for her property was not matched by this developer. Many states's law have been changed during the '90's to allow the power of the state to take such private property under eminent domain, to benefit developers. This misuse of powers of the state to redistribute private property by force is a very wide and steep slope to fascism, corrupt socialism.

The state's claim of a public interest is increased tax revenues and new jobs from new development. Many government officials after forcing such "deals" take new jobs with these same developers after eminent domain secures the real estate from "sellers". If that is not unacceptable corruption in America, then our socialist nation has become fascist.

Rights to private property are a fundamental freedom. Land owners must not become temporary caretakers of parcels at the pleasure of the state.

11 posted on 04/08/2002 5:35:03 AM PDT by SevenDaysInMay
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To: bleudevil
Nobody held a gun to the women's heads to get them to pose, or forced men to buy the magazine.

Nobody put a gun to his head forcing him to publish his filth either. They're all guilty.

He would have contributed more to society by sitting on a couch and watching TV for the last thirty years.

12 posted on 04/08/2002 5:55:23 AM PDT by Aquinasfan
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To: GalvestonBeachcomber;uglybiker;Minute Gal
Well, I'm shocked that a fine magazine like this, describing fine places to live, is forced out of business by some internet company!

Since we're looking for new digs on the left-coast of FLA, I guess I'd better secure a copy soon........FRegards

13 posted on 04/08/2002 6:04:35 AM PDT by gonzo
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To: Timesink
He spent millions on an unsuccessful attempt to develop small nuclear fusion reactors..

Mr. Guccione, I'll need a couple of million more and some more women."

14 posted on 04/08/2002 6:12:05 AM PDT by csvset
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To: Aquinasfan
Let me be the first to dance on his grave.

Christianity is a religion of love. Bwahhahahahaha

15 posted on 04/08/2002 6:27:25 AM PDT by jlogajan
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To: Timesink
I have great admiration for Bob Guccione, but this really was inevitable. I don't know how any pornographic magazine can remain in circulation, considering what's available for free on the internet.
16 posted on 04/08/2002 6:31:13 AM PDT by Physicist
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To: jlogajan
Christianity is a religion of love. Bwahhahahahaha

Sometimes administering punishment is the loving thing to do. You could probably think of some examples.

17 posted on 04/08/2002 8:37:44 AM PDT by Aquinasfan
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To: Aquinasfan
It should be noted that Bob Guccione ran stories in Penthouse that the mainstream media ignored but are part of Clinton conspiracy lore. Whether it was Gennifer Flowers, serious and less serious questions about what happened at Waco, and most importantly, Roger Morris's The Crimes of Mena saw their first large distribution circulation in the pages of Penthouse.
18 posted on 04/08/2002 8:42:18 AM PDT by JohnGalt
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To: JohnGalt
So you're saying that you bought the magazine for the articles?
19 posted on 04/08/2002 8:50:22 AM PDT by RayBob
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To: RayBob
That's my story, and I'm sticking to it.
20 posted on 04/08/2002 8:59:29 AM PDT by JohnGalt
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