Penthouse Files for Chapter 11

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Penthouse Files for Chapter 11

NEW YORK -- Penthouse magazine took a gamble five years ago, turning to hard-core pornography as it struggled to hold on to a dwindling base of readers. That ended up alienating readers even more, leading to a sharp drop in circulation.

Now, as its revenues continue to slump, Penthouse's publisher is seeking bankruptcy protection. General Media Inc., the company founded by Robert Guccione, filed for Chapter 11 in New York Tuesday as it restructures its debts and comes up with a reorganization plan. It will continue to publish the magazine in the meantime, the Associated Press reported.

Penthouse has been in a downward spiral for most of the past decade, and took a turn for the worse when it moved to explicit pornography in 1998. Since then, its circulation has plummeted from nearly 1 million to 565,700 last year, according to the Audit Bureau of Circulations.

Magazine experts say Penthouse and other publishers of adult magazines have been hurt as people go to the Internet for cheaper, easier and more private access to adult material.

Other men's magazines have held their own or even flourished at the same time that Penthouse has been suffering. Playboy has had financial difficulties, but its circulation has remained steady at about 3.2 million over the past five years. Earlier this month Playboy reported improved second-quarter results, partly due to gains in its online business and better newsstand sales.

At the same time, men's magazines such as Maxim and FHM that contain racy articles and photos but no nudity have become a huge success. Maxim now has a circulation of 2.5 million, growing rapidly since its launch in the United States in 1997, and FHM has circulation of just over 1 million, the report said.

General Media said it had appointed T. Scott Avila of Corporate Revitalization Partners LLC, a consulting firm, to the newly created post of chief restructuring officer. Avila didn't return phone calls seeking comment. General Media has just under $40 million in debt. Feinstein said the company needed relief from the "onerous" terms of current debt servicing agreements in order to improve its business prospects. According to federal securities filings, General Media's revenues have fallen by nearly half since 1998 to $53.8 million last year.

Founded by Guccione in 1965, Penthouse had its heyday in the 1970s and 1980s, drawing large audiences with erotic photography. But it began to have problems with distribution in the late 1980s after many convenience stores stopped carrying the magazine.