Penthouse publisher files for bankruptcy as revenue falls

GENERAL MEDIA INC, the publisher of Penthouse, filed for bankruptcy after competition from the internet, retail video outlets and cable television left the adult magazine company unable to pay its creditors.

The company, best known for its magazine featuring explicit photographs of naked women, missed payments on $41.8 million of bonds in April.

New York-based General Media, a unit of Penthouse International Inc, is 85% owned by Bob Guccione, who founded Penthouse in 1965. Penthouse’s revenue has fallen 53% in the past decade to $53.8 million, and liabilities exceed assets by $64 million, regulatory filings show.

General Media’s downfall is due in part to “the change in the social climate toward men’s magazines, coupled with certain advances in electronic technology, including the proliferation of retail video outlets and the increased market share of cable television and the Internet,” said Scott Avila, who was named the company’s chief restructuring officer, in court papers.

Penthouse had circulation of 530,000 at the end of December, according to the Audit Bureau of Circulations, which tracks magazine circulation. That compares with a circulation of 3.2 million for Playboy Enterprise’s Inc’s Playboy, which is the top-selling US men’s magazine. The company said it had between $50 million and $100 million each in assets and debts in Chapter 11 papers filed yesterday in US Bankruptcy Court in Manhattan. General Media said it closed a $5 million bankruptcy credit line from a group of secured bondholders.

Penthouse International didn’t file for bankruptcy, the company said.

Penthouse said on June 13 that the Securities and Exchange Commission was investigating inaccuracies in its financial statements for the first quarter of 2003 and for all of 2002. The company said it would correct the errors, which it described as inadvertent. In a May SEC filing, General Media said the weak economy, a decrease in cigarette advertising and a decline in the phone-sex industry contributed to its business woes.

Penthouse International shares began trading in December, after Guccione merged his private holding company with a dormant publicly traded company called American Pulp Exchange Inc, and then changed its name to Penthouse International. Penthouse now owns General Media.