Updated: From a Playboy (NYSE: PLA) SEC filing, some more details on the deal terms: it will pay AMI a “flat rate fee in consideration for the services provided as well as cost savings and subscription incentive fees if certain benchmarks are achieved during the next two years. The Company will also pay certain costs and expenses so long as AMI maintains a guaranteed rate base and subscriber mix. The term of the Agreement will expire on December 31, 2014, but will automatically renew for an unlimited number of additional one-year periods unless either party provides the other with advance written notice of intent not to renew. The Agreement is subject to early termination in certain circumstances, including by the Company if AMI fails to achieve certain print and digital advertising sales revenue benchmarks.”
After we first reported last night about Playboy’s mag outsourcing deal with American Media Inc (but we got it mixed up with the sale talks, which are still ongoing), the company has released some official details of the deal: AMI will take over production, circulation, ad sales, marketing and other support services of both Playboy mag and the company’s other domestic pubs (meaning special editions and calendars). Like we reported, edit remains with Playboy, under Hugh Hefner.
AMI will be paid negotiated fees to perform functions currently done by PEI and will be “incented to increase both advertising and circulation revenues,” the companies said. The mag is expected to lose about $8 million in 2009, and, with this agreement, to reduce that loss to about $5 million in 2010 before reaching profitability in late 2011. For Playboy, this will result in a Q4 restructuring charge of about $2.0 million due about 25 layoofs, some of which will be transferred to new job openings at AMI. The transition to AMI is expected by March 2010. More details here.