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* American Media to take over production, sales, support

* Playboy keeps editorial; sees magazine profit in 2011

* Playboy shares up 3 pct premarket

NEW YORK, Nov 24 (Reuters) – Playboy Enterprises Inc
(PLA.N) will outsource all its publishing operations except for
editorial to American Media Inc in a bid to cut costs and
return its namesake magazine to profitability in two years.

The company said on Tuesday that Playboy magazine is
forecast to lose $8 million in 2009, and this outsourcing move
would reduce that loss by $5 million in 2010 before it reaches
profitability in late 2011.

The move comes as Playboy Enterprises, founded by Hugh
Hefner, is in talks to be sold for about $300 million. Sources
familiar with the matter said earlier this month that Iconix
Brand Group (ICON.O) was interested in the Chicago-based
company, as was Jim Griffiths, a former entertainment president
at Playboy.

Florida-based American Media, the fourth-largest U.S.
magazine publisher, will take over production, circulation,
advertising sales, marketing and support functions of both
Playboy magazine and the company’s other domestic
publications.

American Media will be paid fees for these functions, as
well as incentives to increase advertising and circulation
revenue, Playboy said. It did not give details.

The move will result in about 25 job cuts, leading to a
fourth-quarter charge of $2 million, Playboy said, adding that
some of the positions will be transferred to American Media.

“By joining forces with American Media, we will be able to
significantly reduce our cost structure and leverage the
economies of scale related to manufacturing, distribution and
marketing,” Playboy Chief Executive Scott Flanders said.

“This partnership will enable us to generate profits from
our magazine operations in 2011,” he said in a statement.

Earlier this month, Playboy posted a narrower third-quarter
loss of $1.1 million, or 3 cents per share, as revenue fell
across its print, TV and licensing businesses. That compared
with its $6.2 million loss, or 19 cents a share, a year
earlier. [ID:nN053714]

The outsourcing move was first reported in the Wall Street
Journal, which said it would be funded in part from Playboy’s
advertising sales.

Shares of Playboy rose 3 percent to $4.24 in premarket
trade from their previous close of $4.12.
(Reporting by Tiffany Wu and Deepti Govind, editing by Dave
Zimmerman)
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