UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2009

                                       OR

[ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                        Commission file number 001-14790

                            Playboy Enterprises, Inc.
             (Exact name of registrant as specified in its charter)

                Delaware                                36-4249478
        (State of incorporation)         (I.R.S. Employer Identification Number)

       680 North Lake Shore Drive
              Chicago, IL                                 60611
(Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (312) 751-8000

- --------------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be  submitted  and posted  pursuant to Rule 405 of  Regulation  S-T  (Section
232.405 of this  chapter)  during the  preceding  12 months (or for such shorter
period that the registrant was required to submit and post such files).  Yes [ ]
No [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]    Accelerated filer [X]   Non-accelerated filer [ ]
Smaller reporting company [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [ ] No [X]

At April 30,  2009,  there  were  4,864,102  shares of Class A Common  Stock and
28,574,953 shares of Class B Common Stock outstanding.



FORWARD-LOOKING STATEMENTS

      This Quarterly Report on Form 10-Q contains "forward-looking  statements,"
including statements in Part I, Item 2. "Management's Discussion and Analysis of
Financial  Condition and Results of  Operations," as to  expectations,  beliefs,
plans,  objectives and future financial performance,  and assumptions underlying
or  concerning  the  foregoing.  We use words  such as "may,"  "will,"  "would,"
"could," "should," "believes,"  "estimates," "projects," "potential," "expects,"
"plans,"  "anticipates,"  "intends,"  "continues" and other similar terminology.
These forward-looking  statements involve known and unknown risks, uncertainties
and other factors, which could cause our actual results, performance or outcomes
to differ  materially  from those  expressed  or implied in the  forward-looking
statements.  We  want  to  caution  you  not  to  place  undue  reliance  on any
forward-looking  statements.  We undertake no obligation to publicly  update any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.

      The  following  are some of the  important  factors  that could  cause our
actual  results,  performance  or  outcomes  to  differ  materially  from  those
discussed in the forward-looking statements:

(1)   Foreign,  national,  state and local  government  regulations,  actions or
      initiatives, including:
         (a)   attempts to limit or otherwise regulate the sale, distribution or
               transmission  of  adult-oriented   materials,   including  print,
               television, video, Internet and mobile materials;
         (b)   limitations on the  advertisement  of tobacco,  alcohol and other
               products which are important  sources of advertising  revenue for
               us; or
         (c)   substantive  changes in postal  regulations  which could increase
               our postage and distribution costs;
(2)   Risks associated with our foreign operations,  including market acceptance
      and  demand  for  our  products  and the  products  of our  licensees  and
      partners;
(3)   Our  ability to manage the risk  associated  with our  exposure to foreign
      currency exchange rate fluctuations;
(4)   Further changes in general economic conditions,  consumer spending habits,
      viewing patterns,  fashion trends or the retail sales environment,  which,
      in each case,  could reduce  demand for our  programming  and products and
      impact our advertising and licensing revenues;
(5)   Our ability to protect our trademarks,  copyrights and other  intellectual
      property;
(6)   Risks as a distributor of media content, including our becoming subject to
      claims for defamation, invasion of privacy, negligence,  copyright, patent
      or trademark infringement and other claims based on the nature and content
      of the materials we distribute;
(7)   The risk  our  outstanding  litigation  could  result  in  settlements  or
      judgments which are material to us;
(8)   Dilution from any potential  issuance of common stock or convertible  debt
      in connection with financings or acquisition activities;
(9)   Further  competition for  advertisers  from other  publications,  media or
      online  providers  or any  decrease  in spending  by  advertisers,  either
      generally or with respect to the adult male market;
(10)  Competition in the  television,  men's  magazine,  Internet,  mobile,  new
      electronic media and product licensing markets;
(11)  Attempts by consumers, distributors,  merchants or private advocacy groups
      to exclude our programming or other products from distribution;
(12)  Our television,  Internet and mobile businesses' reliance on third parties
      for  technology  and  distribution,  and any  changes in that  technology,
      distribution and/or unforeseen delays in implementation which might affect
      our financial results, plans and assumptions;
(13)  Risks  associated with losing access to transponders or technical  failure
      of transponders or other transmitting or playback equipment that is beyond
      our control;
(14)  Competition  for channel  space on linear  television  or  video-on-demand
      platforms;
(15)  Failure to maintain our  agreements  with multiple  system  operators,  or
      MSOs, and direct-to-home, or DTH, operators on favorable terms, as well as
      any decline in our access to and  acceptance  by DTH and/or cable  systems
      and the possible resulting deterioration in the terms, cancellation of fee
      arrangements,  pressure  on splits or adverse  changes in certain  minimum
      revenue amounts with operators of these systems;
(16)  Risks that we may not realize the expected increased sales and profits and
      other benefits from acquisitions;
(17)  Any charges or costs we incur in connection with restructuring measures we
      may take in the future;
(18)  Risks  associated  with the  financial  condition  of Claxson  Interactive
      Group, Inc., our Playboy TV-Latin America, LLC, joint venture partner;
(19)  Increases in paper, printing or postage costs;

                                        2



(20)  Effects  of  the  national   consolidation  of  the  single-copy  magazine
      distribution  system and risks associated with the financial  stability of
      major magazine wholesalers;
(21)  Effects of the national  consolidation  and/or  bankruptcies of television
      distribution   companies  (e.g.,  cable  MSOs,   satellite  platforms  and
      telecommunications companies);
(22)  Risks  associated  with  the  viability  of our  subscription,  on-demand,
      ad-supported and e-commerce Internet models;
(23)  Risks that adverse market and economic conditions may result in a decrease
      in the value of our  investments  in marketable  securities and risks that
      adverse  market  conditions  in the  securities  and  credit  markets  may
      significantly affect our ability to access the capital and credit markets;
      and
(24)  The risk that our common  stock could be delisted  from the New York Stock
      Exchange,  or  NYSE,  if we fail  to meet  the  NYSE's  continued  listing
      requirements.

      For a detailed  discussion  of these and other factors that may affect our
performance,  see Part I, Item 1A. "Risk  Factors" in our Annual  Report on Form
10-K for the fiscal year ended December 31, 2008.

                                        3



                            PLAYBOY ENTERPRISES, INC.
                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                     PART I
                              FINANCIAL INFORMATION

Item 1.   Financial Statements

             Consolidated Statements of Operations and Comprehensive Loss
             for the Quarters Ended March 31, 2009 and 2008 (Unaudited)        5

             Consolidated  Balance  Sheets at March 31, 2009  (Unaudited)
             and December 31, 2008                                             6

             Condensed  Consolidated  Statements  of Cash  Flows  for the
             Quarters Ended March 31, 2009 and 2008 (Unaudited)                7

             Notes  to  Condensed   Consolidated   Financial   Statements
             (Unaudited)                                                       8

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                               16

Item 3.   Quantitative and Qualitative Disclosures About Market Risk          21

Item 4.   Controls and Procedures                                             21

                                     PART II
                                OTHER INFORMATION

Item 1.   Legal Proceedings                                                   22

Item 1A.  Risk Factors                                                        23

Item 6.   Exhibits                                                            23

                                        4



                                     PART I
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                            PLAYBOY ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                   for the Quarters Ended March 31 (Unaudited)
                    (In thousands, except per share amounts)



                                                                           2009          2008
- ---------------------------------------------------------------------------------------------
                                                                            
Net revenues                                                        $    61,633   $    78,536
- ---------------------------------------------------------------------------------------------
Costs and expenses
   Cost of sales                                                        (50,430)      (63,756)
   Selling and administrative expenses                                  (12,538)      (14,705)
   Restructuring expense                                                 (3,179)         (594)
   Impairment charge                                                     (5,518)            -
- ---------------------------------------------------------------------------------------------
Total costs and expenses                                                (71,665)      (79,055)
- ---------------------------------------------------------------------------------------------
Operating loss                                                          (10,032)         (519)
- ---------------------------------------------------------------------------------------------
Nonoperating income (expense)
   Investment income                                                         33           360
   Interest expense                                                      (2,147)       (2,110)
   Amortization of deferred financing fees                                 (225)         (156)
   Other, net                                                               (89)         (517)
- ---------------------------------------------------------------------------------------------
Total nonoperating expense                                               (2,428)       (2,423)
- ---------------------------------------------------------------------------------------------
Loss before income taxes                                                (12,460)       (2,942)
Income tax expense                                                       (1,202)       (1,237)
- ---------------------------------------------------------------------------------------------
Net loss                                                            $   (13,662)  $    (4,179)
=============================================================================================

Other comprehensive income (loss)
   Unrealized loss on marketable securities                                 (26)         (470)
   Unrealized gain on derivatives                                             -            78
   Foreign currency translation gain (loss)                                (187)          383
- ---------------------------------------------------------------------------------------------
Total other comprehensive loss                                             (213)           (9)
- ---------------------------------------------------------------------------------------------
Comprehensive loss                                                  $   (13,875)  $    (4,188)
=============================================================================================

Weighted average number of common shares outstanding
   Basic and diluted                                                     33,388        33,275
=============================================================================================

Basic and diluted loss per common share                             $     (0.41)  $     (0.13)
=============================================================================================


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.

                                        5



                            PLAYBOY ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)



                                                                    (Unaudited)
                                                                       Mar. 31,      Dec. 31,
                                                                           2009          2008
- ---------------------------------------------------------------------------------------------
                                                                            
Assets
Cash and cash equivalents                                           $    25,902   $    25,192
Marketable securities and short-term investments                            605         6,139
Receivables, net of allowance for doubtful accounts of
   $4,397 and $4,084, respectively                                       34,365        40,428
Receivables from related parties                                          3,360         2,061
Inventories                                                               6,335         7,341
Deferred tax asset                                                        2,035         2,268
Prepaid expenses and other current assets                                 6,591         9,127
- ---------------------------------------------------------------------------------------------
   Total current assets                                                  79,193        92,556
- ---------------------------------------------------------------------------------------------
Property and equipment, net                                              20,135        20,319
Programming costs, net                                                   51,281        52,056
Goodwill                                                                 22,206        27,758
Trademarks                                                               42,709        42,503
Distribution agreements, net of accumulated amortization
   of $6,320 and $6,126, respectively                                    11,944        12,138
Deferred tax asset                                                          176           180
Other noncurrent assets                                                   5,830         6,078
- ---------------------------------------------------------------------------------------------
Total assets                                                        $   233,474   $   253,588
=============================================================================================

Liabilities
Acquisition liabilities                                             $     2,844   $     2,785
Accounts payable                                                         21,884        24,816
Accrued salaries, wages and employee benefits                             9,698         9,159
Deferred revenues                                                        36,764        36,402
Other current liabilities and accrued expenses                           13,396        19,557
- ---------------------------------------------------------------------------------------------
   Total current liabilities                                             84,586        92,719
- ---------------------------------------------------------------------------------------------
Financing obligations                                                   100,817        99,763
Acquisition liabilities                                                   5,291         5,419
Deferred tax liability                                                    8,125         7,783
Other noncurrent liabilities                                             20,213        19,785
- ---------------------------------------------------------------------------------------------
   Total liabilities                                                    219,032       225,469
- ---------------------------------------------------------------------------------------------

Shareholders' equity
Common stock, $0.01 par value
   Class A voting - 7,500,000 shares authorized; 4,864,102 issued            49            49
   Class B nonvoting - 75,000,000 shares authorized;
       28,933,455 and 28,868,900 issued, respectively                       289           288
Capital in excess of par value                                          259,437       259,240
Accumulated deficit                                                    (237,348)     (223,686)
Treasury stock, at cost - 381,971 shares                                 (5,000)       (5,000)
Accumulated other comprehensive loss                                     (2,985)       (2,772)
- ---------------------------------------------------------------------------------------------
   Total shareholders' equity                                            14,442        28,119
- ---------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                          $   233,474   $   253,588
=============================================================================================


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.

                                        6



                            PLAYBOY ENTERPRISES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   for the Quarters Ended March 31 (Unaudited)
                                 (In thousands)



                                                                           2009          2008
- ---------------------------------------------------------------------------------------------
                                                                            
Cash flows from operating activities
Net loss                                                            $   (13,662)  $    (4,179)
Adjustments to reconcile net loss to net cash used for
  operating activities:
   Depreciation of property and equipment                                 1,232         1,044
   Amortization of intangible assets                                        506           565
   Amortization of investments in entertainment programming               7,986         8,210
   Amortization of deferred financing fees                                  225           156
   Stock-based compensation                                                 178           584
   Noncash interest expense                                               1,054           977
   Impairment charge                                                      5,518             -
   Deferred income taxes                                                    579           431
   Payment of deferred compensation plan                                 (5,133)         (106)
   Net change in operating assets and liabilities                         5,483        (1,126)
   Investments in entertainment programming                              (7,171)       (8,258)
   Other, net                                                                17           215
- ---------------------------------------------------------------------------------------------
Net cash used for operating activities                                   (3,188)       (1,487)
- ---------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of investments                                                    (93)         (397)
Proceeds from sales of investments                                        5,575         8,513
Additions to assets held for sale                                             -        (6,832)
Additions to property and equipment                                      (1,079)       (2,759)
Other, net                                                                    4             -
- ---------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities                      4,407        (1,475)
- ---------------------------------------------------------------------------------------------
Cash flows from financing activities
Payments of deferred financing fees                                        (173)            -
Payments of acquisition liabilities                                        (250)         (250)
Proceeds from stock-based compensation                                       21            36
- ---------------------------------------------------------------------------------------------
Net cash used for financing activities                                     (402)         (214)
- ---------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents               (107)          243
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                        710        (2,933)
Cash and cash equivalents at beginning of period                         25,192        20,603
- ---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                          $    25,902   $    17,670
=============================================================================================


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.

                                        7



        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(A)   BASIS OF PREPARATION

      The  financial  information  included  in these  financial  statements  is
unaudited but, in the opinion of management,  reflects all normal  recurring and
other  adjustments  necessary  for a fair  presentation  of the  results for the
interim  periods.  The  interim  results  of  operations  and cash flows are not
necessarily  indicative  of those  results  and cash flows for the entire  year.
These  financial  statements  should be read in  conjunction  with the financial
statements and notes to the financial  statements contained in our Annual Report
on Form 10-K for the fiscal  year  ended  December  31,  2008.  Certain  amounts
reported for the prior periods have been  reclassified to conform to the current
year's presentation.

      As previously announced, in concert with the integration of our publishing
and online  businesses,  beginning with the current year quarter,  we have moved
the reporting of our online/mobile  business from the  Entertainment  Group into
the new  Print/Digital  Group,  formerly the Publishing Group. The Print/Digital
Group will focus on creating  brand-consistent content that extends across print
and digital platforms. Amounts reported for prior periods have been reclassified
to conform to the revised segment reporting.

(B)   RECENTLY ISSUED ACCOUNTING STANDARDS

      In May 2008, the Financial  Accounting  Standards  Board, or FASB,  issued
Staff Position No. APB 14-1,  Accounting for Convertible  Debt  Instruments That
May Be Settled in Cash upon Conversion  (Including Partial Cash Settlement),  or
FSP  APB  14-1.  FSP  APB  14-1  specifies  that  issuers  of  convertible  debt
instruments  that may be  settled  in cash  upon  conversion  should  separately
account for the  liability  and equity  components in a manner that will reflect
the entity's nonconvertible debt borrowing rate when interest cost is recognized
in  subsequent  periods.  We adopted FSP APB 14-1 at the  beginning  of 2009 and
applied FSP APB 14-1  retrospectively to all prior periods.  In applying FSP APB
14-1,  we  reclassified  $29.1  million  of the  carrying  value  of  our  3.00%
convertible  senior  subordinated notes due 2025, or convertible notes, and $1.2
million  of the  issuance  costs  related  to the  convertible  notes to  equity
retroactive to the March 2005 issuance date. These amounts  represent the equity
component  of  the  proceeds  from  the  notes   calculated   assuming  a  7.75%
nonconvertible  borrowing  rate.  The  discount is being  accreted to  "Interest
expense" and the debt issuance  costs are being  amortized to  "Amortization  of
deferred  financing fees" over a seven-year  term,  which  represents the period
beginning on the issuance  date of the notes of March 15, 2005 and ending on the
first put date of March 15, 2012.  Accordingly,  we recorded $4.0 million,  $3.8
million,  $3.5 million and $2.6 million of additional  noncash  interest expense
and $0.3  million,  $0.2  million,  $0.3 million and $0.2 million of  additional
amortization of deferred  financing fees, or $0.13,  $0.12,  $0.11 and $0.08 per
basic  and  diluted  share on a  combined  basis in 2008,  2007,  2006 and 2005,
respectively.  We will recognize  additional  noncash  interest  expense of $4.4
million and additional  amortization of deferred  financing fees of $0.3 million
for the year ended December 31, 2009, of which $1.1 million of interest  expense
and $0.1 million of amortization of deferred  financing fees, or $0.03 per basic
and diluted  share on a combined  basis,  were  recognized  for the current year
quarter.  On January 1, 2009,  as a result of adopting FSP APB 14-1,  we reduced
the carrying  value of the debt in  "Financing  obligations"  by $15.2  million,
decreased  "Other  noncurrent  assets" by $2.2  million,  increased  "Capital in
excess of par value" by $27.9  million and  increased  "Accumulated  deficit" by
$14.9 million on our Consolidated Balance Sheet.

      In March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161,  Disclosures  about  Derivative  Instruments and Hedging  Activities-an
amendment of FASB  Statement No. 133, or Statement  161.  Statement 161 requires
enhanced  disclosures  about how and why an entity uses derivative  instruments,
how  derivative  instruments  and related  hedged items are  accounted for under
Statement of Financial  Accounting  Standards No. 133, Accounting for Derivative
Instruments and Hedging  Activities,  and its related  interpretations,  and how
derivative  instruments  and related  hedged items affect an entity's  financial
position,  financial performance and cash flows. We adopted Statement 161 at the
beginning  of 2009.  Since  Statement  161  impacts our  disclosure  but not our
accounting  treatment for derivative  instruments and related hedged items,  our
adoption of Statement  161 did not impact our results of operations or financial
condition.

      In  December  2007,  the FASB issued  Statement  of  Financial  Accounting
Standards  No.  160,   Noncontrolling   Interests  in   Consolidated   Financial
Statements-an amendment of ARB No. 51, or Statement 160. Statement 160 clarifies
that a noncontrolling  interest (previously referred to as minority interest) in
a subsidiary is an ownership

                                        8



interest  in a  consolidated  entity  that  should be  reported as equity in the
consolidated  financial statements.  It also requires consolidated net income to
include  the  amounts  attributable  to both the parent  and the  noncontrolling
interest.  We adopted  Statement 160 at the  beginning of 2009.  The adoption of
Statement  160 did not have an impact on our results of  operations or financial
condition.

      In September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standards  No. 157, Fair Value  Measurements,  or Statement  157.  Statement 157
provides   enhanced  guidance  for  using  fair  value  to  measure  assets  and
liabilities. FASB Staff Position FAS 157-2, Effective Date of FASB Statement No.
157,  delayed the  effective  date of Statement 157 to the beginning of 2009 for
all nonfinancial assets and nonfinancial liabilities,  except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).  We adopted  Statement 157 on January 1, 2008 for our
financial  assets and  liabilities  and on January 1, 2009 for our  nonfinancial
assets and liabilities.  The adoption of Statement 157 did not have an impact on
our results of operations or financial condition.

(C)   RESTRUCTURING EXPENSE

      In the current  year  quarter,  we  implemented  a  restructuring  plan to
integrate our print and digital  businesses  and base them in our Chicago office
as  well  as  to  streamline  operations  across  the  Company,   including  the
elimination  of  additional  positions.  As a result of this plan, we recorded a
charge of $2.6 million  related to the  workforce  reduction  of 107  employees,
whose  jobs  will  be  eliminated  by the end of the  second  quarter  of  2009.
Severance payments under this plan began in the current year quarter and will be
completed  by  the  end  of  2009.  We  will  record  an  additional  charge  of
approximately  $4 million in the second  quarter of 2009 largely  related to the
exiting of our New York office space.

      In the fourth  quarter of 2008,  we  implemented a  restructuring  plan to
lower overhead costs,  primarily  related to senior Corporate and  Entertainment
Group positions.  As a result of this plan, we recorded a charge of $4.0 million
related to 21 employees,  most of whose jobs were eliminated in the current year
quarter.  Payments  under this plan began in the fourth quarter of 2008 and will
be substantially completed by the end of 2009 with some payments continuing into
2010. In the current year quarter, we recorded an unfavorable adjustment of $0.9
million against this plan as a result of changes in plan assumptions.

      In the third  quarter of 2008,  we  implemented  a  restructuring  plan to
reduce  overhead  costs.  As a result of this plan, we recorded a charge of $2.2
million related to costs associated with a workforce  reduction of 55 employees,
most of whose jobs were eliminated in the fourth quarter of 2008. Payments under
this  plan  began  in the  fourth  quarter  of 2008  and  will be  substantially
completed by the end of 2009 with some  payments  continuing  into 2010.  In the
current year quarter, we recorded a favorable adjustment of $0.3 million to this
plan as a result of changes in plan assumptions.

      The  following   table  sets  forth  the  activity  and  balances  of  our
restructuring  reserves,  which are  included  in "Accrued  salaries,  wages and
employee  benefits" and "Other current  liabilities and accrued expenses" on our
Consolidated Balance Sheets (in thousands):

                                                   Consolidation
                                                   of Facilities
                                       Workforce             and
                                       Reduction      Operations          Total
- --------------------------------------------------------------------------------
Balance at December 31, 2007            $    429         $   114       $    543
Reserve recorded                           6,357               -          6,357
Additional reserve recorded                  150             445            595
Adjustments to previous estimates           (128)            (41)          (169)
Cash payments                             (1,633)           (518)        (2,151)
- --------------------------------------------------------------------------------
Balance at December 31, 2008               5,175               -          5,175
Reserve recorded                           2,555               -          2,555
Adjustments to previous estimates            624               -            624
Cash payments                             (3,145)              -         (3,145)
- --------------------------------------------------------------------------------
Balance at March 31, 2009               $  5,209         $     -       $  5,209
================================================================================

                                        9



(D)   IMPAIRMENT

      In accordance  with FASB Statement of Financial  Accounting  Standards No.
142, Goodwill and Other Intangible  Assets, or Statement 142, we do not amortize
goodwill  and  trademarks  with  indefinite  lives,  but subject  them to annual
impairment  tests. Due to the current year quarter  realignment of our reporting
segments, we conducted interim impairment testing of goodwill in accordance with
Statement 142. As a result, we recorded an impairment charge on goodwill of $5.5
million  as certain  digital  assets  were  deemed  impaired  based on their new
reporting  segment.  This analysis was based in part upon our financial  results
during the current year and our expectation of future performance.

(E)   EARNINGS PER COMMON SHARE

      The  following  table sets  forth the  computations  of basic and  diluted
earnings per share, or EPS (in thousands, except per share amounts):

                                                              Quarters Ended
                                                                 March 31,
                                                           --------------------
                                                                2009       2008
- -------------------------------------------------------------------------------
Numerator:
For basic and diluted EPS - net loss                       $ (13,662)  $ (4,179)
===============================================================================

Denominator:
For basic and diluted EPS - weighted average shares           33,388     33,275
===============================================================================

Basic and diluted loss per common share                    $   (0.41)  $  (0.13)
===============================================================================

      The following table sets forth the number of shares related to outstanding
options  to  purchase  our  Class B common  stock,  or  Class B  stock,  and the
potential  number  of shares of Class B stock  contingently  issuable  under our
convertible notes. These shares were not included in the computations of diluted
EPS for the quarters  ended March 31, 2009 and 2008,  as their  inclusion  would
have been antidilutive (in thousands):
                                                               Quarters Ended
                                                                  March 31,
                                                           --------------------
                                                                2009       2008
- -------------------------------------------------------------------------------
Stock options                                                  4,575      3,546
Restricted stock                                                 536          -
Convertible notes                                              6,758      6,758
- -------------------------------------------------------------------------------
Total                                                         11,869     10,304
===============================================================================

(F)   INVENTORIES

      The following table sets forth inventories,  which are stated at the lower
of cost (specific cost and average cost) or fair value (in thousands):

                                                            Mar. 31,   Dec. 31,
                                                                2009       2008
- -------------------------------------------------------------------------------
Paper                                                      $   1,959   $  2,371
Editorial and other prepublication costs                       4,183      4,759
Merchandise finished goods                                       193        211
- -------------------------------------------------------------------------------
Total                                                      $   6,335   $  7,341
===============================================================================

(G)   INCOME TAXES

      Our income tax provision  consists  primarily of foreign income tax, which
relates  to  our  international  television  networks  and  withholding  tax  on
licensing income,  for which we do not receive a current U.S. income tax benefit
due to our net  operating  loss,  or NOL,  position  in the U.S.  Our income tax
provision also includes  deferred

                                       10



federal and state income taxes related to the amortization of goodwill and other
indefinite-lived intangibles, which cannot be offset against deferred tax assets
due to the indefinite reversal period of the deferred tax liabilities.

      We utilize the  liability  method of  accounting  for income  taxes as set
forth in FASB Statement of Financial  Accounting  Standards No. 109,  Accounting
for Income  Taxes.  We record net  deferred  tax assets to the extent we believe
these   assets  will  more  likely  than  not  be   realized.   In  making  such
determination,  we  consider  all  available  positive  and  negative  evidence,
including  scheduled  reversals of deferred tax  liabilities,  projected  future
taxable income, tax planning strategies and recent financial  performance.  As a
result of our cumulative  losses in the U.S. and certain foreign  jurisdictions,
we have concluded that a full  valuation  allowance  should be recorded for such
jurisdictions.

      At March 31, 2009 and December 31, 2008, we had  unrecognized tax benefits
of $8.0 million and do not expect this amount to change  significantly  over the
next 12  months.  Due to the  impact of  deferred  income  tax  accounting,  the
disallowance  of these benefits  would not affect our effective  income tax rate
nor would it  accelerate  the  payment  of cash to the  taxing  authority  to an
earlier period.

      Our continuing  practice is to recognize interest and/or penalties related
to income tax matters in income tax expense.

      We file U.S., state and foreign income tax returns in  jurisdictions  with
varying  statutes of  limitations.  The 2005  through  2008 tax years  generally
remain  subject to  examination  by federal and most state tax  authorities.  In
addition, for all tax years prior to 2005 generating an NOL, tax authorities can
adjust the NOL amount.  In our  international  tax  jurisdictions,  numerous tax
years remain subject to examination  by tax  authorities,  including tax returns
for 2003 and subsequent years.

(H)   FAIR VALUE MEASUREMENT

      As discussed in Note (B), Recently Issued Accounting Standards, we adopted
Statement 157 for our financial  assets and  liabilities  on January 1, 2008 and
for our  nonfinancial  assets and  liabilities  on  January 1, 2009.  Our assets
primarily  relate to marketable  securities and investments,  while  liabilities
primarily  relate  to  derivative   instruments  to  hedge  the  variability  of
forecasted  cash receipts  related to royalty  payments  denominated  in yen and
euro.

      We utilize the market  approach  to measure  fair value for our assets and
liabilities.  The market  approach  uses prices and other  relevant  information
generated by market  transactions  involving  identical or comparable  assets or
liabilities.

      Statement 157 includes a fair value hierarchy that is intended to increase
consistency  and   comparability   in  fair  value   measurements   and  related
disclosures.  The fair value  hierarchy is based on observable  or  unobservable
inputs to valuation  techniques that are used to measure fair value.  Observable
inputs reflect  assumptions market participants would use in pricing an asset or
liability  based  on  market  data  obtained  from  independent   sources  while
unobservable  inputs  reflect a reporting  entity's  pricing  based upon its own
market assumptions. The fair value hierarchy consists of three levels: Level 1 -
Inputs are quoted prices in active markets for identical  assets or liabilities;
Level 2 - Inputs  are quoted  prices for  similar  assets or  liabilities  in an
active  market,  quoted prices for identical or similar assets or liabilities in
markets that are not active, inputs other than quoted prices that are observable
and   market-corroborated   inputs,   which  are  derived  principally  from  or
corroborated  by observable  market data;  and Level 3 - Inputs that are derived
from  valuation  techniques  in which  one or more  significant  inputs or value
drivers are unobservable.

                                       11



      The following table sets forth our assets and liabilities measured at fair
value on a recurring  basis and the basis of  measurement  at March 31, 2009 (in
thousands):



                                                                  Quoted Prices in                           Significant
                                                                Active Markets for   Significant Other      Unobservable
                                             Total Fair Value     Identical Assets   Observable Inputs            Inputs
                                                  Measurement            (Level 1)           (Level 2)         (Level 3)
- ------------------------------------------------------------------------------------------------------------------------
                                                                                                
Marketable securities and investments        $            605   $              144   $             461(1)   $          -
Derivative assets                            $            263   $                -   $             263      $          -
- ------------------------------------------------------------------------------------------------------------------------


(1)   At December 31, 2008,  we had $0.9 million in an enhanced  cash  portfolio
      included in  "Marketable  securities and  short-term  investments"  on our
      Consolidated   Balance  Sheet.  Due  to  adverse  market  conditions,   we
      determined    that   the   market   value   of   this    investment    was
      other-than-temporarily  impaired,  and  through  March  31,  2009,  we had
      cumulative  impairment  charges of $0.9 million.  As of March 31, 2009, we
      have  received  12  distributions  from  the  investment,  which  is being
      liquidated,  at an  average  net asset  value of  95.47%,  resulting  in a
      cumulative  realized loss of $1.2 million,  which  includes the impairment
      charges.  At March 31, 2009, our remaining  balance in this investment was
      $0.5 million.

(I)   CONTINGENCIES

      In 2006, we acquired Club Jenna, Inc. and related companies,  for which we
paid $7.7 million at closing, $1.6 million in 2007 and $1.7 million in 2008 with
additional  purchase price payments of $2.3 million and $4.3 million due in 2009
and 2010,  respectively.  Pursuant  to the  acquisition  agreement,  we are also
obligated to make future  contingent  earnout  payments  based  primarily on DVD
sales of existing content of the acquired  business over a 10-year period and on
content produced by the acquired  business during the five-year period after the
closing of the acquisition. No earnout payments have been made through March 31,
2009 and no future  earnout  payments  are  expected  as we have  exited the DVD
business.

      In 2005,  we  acquired  an  affiliate  network of  websites.  We paid $8.0
million at closing  and $2.0  million in each of 2006 and 2007.  Pursuant to the
acquisition  agreement,  we are also obligated to make future contingent earnout
payments over the five-year period commencing January 1, 2005 based primarily on
the financial  performance of the acquired business. If the required performance
benchmarks  are achieved,  any contingent  earnout  payments will be recorded as
additional purchase price and/or compensation  expense. No earnout payments were
made during the quarter  ended March 31,  2009.  During  2008,  $0.1  million of
earnout payments were made and recorded as additional purchase price.

(J)   BENEFIT PLANS

      We  maintain a practice  of paying a  separation  allowance,  which is not
funded,  under our salary  continuation  policy to employees  with at least five
years of continuous service who voluntarily terminate employment with us and are
at age 60 or thereafter. We made cash payments under this policy of $0.2 million
during each of the quarters ended March 31, 2009 and March 31, 2008.

(K)   STOCK-BASED COMPENSATION

      The following table sets forth stock-based compensation expense related to
stock  options,  restricted  stock units,  other equity  awards and our employee
stock purchase plan, or ESPP (in thousands):

                                                               Quarters Ended
                                                                  March 31,
                                                              -----------------
                                                                2009       2008
- -------------------------------------------------------------------------------
Stock options                                                 $  102   $    464
Restricted stock units                                           (23)        61
Other equity awards                                               96         53
ESPP                                                               3          6
- -------------------------------------------------------------------------------
Total                                                         $  178   $    584
===============================================================================

                                       12



      The total amount of compensation expense recognized reflects the number of
stock-based  awards that actually vest as of the completion of their  respective
vesting periods.  Upon the vesting of certain  stock-based awards, we adjust our
stock-based compensation expense to reflect actual versus estimated forfeitures.
During the  quarters  ended  March 31,  2009 and 2008,  we  recorded a favorable
adjustment  of $0.1  million  and an  unfavorable  adjustment  of $0.1  million,
respectively, to reflect actual forfeitures for vested stock option grants.

Stock Options

      We  estimate  the value of options on the date of grant  using the Lattice
Binomial model, or Lattice model. The Lattice model requires  extensive analysis
of actual  exercise  and  cancellation  data and  involves  a number of  complex
assumptions  including expected  volatility,  risk-free interest rate,  expected
dividends and option exercises and cancellations.

      The following table sets forth the assumptions used for the Lattice model:

                                                              Quarters Ended
                                                                 March 31,
                                                           ---------------------
                                                                   2009     2008
- --------------------------------------------------------------------------------
Expected volatility                                            43% - 97%     N/A
Weighted average volatility                                          57%     N/A
Risk-free interest rate                                    0.14% - 4.71%     N/A
Expected dividends                                                    -      N/A
- --------------------------------------------------------------------------------

      The expected life of stock options  represents the weighted average period
the stock options are expected to remain  outstanding and is a derived output of
the Lattice model.  The expected life of stock options is impacted by all of the
underlying  assumptions and calibration of the Lattice model.  The Lattice model
assumes that exercise  behavior is a function of the option's  contractual term,
vesting  schedule and the extent to which the option's  intrinsic  value exceeds
the exercise price.

      During the quarter ended March 31, 2009, we granted 996,000 stock options,
exercisable for shares of our Class B stock, which vest over a three-year period
from the grant  date and  expire  10 years  from the grant  date.  The  weighted
average expected life for options granted was 6.9 years and the weighted average
fair value per share for  options  granted  was  $0.73.  No stock  options  were
granted during the quarter ended March 31, 2008.

      The  following  table sets forth the  activity  and  balances of our stock
options for the quarter ended March 31, 2009:

                                                                        Weighted
                                                                         Average
                                                            Number of   Exercise
                                                               Shares      Price
- --------------------------------------------------------------------------------
Outstanding at December 31, 2008                            3,578,584   $  15.22
Granted                                                       996,000       1.25
Forfeited                                                    (751,000)     24.59
Canceled                                                     (140,834)     11.68
- ---------------------------------------------------------------------
Outstanding at March 31, 2009                               3,682,750   $   9.66
================================================================================

      At  March  31,  2009,  we had $1.1  million  of  unrecognized  stock-based
compensation  expense  related  to  nonvested  stock  options,   which  will  be
recognized over a weighted average period of 2.2 years.

Restricted Stock Units

      In March 2009, we awarded 332,000 restricted stock units with a grant-date
fair value per share of $1.25,  which  provide  for the  issuance of our Class B
stock vesting over a three-year  period from the grant date. No restricted stock
units were granted during the quarter ended March 31, 2008.

                                       13



      In May 2008, we awarded 270,625 restricted stock units, which provided for
the  issuance  of our Class B stock if certain  performance  goals were met.  In
March 2009,  the Board of Directors  modified  the 2008 grants by replacing  the
performance-based  criteria  for the vesting of the grants with a  service-based
vesting  schedule.  Pursuant to the  requirements of FASB Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment, the fair value
of the grants was remeasured at the  modification  date to a fair value of $1.25
per share.  Accordingly,  we  recorded a  cumulative  adjustment  credit of $0.1
million related to this modification. The modification did not affect the number
of shares  expected to vest and no incremental  compensation  cost is associated
with the modification.

      During the quarter ended March 31, 2009,  we  determined  that the minimum
performance  thresholds  associated with the 2006 and 2007 restricted stock unit
grants were not achieved. Accordingly, these grants were forfeited.

      The following table sets forth the activity and balances of our restricted
stock units for the quarter ended March 31, 2009:

                                                                        Weighted
                                                                         Average
                                                          Number of   Grant-Date
                                                             Shares   Fair Value
- --------------------------------------------------------------------------------
Outstanding at December 31, 2008                            632,750   $     8.02
Granted                                                     332,000         1.25
Forfeited                                                  (385,875)       11.74
Canceled                                                    (43,125)        1.55
- -------------------------------------------------------------------
Outstanding at March 31, 2009                               535,750   $     1.25
================================================================================

      At  March  31,  2009,  we had $0.4  million  of  unrecognized  stock-based
compensation  expense related to nonvested restricted stock units, which will be
recognized over a weighted average period of 2.6 years.

                                       14



(L)   SEGMENT INFORMATION

      The following table sets forth financial information by reportable segment
(in thousands):

                                                             Quarters Ended
                                                                March 31,
                                                          ---------------------
                                                               2009        2008
- -------------------------------------------------------------------------------
Net revenues
Entertainment                                             $  26,181   $  32,669
Print/Digital                                                26,080      35,376
Licensing                                                     9,372      10,491
- -------------------------------------------------------------------------------
Total                                                     $  61,633   $  78,536
===============================================================================
Loss before income taxes
Entertainment                                             $   2,950   $   2,359
Print/Digital                                                (3,628)     (2,828)
Licensing                                                     5,606       6,643
Corporate                                                    (6,263)     (6,099)
Restructuring expense                                        (3,179)       (594)
Impairment charge                                            (5,518)          -
Investment income                                                33         360
Interest expense                                             (2,147)     (2,110)
Amortization of deferred financing fees                        (225)       (156)
Other, net                                                      (89)       (517)
- -------------------------------------------------------------------------------
Total                                                     $ (12,460)  $  (2,942)
===============================================================================

                                                           Mar. 31,    Dec. 31,
                                                               2009        2008
- -------------------------------------------------------------------------------
Identifiable assets
Entertainment                                             $ 110,937   $ 115,230
Print/Digital                                                25,227      36,874
Licensing                                                     8,164       7,601
Corporate                                                    89,146      93,883
- -------------------------------------------------------------------------------
Total                                                     $ 233,474   $ 253,588
===============================================================================

      As previously announced, in concert with the integration of our publishing
and online  businesses,  beginning with the current year quarter,  we have moved
the reporting of our online/mobile  business from the  Entertainment  Group into
the new  Print/Digital  Group,  formerly the Publishing Group. The Print/Digital
Group will focus on creating  brand-consistent content that extends across print
and  digital  platforms.  These  reporting  changes are in  conformity  with the
requirements  of FASB  Statement  of  Financial  Accounting  Standards  No. 131,
Disclosures about Segments of an Enterprise and Related Information,  and better
reflect how  management  views the  Company's  operations.  The revised  segment
reporting is reflected throughout this report for all periods presented. Amounts
reported  for prior  periods  have been  reclassified  to conform to the revised
segment reporting.

                                       15



ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      This  discussion   should  be  read  in  conjunction  with  the  Condensed
Consolidated  Financial  Statements  and  accompanying  notes  in Item 1 of this
Quarterly  Report on Form 10-Q and with our  Annual  Report on Form 10-K for the
fiscal year ended December 31, 2008.

RESULTS OF OPERATIONS (1)

      The  following  table sets forth our results of  operations  (in millions,
except per share amounts):

                                                               Quarters Ended
                                                                  March 31,
                                                            -------------------
                                                                2009       2008
- -------------------------------------------------------------------------------
Net revenues
Entertainment
   Domestic TV                                              $   13.3   $   16.5
   International TV                                             11.3       14.7
   Other                                                         1.6        1.5
- -------------------------------------------------------------------------------
   Total Entertainment                                          26.2       32.7
- -------------------------------------------------------------------------------
Print/Digital
   Domestic magazine                                            13.5       16.1
   International magazine                                        1.7        2.1
   Special editions and other                                    1.6        1.9
   Digital                                                       9.3       15.2
- -------------------------------------------------------------------------------
   Total Print/Digital                                          26.1       35.3
- -------------------------------------------------------------------------------
Licensing
   Consumer products                                             7.8        9.2
   Location-based entertainment                                  1.1        0.9
   Marketing events                                              0.1        0.2
   Other                                                         0.3        0.2
- -------------------------------------------------------------------------------
   Total Licensing                                               9.3       10.5
- -------------------------------------------------------------------------------
Total net revenues                                          $   61.6   $   78.5
===============================================================================

Net loss
Entertainment
   Before programming amortization                          $   11.0   $   10.5
   Programming amortization                                     (8.0)      (8.2)
- -------------------------------------------------------------------------------
   Total Entertainment                                           3.0        2.3
- -------------------------------------------------------------------------------
Print/Digital                                                   (3.6)      (2.8)
- -------------------------------------------------------------------------------
Licensing                                                        5.6        6.7
- -------------------------------------------------------------------------------
Corporate                                                       (6.3)      (6.1)
- -------------------------------------------------------------------------------
Segment income (loss)                                           (1.3)       0.1
Restructuring expense                                           (3.2)      (0.6)
Impairment charge                                               (5.5)         -
- -------------------------------------------------------------------------------
Operating loss                                                 (10.0)      (0.5)
- -------------------------------------------------------------------------------
Nonoperating income (expense)
   Investment income                                               -        0.3
   Interest expense                                             (2.1)      (2.1)
   Amortization of deferred financing fees                      (0.3)      (0.2)
   Other, net                                                   (0.1)      (0.5)
- -------------------------------------------------------------------------------
Total nonoperating expense                                      (2.5)      (2.5)
- -------------------------------------------------------------------------------
Loss before income taxes                                       (12.5)      (3.0)
Income tax expense                                              (1.2)      (1.2)
- -------------------------------------------------------------------------------
Net loss                                                    $  (13.7)  $   (4.2)
- -------------------------------------------------------------------------------
Basic and diluted loss per share                            $  (0.41)  $  (0.13)
===============================================================================

(1)   Certain amounts  reported for the prior periods have been  reclassified to
      conform to the current year's presentation.

                                       16



OVERVIEW

      Our total revenues decreased $16.9 million,  or 22%, compared to the prior
year quarter due to lower revenues from each of our groups, but our segment loss
of $1.3 million for the current  year  quarter was only $1.4  million  below the
prior year quarter largely due to the results of our cost reduction efforts.

      A $5.5 million  impairment charge during the current year quarter,  a $2.6
million increase in  restructuring  expense and lower segment income compared to
the prior year quarter resulted in our operating and net loss increasing by $9.5
million compared to the prior year quarter.

      As previously announced, in concert with the integration of our publishing
and online  businesses,  beginning with the current year quarter,  we have moved
the reporting of our online/mobile  business from the  Entertainment  Group into
the new  Print/Digital  Group,  formerly the Publishing Group. The Print/Digital
Group will focus on creating  brand-consistent content that extends across print
and digital platforms. Amounts reported for prior periods have been reclassified
to conform to the revised segment reporting.

CURRENT ECONOMIC CONDITIONS

      We have been  reporting on the  challenges  we and the media  industry are
facing,  including increased competition for consumers' attention, the migration
of advertisers to other platforms,  the increasing costs of paper,  postage, ink
and other  expenses and the current  state of the global  economy.  We have made
significant  changes to our  processes  and business  activities  to address the
changing  economic  environment  and industry  challenges.  To that end, we have
developed and begun implementing plans to reduce overhead costs,  including both
employees and  facilities,  the strategic  realignment  of our print and digital
businesses and a strategic focus on Playboy-branded licensing,  resulting in the
sale of our Los Angeles  production  facility  assets,  the  outsourcing  of our
e-commerce  and catalog  businesses  and our exiting of the DVD market.  We will
continue to adapt our business and strategic plans to increase shareholder value
and profitability.

ENTERTAINMENT GROUP

      Domestic TV revenues decreased $3.2 million, or 19%, compared to the prior
year quarter,  in part reflecting  consumers'  continuing  migration from linear
networks to the more competitive video-on-demand platform, where we control less
shelf  space.  The sale of our Los  Angeles  production  facility  assets in the
second quarter of 2008 accounted for the majority of the lower revenues.

      International TV revenues decreased $3.4 million,  or 23%, compared to the
prior  year  quarter  primarily   reflecting   foreign  currency  exchange  rate
fluctuations.

      Revenues  from  other  businesses  were flat  compared  to the prior  year
quarter.  Revenues from our production company,  Alta Loma  Entertainment,  were
favorable.  As described in previous filings, we have exited the DVD business to
focus on digital distribution, which resulted in lower revenues.

      Segment income for the group increased $0.7 million,  or 25%,  compared to
the prior year quarter.  The lower revenues previously  discussed were more than
offset by lower costs  associated  with the sale of our Los  Angeles  production
facility and the exiting of the DVD  business,  foreign  currency  exchange rate
fluctuations and lower group administrative expenses.

PRINT/DIGITAL GROUP

      Our domestic  magazine  revenue  streams  continued to decline  during the
current year  quarter,  reflecting  industry  dynamics  and  resulting in a $2.6
million,  or 16%,  decrease  in  revenues  compared  to the prior year  quarter.
Subscription  revenues were $0.7 million, or 7%, lower primarily due to 6% fewer
paid copies served in the current year  quarter.  Newsstand  revenues  decreased
$0.8 million, or 39%, on 33% fewer copies sold in the current year quarter.  32%
fewer  advertising  pages compared to the prior year quarter  resulted in a $1.1
million,  or 28%,  decrease in advertising  revenues.  Advertising sales for the
2009  second  quarter  magazine  issues  are  closed,  and we  expect  to report
approximately  39% lower  advertising  revenues and 38% fewer  advertising pages
compared to the 2008 second quarter.

                                       17



      On a  combined  basis,  Playboy  print and  digital  advertising  revenues
decreased $1.2 million, or 25%, compared to the prior year quarter.

      International  magazine revenues decreased $0.4 million,  or 17%, compared
to the  prior  year  quarter  largely  due to lower  royalties  from our  German
edition.

      Special  editions  and other  revenues  decreased  $0.3  million,  or 19%,
compared  to the prior year  quarter  due mainly to 18% fewer  newsstand  copies
sold.

      Digital  revenues  decreased $5.9 million,  or 39%,  compared to the prior
year quarter largely due to outsourcing our Playboy and BUNNYshop e-commerce and
catalog  business  during  the prior year  quarter  coupled  with lower  paysite
revenues, which were impacted by continued competition. In the second quarter of
2009, we completed a major infrastructure overhaul, redesign and relaunch of our
websites.

      The group's segment loss increased $0.8 million,  or 28%,  compared to the
prior year quarter as the revenue  declines  discussed  earlier,  combined  with
higher  direct  response  advertising  costs in the current year  quarter,  were
mostly offset by lower  e-commerce,  manufacturing,  severance and  subscription
mailing costs and other cost savings  initiatives.  We expect to report a modest
improvement  in domestic  magazine's  segment  results for the year and improved
segment income for the digital business by year end.

LICENSING GROUP

      Licensing  Group  revenues for the current year quarter were $1.2 million,
or 11%,  lower  than the prior year  quarter.  International  consumer  products
royalties were lower  primarily from Western  European  licensees as a result of
the economic  recession.  Partially  offsetting  were higher  domestic  consumer
products  revenues  resulting in part from our  acquisition  of a Playboy retail
store in Las Vegas in the fourth quarter of 2008.

      The group's segment income decreased $1.1 million, or 16%, compared to the
prior year quarter  primarily  due to the changes in revenues  discussed  above.
Segment income was also impacted by costs related to the acquired  retail store.
We expect  revenues  and  segment  income in the second half of 2009 to increase
compared to the prior year period.

CORPORATE

      Corporate  expenses  increased $0.2 million,  or 3%, compared to the prior
year quarter.

RESTRUCTURING EXPENSE

      In the current  year  quarter,  we  implemented  a  restructuring  plan to
integrate our print and digital  businesses  and base them in our Chicago office
as  well  as  to  streamline  operations  across  the  Company,   including  the
elimination  of  additional  positions.  As a result of this plan, we recorded a
charge of $2.6 million  related to the  workforce  reduction  of 107  employees,
whose  jobs  will  be  eliminated  by the end of the  second  quarter  of  2009.
Severance payments under this plan began in the current year quarter and will be
completed  by  the  end  of  2009.  We  will  record  an  additional  charge  of
approximately  $4 million in the second  quarter of 2009 largely  related to the
exiting of our New York office space.

      In the fourth  quarter of 2008,  we  implemented a  restructuring  plan to
lower overhead costs,  primarily  related to senior Corporate and  Entertainment
Group positions.  As a result of this plan, we recorded a charge of $4.0 million
related to 21 employees,  most of whose jobs were eliminated in the current year
quarter.  Payments  under this plan began in the fourth quarter of 2008 and will
be substantially completed by the end of 2009 with some payments continuing into
2010. In the current year quarter, we recorded an unfavorable adjustment of $0.9
million against this plan as a result of changes in plan assumptions.

      In the third  quarter of 2008,  we  implemented  a  restructuring  plan to
reduce  overhead  costs.  As a result of this plan, we recorded a charge of $2.2
million related to costs associated with a workforce  reduction of 55 employees,
most of whose jobs were eliminated in the fourth quarter of 2008. Payments under
this  plan  began  in the  fourth  quarter  of 2008  and  will be  substantially
completed by the end of 2009 with some  payments  continuing  into 2010.  In

                                       18



the current year quarter, we recorded a favorable adjustment of $0.3 million to
this plan as a result of changes in plan assumptions.

IMPAIRMENT CHARGE

      Due to the current year quarter realignment of our reporting segments,  we
conducted  interim  impairment  testing of goodwill in accordance with Financial
Accounting Standards Board, or FASB, Statement of Financial Accounting Standards
No. 142,  Goodwill  and Other  Intangible  Assets.  As a result,  we recorded an
impairment  charge on goodwill of $5.5  million as certain  digital  assets were
deemed impaired based on their new reporting segment.

INCOME TAX EXPENSE

      Income tax expense of $1.2  million for the current  year quarter was flat
compared to the prior year quarter.

      Our effective  income tax rate differs from the U.S.  statutory  rate. Our
income tax  provision  consists  of foreign  income  tax,  which  relates to our
international  television  networks and withholding tax on licensing income, for
which we do not  receive  a  current  U.S.  income  tax  benefit  due to our net
operating loss position. Our income tax provision also includes deferred federal
and state  income  taxes  related  to the  amortization  of  goodwill  and other
indefinite-lived intangibles, which cannot be offset against deferred tax assets
due to the indefinite reversal period of the deferred tax liabilities.

LIQUIDITY AND CAPITAL RESOURCES

      At March 31,  2009,  we had  $25.9  million  in cash and cash  equivalents
compared to $25.2 million in cash and cash  equivalents at December 31, 2008. At
March 31, 2009 and December 31, 2008, our outstanding  debt consisted  solely of
our $115.0  million 3.00%  convertible  senior  subordinated  notes due 2025, or
convertible  notes. At the beginning of 2009, we adopted FASB Staff Position No.
APB 14-1,  Accounting for Convertible  Debt  Instruments  That May Be Settled in
Cash upon Conversion  (Including Partial Cash Settlement),  or FSP APB 14-1, and
are now reporting our financing  obligations as $100.8 million and $99.8 million
at March 31, 2009 and December 31, 2008,  respectively.  The difference  between
the principal  amount of $115.0  million and the financing  obligation  reported
represents   the  discount   associated   with  applying  the  estimated   7.75%
nonconvertible  borrowing rate at the time of issuance of our convertible notes.
The total discount will be amortized over a seven-year  term,  which  represents
the period  beginning  on the  issuance  date of the notes of March 15, 2005 and
ending on the first put date of March 15, 2012. See "Recently Issued  Accounting
Standards" below.

      At March 31, 2009, cash generated from our operating activities,  existing
cash and cash equivalents and marketable  securities and short-term  investments
were fulfilling our liquidity requirements.  We also have a $30.0 million credit
facility, which can be used for revolving borrowings,  issuing letters of credit
or a  combination  of both. As of March 31, 2009,  there were no borrowings  and
$0.8 million in letters of credit outstanding under this facility,  resulting in
$29.2 million of available borrowings.

DERIVATIVE INSTRUMENTS

      We hedge the  variability of forecasted  cash receipts  related to royalty
payments  denominated  in  yen  and  euro  with  derivative  instruments.  These
royalties are hedged with forward contracts for periods not exceeding 12 months.
The fair value and carrying value of our forward contracts are not material. For
the current year quarter,  hedges deemed to be  ineffective  due to us not being
able to exactly match the settlement  date of the hedges to the receipt of these
royalty payments resulted in immaterial gains.

CASH FLOWS FROM OPERATING ACTIVITIES

      Net cash used for  operating  activities  for the current year quarter was
$3.2 million  compared to $1.5 million in the prior year quarter.  This increase
was primarily due to the operating  results  discussed earlier combined with the
distribution of deferred compensation plan account balances, partially offset by
changes in accounts receivable, accounts payable and accrued salaries, wages and
employee benefits.

                                       19



CASH FLOWS FROM INVESTING ACTIVITIES

      Net cash provided by investing activities for the current year quarter was
$4.4 million compared to net cash used for investing  activities of $1.5 million
in the prior year quarter.  The current year quarter reflected net proceeds from
sales of investments of $5.5 million  related to the termination of our deferred
compensation  plan  combined  with  additions  of $1.1  million to property  and
equipment.  The net cash  used  during  the prior  year  quarter  reflected  net
proceeds from sales of  investments  of $8.1 million,  primarily  reflecting the
sale  of  auction  rate  securities  and the  liquidation  of a  portion  of our
investment  in an enhanced  cash  portfolio,  together  with  additions  of $6.8
million related to the sale of our Los Angeles production facility assets in the
second quarter of 2008.

CASH FLOWS FROM FINANCING ACTIVITIES

      Net cash used for  financing  activities  for the current year quarter was
$0.4  million  compared to $0.2  million in the prior year  quarter.  The change
reflected $0.2 million of financing fees related to amending our credit facility
during the current year quarter.

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

      The $0.1 million negative effect of foreign currency exchange rates on our
cash and  cash  equivalents  during  the  current  year  quarter  was due to the
strengthening  of the U.S.  dollar against the pound sterling and euro; the $0.2
million positive effect of foreign currency  exchange rates on our cash and cash
equivalents  during the prior year quarter was a result of the  weakening of the
U.S. dollar against the pound sterling and euro.

RECENTLY ISSUED ACCOUNTING STANDARDS

      In May 2008, the FASB issued FSP APB 14-1, which specifies that issuers of
convertible debt instruments that may be settled in cash upon conversion  should
separately account for the liability and equity components in a manner that will
reflect the entity's  nonconvertible  debt  borrowing rate when interest cost is
recognized  in subsequent  periods.  We adopted FSP APB 14-1 at the beginning of
2009 and applied FSP APB 14-1  retrospectively to all prior periods. In applying
FSP APB  14-1,  we  reclassified  $29.1  million  of the  carrying  value of the
convertible  notes  and  $1.2  million  of the  issuance  costs  related  to the
convertible  notes to equity  retroactive to the March 2005 issuance date. These
amounts represent the equity component of the proceeds from the notes calculated
assuming a 7.75%  nonconvertible  borrowing rate. The discount is being accreted
to  "Interest  expense"  and the debt  issuance  costs  are being  amortized  to
"Amortization  of  deferred  financing  fees"  over  a  seven-year  term,  which
represents  the period  beginning on the issuance date of the notes of March 15,
2005 and  ending  on the  first  put date of March  15,  2012.  Accordingly,  we
recorded $4.0 million, $3.8 million, $3.5 million and $2.6 million of additional
noncash interest expense and $0.3 million,  $0.2 million,  $0.3 million and $0.2
million of additional  amortization of deferred financing fees, or $0.13, $0.12,
$0.11 and $0.08 per basic and diluted share on a combined  basis in 2008,  2007,
2006 and 2005,  respectively.  We will  recognize  additional  noncash  interest
expense of $4.4 million and additional  amortization of deferred  financing fees
of $0.3 million for the year ended  December 31, 2009,  of which $1.1 million of
interest expense and $0.1 million of amortization of deferred financing fees, or
$0.03 per basic and diluted share on a combined  basis,  were recognized for the
current year quarter.  On January 1, 2009, as a result of adopting FSP APB 14-1,
we reduced the carrying  value of the debt in "Financing  obligations"  by $15.2
million, decreased "Other noncurrent assets" by $2.2 million, increased "Capital
in excess of par value" by $27.9 million and increased  "Accumulated deficit" by
$14.9 million on our Consolidated Balance Sheet.

      In March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161,  Disclosures  about  Derivative  Instruments and Hedging  Activities-an
amendment of FASB  Statement No. 133, or Statement  161.  Statement 161 requires
enhanced  disclosures  about how and why an entity uses derivative  instruments,
how  derivative  instruments  and related  hedged items are  accounted for under
Statement of Financial  Accounting  Standards No. 133, Accounting for Derivative
Instruments and Hedging  Activities,  and its related  interpretations,  and how
derivative  instruments  and related  hedged items affect an entity's  financial
position,  financial performance and cash flows. We adopted Statement 161 at the
beginning  of 2009.  Since  Statement  161  impacts our  disclosure  but not our
accounting  treatment for derivative  instruments and related hedged items,  our
adoption of Statement  161 did not impact our results of operations or financial
condition.

                                       20



      In  December  2007,  the FASB issued  Statement  of  Financial  Accounting
Standards  No.  160,   Noncontrolling   Interests  in   Consolidated   Financial
Statements-an amendment of ARB No. 51, or Statement 160. Statement 160 clarifies
that a noncontrolling  interest (previously referred to as minority interest) in
a subsidiary is an ownership  interest in a  consolidated  entity that should be
reported as equity in the consolidated  financial  statements.  It also requires
consolidated  net income to include the amounts  attributable to both the parent
and the  noncontrolling  interest.  We adopted Statement 160 at the beginning of
2009.  The  adoption of  Statement  160 did not have an impact on our results of
operations or financial condition.

      In September  2006,  the FASB issued  Statement  of  Financial  Accounting
Standards  No. 157, Fair Value  Measurements,  or Statement  157.  Statement 157
provides   enhanced  guidance  for  using  fair  value  to  measure  assets  and
liabilities. FASB Staff Position FAS 157-2, Effective Date of FASB Statement No.
157,  delayed the  effective  date of Statement 157 to the beginning of 2009 for
all nonfinancial assets and nonfinancial liabilities,  except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).  We adopted  Statement 157 on January 1, 2008 for our
financial  assets and  liabilities  and on January 1, 2009 for our  nonfinancial
assets and liabilities.  The adoption of Statement 157 did not have an impact on
our results of operations or financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are  exposed  to certain  market  risks,  including  changes in foreign
currency  exchange  rates.  There was no material change in our exposure to such
fluctuations  during the quarter  ended March 31,  2009.  Information  regarding
market risks as of December 31, 2008 is contained in Item 7A.  "Quantitative And
Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2008.

      At March 31, 2009, we did not have any floating interest rate exposure. As
of that date, all of our outstanding  debt consisted of the  convertible  notes,
which are fixed-rate obligations. The fair value of the $115.0 million aggregate
principal  amount of the  convertible  notes is  influenced by changes in market
interest  rates,  the  share  price of our Class B common  stock and our  credit
quality.  At March 31, 2009, the convertible  notes had an implied fair value of
$63.5 million.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

      Our  management,  with the  participation  of our Interim Chief  Executive
Officer and Chief  Financial  Officer,  has evaluated the  effectiveness  of our
disclosure  controls and procedures (as such term is defined in Rules  13a-15(e)
and 15d-15(e)  under the  Securities  Exchange Act of 1934,  as amended,  or the
Exchange  Act) as of the end of the  period  covered by this  quarterly  report.
Based  on such  evaluation,  our  Interim  Chief  Executive  Officer  and  Chief
Financial  Officer  have  concluded  that,  as of the  end of such  period,  our
disclosure  controls and  procedures  are  effective in  recording,  processing,
summarizing  and  reporting,  on a  timely  basis,  information  required  to be
disclosed by us in the reports that we file or submit under the Exchange Act.

Internal Control over Financial Reporting

      There have not been any changes in our  internal  control  over  financial
reporting (as such term is defined in Rules  13a-15(f)  and 15d-15(f)  under the
Exchange Act) during the fiscal  quarter to which this report  relates that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

                                       21



                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      On February 17, 1998,  Eduardo  Gongora,  or Gongora,  filed suit in state
court in Hidalgo County,  Texas,  against  Editorial  Caballero SA de CV, or EC,
Grupo Siete International,  Inc., or GSI, collectively the Editorial Defendants,
and us. In the complaint, Gongora alleged that he was injured as a result of the
termination of a publishing license agreement, or the License Agreement, between
us and EC for the publication of a Mexican edition of Playboy  magazine,  or the
Mexican  Edition.  We terminated  the License  Agreement on or about January 29,
1998,  due to EC's failure to pay  royalties  and other amounts due us under the
License  Agreement.  On February  18, 1998,  the  Editorial  Defendants  filed a
cross-claim against us. Gongora alleged that in December 1996 he entered into an
oral  agreement  with the Editorial  Defendants to solicit  advertising  for the
Mexican  Edition  to be  distributed  in the United  States.  The basis of GSI's
cross-claim was that it was the assignee of EC's right to distribute the Mexican
Edition in the United States and other Spanish-speaking Latin American countries
outside of Mexico.  On May 31, 2002, a jury returned a verdict against us in the
amount of $4.4 million.  Under the verdict,  Gongora was awarded no damages. GSI
and EC were  awarded $4.1 million in  out-of-pocket  expenses and  approximately
$0.3 million for lost profits,  even though the jury found that EC had failed to
comply with the terms of the License  Agreement.  On October 24, 2002, the trial
court signed a judgment against us for $4.4 million plus pre- and  post-judgment
interest  and costs.  On  November  22,  2002,  we filed  post-judgment  motions
challenging  the judgment in the trial court.  The trial court  overruled  those
motions  and we  vigorously  pursued an appeal  with the State  Appellate  Court
sitting  in Corpus  Christi  challenging  the  verdict.  We posted a bond in the
amount of  approximately  $9.4  million,  which  represented  the  amount of the
judgment,  costs and estimated pre- and  post-judgment  interest,  in connection
with the  appeal.  On May 25,  2006,  the State  Appellate  Court  reversed  the
judgment by the trial  court,  rendered  judgment  for us on the majority of the
plaintiffs'  claims and remanded the remaining  claims for a new trial.  On July
14,  2006,   the   plaintiffs   filed  a  motion  for   rehearing  and  en  banc
reconsideration,  which we opposed.  On October 12,  2006,  the State  Appellate
Court denied  plaintiffs'  motion. On December 27, 2006, we filed a petition for
review with the Texas  Supreme  Court.  On January 25, 2008,  the Texas  Supreme
Court denied our petition for review.  On February 8, 2008,  we filed a petition
for rehearing with the Texas Supreme  Court.  On May 16, 2008, the Texas Supreme
Court denied our motion for rehearing. The posted bond has been canceled and the
remaining claims will be retried.  We, on advice of legal counsel,  believe that
it is not probable  that a material  judgment  against us will be  obtained.  In
accordance  with Financial  Accounting  Standards  Board  Statement of Financial
Accounting  Standards No. 5,  Accounting for  Contingencies,  or Statement 5, no
liability has been accrued.

      On April 12, 2004, J. Roger Faherty, or Faherty,  filed suit in the United
States  District  Court for the  Southern  District  of New York  against  Spice
Entertainment  Companies,  or Spice,  Playboy  Enterprises,  Inc.,  or  Playboy,
Playboy  Enterprises  International,  Inc.,  or PEII, D. Keith  Howington,  Anne
Howington and Logix  Development  Corporation,  or Logix. The complaint  alleges
that  Faherty is entitled to  statutory  and  contractual  indemnification  from
Playboy,  PEII and Spice with respect to defense costs and liabilities  incurred
by Faherty in the litigation described in our Annual Report on Form 10-K for the
fiscal year ended  December 31, 2008,  or the Logix  litigation.  The  complaint
further alleges that Playboy,  PEII,  Spice, D. Keith Howington,  Anne Howington
and Logix conspired to deprive  Faherty of his alleged right to  indemnification
by excluding him from the settlement of the Logix litigation.  On June 18, 2004,
a jury entered a special  verdict finding  Faherty  personally  liable for $22.5
million in damages to the  plaintiffs  in the Logix  litigation.  A judgment was
entered on the verdict on or around  August 2, 2004.  Faherty  filed  post-trial
motions for a judgment  notwithstanding  the verdict and a new trial,  but these
motions were both denied on or about  September  21, 2004.  On October 20, 2004,
Faherty filed a notice of appeal from the verdict. As a result of rulings by the
California  Court of Appeal and the  California  Supreme  Court as  recently  as
February  13,  2008,   Logix's   recovery   against  Faherty  has  been  reduced
significantly,  although  certain  portions  of the  case  have  been  set for a
retrial. In light of these rulings,  however,  when coupled with any offset as a
result of the settlement of the Logix  litigation,  any ultimate net recovery by
Logix against Faherty will be severely reduced and might be entirely eliminated.
In consideration  of this appeal,  Faherty and Playboy have agreed to continue a
temporary stay of the indemnification action filed in the United States District
Court for the  Southern  District of New York  through the end of June 2009.  In
late June 2008,  plaintiffs in the Logix  litigation filed a motion in the trial
court seeking to amend a $40.0 million  judgment  previously  entered on consent
against  defendant  Emerald  Media  Inc.,  or EMI,  seeking to add  Faherty as a
judgment debtor. In the event Faherty's indemnification and conspiracy claims go
forward  against  us, we believe  they are  without  merit and that we have good
defenses against

                                       22



them. As such,  based on the information  known to us to date, we do not believe
that  it is  probable  that a  material  judgment  against  us will  result.  In
accordance with Statement 5, no liability has been accrued.

ITEM 1A. RISK FACTORS

      For a detailed discussion of factors that may affect our performance,  see
Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal
year ended  December  31, 2008.  Except as set forth  below,  there have been no
material changes to these risk factors.

      If we do not meet the continued listing requirements of the New York Stock
Exchange, or NYSE, our common stock may be delisted.

      Our common stock is listed on the NYSE, which maintains  continued listing
requirements  relating to, among other things, market capitalization and minimum
stock price. The market  capitalization  requirements  provide that the NYSE may
take  action  to  delist  our  common  stock  if  our  average   global   market
capitalization  for 30 consecutive  trading days is less than $75.0 million and,
at the same time, our total stockholders' equity is less than $75.0 million. The
market  capitalization  requirements further provide that the NYSE will promptly
initiate suspension and delisting procedures with respect to our common stock if
our global market  capitalization  for 30 consecutive  trading days is less than
$15.0 million (until June 30, 2009, when this requirement will increase to $25.0
million),  in which case we would not be eligible to utilize the cure procedures
provided  by  the  NYSE  in  other   circumstances.   The  minimum  stock  price
requirements  of the NYSE  provide  that the NYSE may take  action to delist our
common stock if the average closing price of our common stock is less than $1.00
for 30  consecutive  trading  days,  in which  case we would  expect to have six
months to take corrective action before our common stock would be delisted.  The
NYSE has temporarily  suspended its $1.00 minimum stock price  requirement until
June 30, 2009.

      On April 16, 2009,  we received a notice from the NYSE that we were not in
compliance with one of the NYSE's continued  listing standards because our total
market   capitalization   was  less  than  $75.0   million  over  a  consecutive
30-trading-day  period and our last reported  stockholders' equity was less than
$75.0  million.  In accordance  with NYSE  procedures,  we have 45 days from the
receipt of such notice to submit a business plan to the NYSE  demonstrating  how
we  intend to comply  with the  NYSE's  continued  listing  standards  within 18
months.  We intend to submit such a plan within the required time frame.  During
this time,  our common stock will continue to be listed on the NYSE,  subject to
compliance with other NYSE listing  requirements.  If the NYSE accepts our plan,
we would be subject to quarterly monitoring for compliance with the plan. If the
NYSE does not accept our plan, we would be subject to suspension by the NYSE.

      There can be no assurance that we will meet the NYSE's  continued  listing
standards  or that the NYSE will not act to suspend  trading in our common stock
and initiate  delisting  procedures.  The suspension and delisting of our common
stock by the NYSE and the  movement  of trading  of our common  stock to another
securities exchange or over-the-counter market could materially adversely impact
our business and liquidity and the price of our common  stock.  It could,  among
other things, reduce our stockholders' ability to buy and sell our common stock,
reduce the number of investors  willing to hold or acquire our common stock,  or
inhibit our ability  to arrange financing or access the public capital  markets.

ITEM 6. EXHIBITS

Exhibit Number                       Description
- --------------                       -----------

31.1    Certification of Chief Executive Officer  pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002

31.2    Certification of Chief Financial Officer  pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002

32      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002

                                       23



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                                 PLAYBOY ENTERPRISES, INC.
                                                 -------------------------
                                                        (Registrant)

Date: May 11, 2009                               By /s/ Linda Havard
      ------------                                  ----------------
                                                    Linda G. Havard
                                                    Executive Vice President
                                                    and Chief Financial Officer
                                                    (Authorized Officer and
                                                    Principal Financial and
                                                    Accounting Officer)

                                       24



                                  EXHIBIT INDEX

Exhibit Number                         Description
- --------------                         -----------

31.1    Certification of Chief Executive Officer  pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002

31.2    Certification of Chief Financial Officer  pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002

32      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002

                                       25