Ambition made Bob Guccione. And ambition did for him in the end. The Penthouse publisher who built a publishing empire out of naked flesh is facing financial ruin, the result of a series of catastrophically egotistical investments that sucked millions of dollars out of his main business — pornography.
This weekend the 72-year-old is watching his empire go up in flames. Guccione’s company, General Media, is saddled with debt and facing the mother of all credit crises.
Admittedly, ‘Guccione broke’ is a perennial New York story. He has come close to losing everything many times before. But this time around things are blacker than they have ever been. Penthouse’s print run was cancelled in April because the company couldn’t pay its printing costs. Staff have been laid off and some of those who kept their jobs have not been paid.
The company has defaulted on a $41-million loan and Guccione faces the ignominy of the banks reclaiming his opulent 45-room mansion, one of the largest on Manhattan’s East Side, where he lives in regal isolation with a small army of Rhodesian ridgeback dogs.
An eleventh-hour payment has given him a stay of execution, but he still owes creditors millions.
There is more than a whiff of the Great Gatsby about Guccione’s decline. Seriously ill with throat cancer, the publicity-shy insomniac has taken to pawning large chunks of his fabled art collection and cutting his salary, from $4,5m to $1,7m to keep his empire afloat. But this amounts to little more than moving around the deckchairs on the Titanic.
Although Guccione’s financial suicide has been building for years, the stakes were upped dramatically earlier this summer. In a filing quietly made to the US stock exchange authorities in June, the company’s accountants dropped a bombshell.
‘Substantial doubt exists about the entity’s ability to continue as a going concern,’ the bean-counters noted. The words are prosaic but their import is not. Guccione has reached the endgame. For years he has doggedly staved off bankruptcy as his publishing empire found itself squeezed by the explosion of porn on the internet and a rising flesh count in lads’ mags.
At its peak, Penthouse would shift five million copies a month. Today it sells barely a tenth of this. General Media’s revenues halved — from $101m in 1998 to $53,8m last year — while interest costs on the loans spiralled .
By the end of last year the writing was on the wall. The company’s last annual accounts stated: ‘At 31 December the company’s current liabilities exceeded current assets by $23 017 000.’
For the anti-porn brigade the demise of Guccione’s empire could not come soon enough. He has been their chief target ever since he took the decision in the mid-1960s to ‘go pubic’ and publish the sort of anatomical photos Playboy had never dreamed of showing. ‘Lesbians, threesomes, full frontal male nudity, erect penis’ — Guccione liked to say he showed them all first.
But some critics have suggested Guccione has ultimately paid the price for this. ‘You look at his magazines and they read more like medical manuals,’ one rival said. ‘It doesn’t offer anything that you can’t get on the net,’ another said.
Guccione seems to have admitted as much when he launched a series of publicity coups to restore the magazine to prominence. He offered to publish the Unabomber manifesto in its entirety. Later he offered Monica Lewinksy $2m for her story and a nude photo shoot. She said no.
‘The circulation’s been declining and the editorial content is a lot raunchier than most clients will accept. Even alcohol and tobacco companies are saying it is starting to be too much,’ Steve Greenberger of media buying firm Zenith Media told Newsweek .
But what really killed Guccione’s empire was his unfettered opulence. The son of a Sicilian-American accountant, he once trained to be a priest but used his wealth to enhance his status, spending $200m acquiring an art collection that boasts works by Renoir and Picasso.
Then there was the $17,5m he spent producing Caligula, the 1979 box-office turkey which had a script by Gore Vidal and starred Sir John Gielgud, Peter O’Toole, Malcolm McDowell and Helen Mirren. It was panned by the critics, but Guccione was unperturbed and went on to produce a pornographic biopic of Catherine the Great.
Then he made a series of surreal investments, spending $12m on an ill-fated project to mass -produce portable nuclear fusion kits. A further $40m went on research into genetic engineering, a pet subject for Guccione who harbours ambitions of immortality.
It was in real estate that Guccione really lost his shirt. He spent an estimated $60m of his own money — and borrowed around $100m more of other people’s — building a casino in Atlantic City, only to pull the plug when an elderly guest-house owner on the site refused to sell up.
Plans to expand the Penthouse brand failed to materialise. The magazine lent its name to a series of gentlemen’s clubs, but it is unclear what, if any, profits have accrued from the venture.
Perhaps things wouldn’t have become so bad if Penthouse had been able to exploit its unrivalled pornographic library on the internet. But the company seems to have been the victim of endemic credit card fraud. ‘Revenue from the online segment has been decreasing over the past few years, primarily as a result of the need for more aggressive credit card validation methods,’ the company noted in a filing to the US stock exchange authorities.
With mounting costs and plunging profits, Guccione was forced to turn to the banks for help. His company issued $43m worth of bonds which carried a crippling interest rate of 15% per annum. ‘When you are paying double-digit interest, you know you’re in trouble,’ one corporate financier said.
Estranged from two of his three sons, still mourning the death of his third wife, Kathy Keeton, in 1997, and sick with cancer himself, the truth may be that Guccione no longer cares. Last year he seemed to hint that the game was up, declaring: ‘There is no future for adult business in mass market magazines.’ He might as well have been talking about himself. – Guardian Unlimited Â