WWW- Playboy Enterprises (NYSE: PLA) opened up the mansion last week to the public — but alas, it wasn’t offering visits to the infamous Grotto. Instead, it shared with investors the results of the company’s latest quarter. While Hugh Hefner and his trio of girlfriends might still be having a blast, the corporation he built on sexual liberation is still mired in a homely mess.

Revenues saw a slight 2% increase, equaling $82.3 million. Operating income sank 31% to $3.7 million. Net profit decreased 66% to $1.1 million. That translated to $0.03 per diluted share, a 70% decrease compared to last year’s earnings number.

Let’s go over some of the things that went wrong for Playboy. The publishing segment is still having trouble, posting a loss of $0.8 million. Entertainment booked a decline in income of 18%, coming in at $5.8 million. Expenses related to corporate administration and promotion jumped 35% to $5.8 million. The driving forces behind these weak operating results include lower advertising pages, declines in newsstand sales and subscriptions, and decreases in household counts for Playboy’s domestic cable and satellite products.

Let’s now go over some positive elements. Licensing performed well, with segment income increasing 41% this quarter. Also, consider that even though the entertainment segment saw an overall decline in profit, both the international and e-commerce/online subscriptions portions saw increases; only the domestic TV sector is hampering growth. However, it should be noted that the company’s video-on-demand and subscription video-on-demand assets are growing their reach. Households more than doubled for the former, while the latter exploded with a 500% increase. CEO Christie Hefner stated that she would like digital cable operators to promote the Playboy TV product as an on-demand service, a form of distribution increasingly embraced by customers.

To keep its brand equity alive, Playboy would be wise to focus on its highest-growth areas. Online assets and on-demand products should help in this matter, although the CEO stated that the company lacks sufficient data to fully determine the effects of these operations. Licensing should continue to grow, and I’m sure investors are encouraged by the new Playboy Club; if it turns out to be a bona fide hit, perhaps the concept could be expanded.

Yet, again, I must bring up the flagship magazine. Playboy in print is becoming increasingly problematic. The prospects of this dragging element must be reversed; I’m sure investors are sick to death by now with this subject. The company stated in its latest 10-Q that its goal for this segment is to merely keep the loss from further accelerating. On one level, I can understand such thinking, since Playboy must patiently retrench and figure out a new strategy for the periodical. On another, I can’t accept such a weak stance; the company should aggressively search for a solution to the falling subscription revenues, even if it means radical editorial changes. As I’ve said on many occasions, Playboy’s magazine doesn’t have that edgy, taboo equity anymore; flashy magazines like Stuff are slowly killing it.

I still believe that the magazine can be turned around, though. And I still believe that Playboy can survive well into the future, even with competition from entities like New Frontier Media (Nasdaq: NOOF). Others must share my thoughts, because the stock rose after the earnings were released. But the company has generated a lot less cash from operations this time around — 75% less, in fact. That’s not so bullish.

The best thing I can say here is that Playboy is a speculative long-term bet on the belief that its brand will survive and will differentiate its content from that of the competitors, leading to cash flows which will allow for further acquisitions of strong franchises, such as the Club Jenna purchase, which I mentioned previously. For now, I still retain confidence in Playboy, and I think that it will eventually return to greatness. Here’s hoping I don’t end up looking like a small-f fool.