Exhibit 10.3

                    SECOND AMENDMENT TO OPERATING AGREEMENT,
                               RELEASE OF GUARANTY
                             AND CONSENT TO TRANSFER

                                       FOR
                          PLAYBOY TV INTERNATIONAL, LLC
                      A DELAWARE LIMITED LIABILITY COMPANY

      This Second Amendment to Operating Agreement, Release of Guaranty and
Consent to Transfer (this "Amendment") is entered into as of December 28, 2000,
by and among Playboy Entertainment Group, Inc., a Delaware corporation ("PEGI"),
Playboy Enterprises International, Inc., a Delaware corporation ("PEII"),
Victoria Springs Investments, Ltd., a British Virgin Islands corporation
("VSI"), Hampstead Management Company, Ltd., a company organized under the laws
of the British Virgin Islands ("Hampstead"), Carlton Investments LLC, a Delaware
limited liability company ("Carlton"), and Carlyle Investments LLC, a Delaware
limited liability company ("Carlyle"), and is made with respect to Playboy TV
International, LLC, a Delaware limited liability company (the "Company").

      A. PEGI and VSI entered into the Operating Agreement the Company as of
August 31, 1999 and the First Amendment thereto as of September 24, 1999 (as
amended, the "Agreement"; all capitalized terms not defined in this Amendment
will have the respective meanings set forth in the Agreement).

      B. Hampstead Management Company, Ltd., a company organized under the laws
of the British Virgin Islands and an Affiliate of VSI ("Hampstead"), entered
into a Guaranty dated as of August 31, 1999 in favor of PEGI, PEII and the
Company pursuant to which Hampstead guaranteed the obligations of VSI under the
Agreement and the Related Documents (the "Guaranty").

      C. Carlton and Carlyle are indirectly controlled by Persons that
collectively control VSI and Hampstead, but are not under common control with
VSI and Hampstead.

      D. VSI wishes to transfer its 80.1% interest in the Company to Carlton and
Carlyle in equal shares and has requested PEGI's consent to such transfer
pursuant to Section 9.1 of the Agreement.

      E. PEGI is willing to give consent to such transfer provided that Carlton
and Carlyle assume the obligations of VSI under the Agreement and the Related
Documents, are each deemed to be Affiliates of VSI for all purposes under the
Agreement and the Related Documents, and collectively exercise the rights of VSI
under the Agreement.

      F. Hampstead wishes to transfer and cause its subsidiaries to transfer all
or substantially all of their respective assets to Carlton and Carlyle in equal
shares and has requested that PEII, PEGI and the Company agree to release
Hampstead from its obligations under the Guaranty.

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      G. PEII, PEGI and the Company are willing to release Hampstead from its
obligations under the Guaranty provided that the proposed transfer of assets to
Carlton and Carlyle is consummated and Carlton and Carlyle guaranty the
obligations of the other on the same terms as the Guaranty.

      H. The parties desire to adopt and approve the following provisions and,
where applicable, incorporate them into the Agreement, effective as of the date
of the transfer of VSI's interest in the Company to Carlton and Carlyle (the
"Effective Date").

      NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and intending to be legally bound, the parties
agree as follows:

1.    Consent to Transfer and Release of Guaranty.

      A. Pursuant to Section 9.1 of the Agreement and subject to the terms of
      this Amendment, PEGI consents to the transfer from VSI to Carlton and
      Carlyle of its 80.1% interest in PTVI in equal shares and the admission of
      each of Carlton and Carlyle as Members of the Company with a Percentage
      Interest of 40.05% each. Each of Carlton and Carlyle hereby jointly and
      severally assume and agree to perform and discharge all of the obligations
      and liabilities of VSI under the Agreement and the Related Documents,
      whether arsising before or after the Effective Date. Each of Carlton and
      Carlyle agree that each of them and their respective Affiliates are deemed
      to be (i) Affiliates of VSI, and (ii) Affiliates of each other, in each
      case for all purposes under the Agreement and the Related Documents (and
      any agreement or document in connection therewith). In furtherance of the
      foregoing, Carlyle and Carlton will be deemed to be Affiliated Members and
      VSI Members under the Agreement. Carlyle and Carlton further agree that
      they will take all actions collectively under the Agremeent and Related
      Documents, including the bringing of any claim or exercising any remedy.

      B. Subject to the terms of this Agreement, PEII, PEGI and the Company
      hereby release Hampstead from its obligations under the Guaranty.

      C. The forgoing consent and release is subject to each of the following
      conditions being true as of the Effective Date: (a) Hampstead will have
      transferred and caused its subsidiaries to transfer all or substantially
      all of their respective assets to Carlton and Carlyle in equal shares; (b)
      each of Carlton and Carlyle will have executed and delivered a Guaranty in
      favor of PEII, PEGI and the Company in the form of Exhibit A.

2.    Amendments to Agreement.

      A.    Section 5.1.3 of the Agreement is amended and restated in its
            entirety as follows:

            "5.1.3 Voting. Except as provided in Section 5.1.4 and in Section
            5.3, all matters submitted to the Management Committee will be
            decided by a majority vote of the Non-Independent Directors. The
            Non-Independent Directors will have voting power in proportion to
            the ratio of Percentage Interests held by the Manager appointing
            them; provided, however, Non-Independent Directors appointed by

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            Affiliated Members will have voting power in proportion to the
            aggregate Percentage Interests held by the Managers appointing them.
            All Non-Independent Directors appointed by a Manager (or Managers,
            if representing Affiliated Members) will collectively exercise such
            voting power and such Manager(s) will designate one of its
            Non-Independent Directors to vote on behalf of all Non-Independent
            Directors appointed by such Manager(s) in the event of a
            disagreement among the Non-Independent Directors appointed by such
            Manager(s)."

      B.    Section 5.2.1 of the Agreement is amended and restated in its
            entiretly as follows:

            "5.2.1 VSI and PEGI, together with (or replaced by, as the case may
            be) any Affiliates to which such Member transfers all or a portion
            of its Membership Interest in compliance with the provisions of this
            Agreement, will be referred to as the "VSI Members" or the "PEGI
            Members" respectively. For so long as the VSI Members and the PEGI
            Members are the only Members and Managers, the Management Committee
            will consist of nine members: three Non-Independent Directors
            selected collectively by the VSI Members (the "VSI Directors"),
            three Non-Independent Directors selected by the PEGI Members (the
            "PEGI Directors") and three other Directors (each, an "Independent
            Director") selected in accordance with the following sentence. The
            VSI Members (acting collectively) and the PEGI Members (acting
            collectively) will each select one Independent Director, and the two
            Independent Directors will select a third Independent Director;
            provided, however, that such third Independent Director will be
            mutually acceptable to both the VSI Members (acting collectively)
            and the PEGI Members (acting collectively). To qualify as an
            Independent Director, a person must have, and continue to have, no
            material business, financial or familial relationship with any of
            the VSI Members, the PEGI Members or any of their respective
            Affiliates or with any officer or executive of any of them. Each of
            VSI and PEGI identified its initial Directors prior to the Funding
            Date. Each member of the Management Committee is referred to as a
            "Director", and, collectively, as the "Directors." A duly-admitted
            Manager will have the right to appoint at least one Non-Independent
            Director (or such greater number as the Management Committee may
            determine); provided, however, that no group of Affiliated Members
            will have the right to appoint more than that number of Directors
            that could have been appointed by that group's initial holder of the
            Membership Interests. A director need not be a resident of the State
            of Delaware or a citizen of the United States. To the fullest extent
            permitted by law, no Director will be deemed an agent or sub-agent
            of the Company. Each Manager, by execution of this Agreement, agrees
            to, consents to, and acknowledges the delegation of powers and
            authority to such Directors and the Management Committee within the
            scope of such Director's and Management Committee's authority as
            provided herein. No Director will have the authority in his capacity
            as a Director to enter into any Transaction on behalf of the
            Company. The Independent Directors will receive compensation as
            determined from time to time by the Management Committee and as
            reflected in the applicable Annual Budget.

<PAGE>

                  (a) At such time as either the VSI Directors or the PEGI
            Directors are no longer entitled to exercise a veto on matters that
            may be determined by the Independent Directors pursuant to Section
            5.3, the Independent Directors will be dismissed from the Management
            Committee.

      C. The references to "VSI" and "PEGI" in the first clause of Section 5.4.4
      of the Agreement are hereby replaced with references to "the VSI Members"
      and the PEGI Members", respectively.

      D. Except as otherwise provided herein, all other terms and conditions of
      the Agreement will remain in full force and effect.

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IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Amendment as of the above date.


                                    PLAYBOY ENTERTAINMENT GROUP, INC.

                                    By:/s/ Jeffrey M. Jenest
                                       ---------------------------------
                                          Name:  Jeffrey M. Jenest
                                          Title: Executive Vice President


                                    PLAYBOY ENTERPRISES INTERNATIONAL, INC.

                                    By: /s/ Howard Shapiro
                                       ---------------------------------
                                          Name:  Howard Shapiro
                                          Title: Executive Vice President


                                    VICTORIA SPRINGS INVESTMENTS LTD.

                                    By: /s/ William T. Keon
                                       ---------------------------------
                                          Name:
                                          Title:

                                    By: /s/ Jose Mizrahi
                                       ---------------------------------
                                          Name:


                                    HAMPSTEAD MANAGEMENT COMPANY, LTD.

                                    By: /s/ Jose Mizrahi
                                       ---------------------------------
                                          Name:
                                          Title:

                                    By: /s/ Harris C. Caston
                                       ---------------------------------
                                          Name:  Harris C. Caston
                                          Title: Attorney - in - Fact

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                                    CARLTON INVESTMENTS LLC

                                    By: /s/ Cary M. Otazo
                                       ---------------------------------
                                          Name:  Cary M. Otazo
                                          Title: Assistant Secretary


                                    CARLYLE INVESTMENTS LLC

                                    By: /s/ Cary M. Otazo
                                       ---------------------------------
                                          Name:  Cary M. Otazo
                                          Title: Assistant Secretary


Acknowledged and Agreed:

PLAYBOY TV INTERNATIONAL, LLC.


By: /s/ William Fisher
   ---------------------------------
      Name:  William Fisher
      Title: President