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, 2001

                                       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 1-6813

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

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

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

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

      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 |_|

      As of April 30, 2001, there were 4,864,102 shares of Class A Common Stock,
par value $0.01 per share, and 19,439,620 shares of Class B Common Stock, par
value $0.01 per share, outstanding.


                                       1
<PAGE>

                            PLAYBOY ENTERPRISES, INC.
                                    FORM 10-Q
                                TABLE OF CONTENTS

                                     PART I
                              FINANCIAL INFORMATION

                                                                            Page
                                                                            ----
Item 1.    Financial Statements

                Condensed Consolidated Statements of Operations and
                Comprehensive Loss for the Quarters Ended March 31,
                2001 and 2000 (Unaudited)                                     3

                Condensed Consolidated Balance Sheets at March 31,
                2001 (Unaudited) and December 31, 2000                        4

                Condensed Consolidated Statements of Cash Flows for the
                Quarters Ended March 31, 2001 and 2000 (Unaudited)            5

                Notes to Condensed Consolidated Financial Statements          6

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                9

                                     PART II
                                OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                                  14


                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 2001          2000
-----------------------------------------------------------------------------------
<S>                                                          <C>           <C>
Net revenues                                                 $ 66,319      $ 73,103
-----------------------------------------------------------------------------------
Costs and expenses
   Cost of sales                                              (58,871)      (66,387)
   Selling and administrative expenses                        (12,338)      (12,773)
   Restructuring expenses                                          --          (257)
-----------------------------------------------------------------------------------
      Total costs and expenses                                (71,209)      (79,417)
-----------------------------------------------------------------------------------
Operating loss                                                 (4,890)       (6,314)
-----------------------------------------------------------------------------------
Nonoperating income (expense)
   Investment income                                              284           415
   Interest expense                                            (2,633)       (1,888)
   Equity in operations of Playboy TV International, LLC          459          (603)
   Loss on disposal                                              (100)           --
   Other, net                                                    (382)         (317)
-----------------------------------------------------------------------------------
      Total nonoperating expense                               (2,372)       (2,393)
-----------------------------------------------------------------------------------
Loss before income taxes and cumulative effect
   of change in accounting principle                           (7,262)       (8,707)
Income tax benefit (expense)                                     (314)        2,472
-----------------------------------------------------------------------------------
Loss before cumulative effect of change
   in accounting principle                                     (7,576)       (6,235)
Cumulative effect of change in
   accounting principle                                        (4,218)           --
-----------------------------------------------------------------------------------
Net loss                                                      (11,794)       (6,235)
-----------------------------------------------------------------------------------

Other comprehensive income (loss) (net of tax)
   Unrealized gain (loss) on marketable securities               (292)          151
   Derivative gain                                                128            --
   Foreign currency translation adjustment                         50            13
-----------------------------------------------------------------------------------
      Total other comprehensive income (loss)                    (114)          164
-----------------------------------------------------------------------------------
Comprehensive loss                                           $(11,908)     $ (6,071)
===================================================================================

Basic and diluted weighted average number
   of common shares outstanding                                24,281        24,201
===================================================================================

Basic and diluted loss per common share
Loss before cumulative effect of change
   in accounting principle                                   $  (0.32)     $  (0.26)
Cumulative effect of change in
   accounting principle                                         (0.17)           --
-----------------------------------------------------------------------------------
Net loss                                                     $  (0.49)     $  (0.26)
===================================================================================
</TABLE>

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


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                       (Unaudited)
                                                                         March 31,       Dec. 31,
                                                                              2001           2000
-------------------------------------------------------------------------------------------------
<S>                                                                      <C>            <C>
Assets
Cash and cash equivalents                                                $   1,468      $   2,534
Marketable securities                                                        3,151          3,443
Receivables, net of allowance for doubtful accounts of
   $6,331 and $5,994, respectively                                          35,414         45,075
Receivables from related parties                                             8,523          7,575
Inventories, net                                                            22,165         20,700
Programming costs                                                               --         51,939
Deferred subscription acquisition costs                                     12,977         12,514
Other current assets                                                         9,945         11,554
-------------------------------------------------------------------------------------------------
   Total current assets                                                     93,643        155,334
-------------------------------------------------------------------------------------------------
Receivables from related parties                                            57,500         57,500
Property and equipment, net                                                 10,646         10,689
Programming costs                                                           57,242          3,515
Goodwill, net of amortization of $5,451 and $4,761, respectively            86,584         87,260
Trademarks, net of amortization of $15,482 and $14,701, respectively        51,557         52,585
Other noncurrent assets                                                     21,309         21,605
-------------------------------------------------------------------------------------------------
Total assets                                                             $ 378,481      $ 388,488
=================================================================================================

Liabilities
Financing obligations                                                    $   9,163      $   3,922
Financing obligations to related parties                                     5,000          5,000
Accounts payable                                                            20,363         25,295
Accounts payable to related parties                                            718            718
Accrued salaries, wages and employee benefits                                3,385          8,915
Deferred revenues                                                           49,096         41,898
Deferred revenues from related parties                                       5,570          4,397
Other liabilities and accrued expenses                                      15,270         16,861
-------------------------------------------------------------------------------------------------
   Total current liabilities                                               108,565        107,006
-------------------------------------------------------------------------------------------------
Financing obligations                                                       91,037         89,328
Financing obligations to related parties                                     5,000          5,000
Deferred revenues from related parties                                      50,450         50,875
Net deferred tax liabilities                                                 4,679          4,679
Other noncurrent liabilities                                                16,210         17,415
-------------------------------------------------------------------------------------------------
   Total liabilities                                                       275,941        274,303
-------------------------------------------------------------------------------------------------

Shareholders' equity
Common stock, $0.01 par value
   Class A voting - 7,500,000 shares authorized; 4,864,102
     and 4,859,102 issued, respectively                                         49             49
   Class B nonvoting - 30,000,000 shares authorized; 19,678,409
     and 19,647,048 issued, respectively                                       197            196
Capital in excess of par value                                             120,781        120,519
Accumulated deficit                                                        (15,178)        (3,384)
Unearned compensation restricted stock                                      (2,713)        (2,713)
Accumulated other comprehensive loss                                          (596)          (482)
-------------------------------------------------------------------------------------------------
   Total shareholders' equity                                              102,540        114,185
-------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                               $ 378,481      $ 388,488
=================================================================================================
</TABLE>

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


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     2001         2000
--------------------------------------------------------------------------------------
<S>                                                             <C>           <C>
Cash flows from operating activities
Net loss                                                        $(11,794)     $ (6,235)
Adjustments to reconcile net loss to net cash
  used for operating activities:
   Depreciation of property and equipment                            974           707
   Amortization of intangible assets                               2,084         1,912
   Equity in operations of Playboy TV International, LLC            (459)          603
   Loss on disposal                                                  100            --
   Cumulative effect of change in accounting principle             4,218            --
   Amortization of investments in entertainment programming        9,389         7,949
   Investments in entertainment programming                      (10,277)       (8,416)
   Net change in operating assets and liabilities                 (1,505)       (2,578)
   Other, net                                                        (36)          224
--------------------------------------------------------------------------------------
Net cash used for operating activities                            (7,306)       (5,834)
--------------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from (payments on) disposal                                 163            (8)
Additions to property and equipment                                 (914)       (1,581)
Acquisition of Rouze Media, Inc.                                      --        (1,125)
Funding of equity interests                                           --          (106)
Purchase of marketable securities                                     --          (500)
Other, net                                                             3            --
--------------------------------------------------------------------------------------
Net cash used for investing activities                              (748)       (3,320)
--------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from financing obligations                                5,000            --
Repayment of financing obligations                                  (800)      (15,000)
Net proceeds from revolving credit facility                        2,750            --
Deferred financing fees                                               --          (292)
Proceeds from stock plans                                            245           918
Other, net                                                          (207)           --
--------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities               6,988       (14,374)
--------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                         (1,066)      (23,528)
Cash and cash equivalents at beginning of period                   2,534        23,528
--------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                      $  1,468      $     --
======================================================================================
</TABLE>

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


                                       5
<PAGE>

                   PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(A)   BASIS OF PREPARATION

      The financial information included in these financial statements is
unaudited but, in the opinion of management, reflects all normal recurring
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 the Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 (the "2000 Form 10-K") of Playboy
Enterprises, Inc. and its subsidiaries (the "Company"). Certain amounts reported
for prior periods have been reclassified to conform to the current year's
presentation.

(B)   RESTRUCTURING EXPENSES

      In fiscal year 1999, the Company began a cost reduction effort that led to
a work force reduction of 49 employees, or approximately 6%, through
Company-wide layoffs and attrition. This resulted in a $0.2 million
restructuring charge related to the termination of eight employees in the first
quarter of fiscal year 2000. All charges related to this restructuring were
recorded and paid by December 31, 2000.

      In the fourth quarter of fiscal year 2000, realignment of senior
management coupled with staff reductions led to an additional restructuring
charge of $3.7 million related to the termination of 19 employees, or
approximately 3% of the work force. A total of $3.1 million related to this
restructuring was paid by March 31, 2001, resulting in a remaining liability of
$0.6 million, most of which will be paid by the end of fiscal year 2001.

(C)   CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

      During the first quarter of fiscal year 2001, the Company adopted
Statement of Financial Accounting Standards No. 139, Rescission of FASB
Statement No. 53 and Amendments to FASB Statements No. 63, 89, and 121
("Statement 139") and Statement of Position 00-2, Accounting by Producers or
Distributors of Films ("SOP 00-2"). Statement 139 rescinds FASB Statement No.
53, Financial Reporting by Producers and Distributors of Motion Picture Films.
SOP 00-2 establishes new film accounting and reporting standards for producers
or distributors of films, including changes in revenue recognition and
accounting for marketing, development and overhead costs. SOP 00-2 also requires
all programming costs to be classified on the balance sheet as noncurrent
assets. As a result of the adoption of SOP 00-2, the Company recorded a noncash,
one-time charge of $4.2 million, or $0.17 per basic and diluted common share, in
the first quarter of fiscal year 2001 representing a cumulative effect of change
in accounting principle. The charge primarily relates to reversals of previously
recognized revenues which under the new rules were not yet considered earned,
combined with a write-off of marketing costs that were previously capitalized
and are no longer capitalizable under the new rules.

(D)   OTHER COMPREHENSIVE INCOME (LOSS)

The following sets forth the components of other comprehensive income (loss),
and the related income tax expense or benefit allocated to each item (in
thousands):

                                                                (Unaudited)
                                                              Quarters Ended
                                                                 March 31,
                                                          ----------------------
                                                              2001          2000
--------------------------------------------------------------------------------
Unrealized gain (loss) on marketable securities (1)       $   (292)    $     151
Derivative gain (2)                                            128            --
Foreign currency translation adjustment (3)               $     50     $      13
--------------------------------------------------------------------------------

(1)   Net of a related tax benefit of $0 and expense of $82 for the quarters
      ended March 31, 2001 and 2000, respectively.
(2)   Net of related tax expense of $0 for the quarter ended March 31, 2001.
(3)   Net of related tax expense of $0 and $7 for the quarters ended March 31,
      2001 and 2000, respectively.


                                       6
<PAGE>

(E)   DERIVATIVE INSTRUMENTS

      Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by Statement of Financial Accounting Standards No. 138,
which require all derivative instruments to be recognized as either assets or
liabilities on the balance sheet at fair value. The accounting for changes in
the fair value of a derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and further, on the
type of relationship. The adoption of these statements did not have a material
impact on the Company's financial statements.

(F)   LOSS PER COMMON SHARE

      For the quarter ended March 31, 2001, options to purchase approximately
2,360,000 shares of the Company's Class B common stock and approximately 240,000
shares of Class B restricted stock awards were outstanding but were not included
in the computation of diluted earnings per common share as the inclusion of
these shares would have been antidilutive. As a result, the weighted average
number of basic and diluted common shares outstanding for the quarter ended
March 31, 2001 were equivalent.

(G)   INVENTORIES, NET

Inventories, net, which are stated at the lower of cost (specific cost and
average cost) or fair value, consisted of the following (in thousands):

                                                       (Unaudited)
                                                         March 31,      Dec. 31,
                                                              2001          2000
--------------------------------------------------------------------------------
Paper                                                     $  6,866     $   6,432
Editorial and other prepublication costs                     7,666         6,987
Merchandise finished goods                                   7,633         7,281
--------------------------------------------------------------------------------
Total inventories, net                                    $ 22,165     $  20,700
================================================================================

(H)   PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consisted of the following (in thousands):

                                                       (Unaudited)
                                                         March 31,     Dec. 31,
                                                              2001         2000
-------------------------------------------------------------------------------
Land                                                      $    292    $     292
Buildings and improvements                                   8,524        8,512
Furniture and equipment                                     15,734       15,420
Leasehold improvements                                       9,981        9,950
Software                                                     3,827        3,232
-------------------------------------------------------------------------------
Total property and equipment                                38,358       37,406
Accumulated depreciation                                   (27,712)     (26,717)
-------------------------------------------------------------------------------
Total property and equipment, net                         $ 10,646    $  10,689
===============================================================================

(I)   FINANCING OBLIGATIONS

      At March 31, 2001, the Company had a $109.2 million credit facility, which
was comprised of $74.2 million of term loans and a $35.0 million revolving
credit facility. At March 31, 2001, $21.0 million was outstanding under the
revolving facility. The credit agreement contains financial covenants requiring
the Company to maintain certain leverage, interest coverage and fixed charge
coverage ratios. The Company has continued to meet all of the financial
covenants through March 31, 2001. It is currently in discussions with its
lenders to amend future financial covenant levels and other terms of the credit
agreement.


                                       7
<PAGE>

      Playboy.com, Inc. ("Playboy.com") has been in active discussions with
potential strategic partners regarding private placement investments. On March
7, 2001 and April 2, 2001, Playboy.com received $5.0 million from each of two
strategic investors. Both amounts are represented by convertible promissory
notes which will convert into a new class of preferred stock of Playboy.com
under certain circumstances. The notes are due and payable on August 13, 2001
unless earlier converted. The Company has agreed to repay the promissory notes
in shares of its Class B common stock upon the occurrence of specified events,
including a failure by Playboy.com to make principal or interest payments on the
notes when due. Playboy.com is currently in discussions with strategic investors
to raise additional capital.

(J)   SEGMENT INFORMATION

The following tables represent financial information by reportable segment (in
thousands):

                                                                (Unaudited)
                                                               Quarters Ended
                                                                  March 31,
                                                           --------------------
                                                               2001        2000
-------------------------------------------------------------------------------
Net revenues
Entertainment                                              $ 24,692    $ 22,604
Publishing                                                   29,827      32,092
Playboy Online                                                6,792       5,781
Catalog                                                       2,980      10,824
Other Businesses                                              2,028       1,802
-------------------------------------------------------------------------------
Total                                                      $ 66,319    $ 73,103
===============================================================================
Loss before income taxes and cumulative effect
  of change in accounting principle
Entertainment                                              $  5,235    $  3,679
Publishing                                                   (1,014)      1,615
Playboy Online                                               (5,435)     (5,713)
Catalog                                                        (145)       (400)
Other Businesses                                                512         218
Corporate Administration and Promotion                       (4,043)     (5,456)
Restructuring expenses                                           --        (257)
Investment income                                               284         415
Interest expense                                             (2,633)     (1,888)
Equity in operations of Playboy TV International, LLC           459        (603)
Loss on disposal                                               (100)         --
Other, net                                                     (382)       (317)
-------------------------------------------------------------------------------
Total                                                      $ (7,262)   $ (8,707)
===============================================================================
EBITDA (1)
Entertainment                                              $ 16,072    $ 13,052
Publishing                                                     (844)      1,752
Playboy Online                                               (4,985)     (5,456)
Catalog                                                        (138)       (357)
Other Businesses                                                565         265
Corporate Administration and Promotion                       (3,097)     (4,446)
Restructuring expenses                                           --        (257)
-------------------------------------------------------------------------------
Total                                                      $  7,573    $  4,553
===============================================================================

(1)   EBITDA represents earnings before interest expense, income taxes,
      cumulative effect of change in accounting principle, depreciation of
      property and equipment, amortization of intangible assets, amortization of
      investments in entertainment programming, amortization of deferred
      financing fees and equity in operations of Playboy TV International, LLC
      ("PTVI"). EBITDA should not be considered an alternative to any measure of
      performance or liquidity under generally accepted accounting principles.
      Similarly, it should not be inferred that EBITDA is more meaningful than
      any of those measures.


                                       8
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following is a summary of the results of operations of the Company for the
periods indicated below (in millions):

                                                              Quarters Ended
                                                                 March 31,
                                                          ---------------------
                                                              2001         2000
-------------------------------------------------------------------------------
Net revenues                                              $   66.3     $   73.1
===============================================================================
Segment loss                                              $   (4.9)    $   (6.1)
Restructuring expenses                                          --         (0.2)
-------------------------------------------------------------------------------
Operating loss                                            $   (4.9)    $   (6.3)
===============================================================================
Net loss                                                  $  (11.8)    $   (6.2)
===============================================================================
Basic and diluted net loss per common share               $  (0.49)    $  (0.26)
===============================================================================

      The Company's revenues decreased 9% to $66.3 million for the quarter ended
March 31, 2001 compared to the prior year quarter primarily due to the sale of
the Critics' Choice Video businesses in October 2000.

      The improvement in operating performance of $1.4 million was primarily due
to better performance from all of the operating groups except Publishing,
primarily Entertainment. Corporate Administration and Promotion expenses were
also lower.

      The higher net loss for the current year quarter included a $4.2 million
noncash, one-time charge for a cumulative effect of change in accounting
principle related to the adoption of SOP 00-2, Accounting by Producers or
Distributors of Films.

      Several of the Company's businesses can experience variations in quarterly
performance. As a result, the Company's performance in any quarter is not
necessarily reflective of full-year or longer-term trends. Playboy magazine
newsstand revenues vary from issue to issue, with revenues generally higher for
holiday issues and any issues including editorial or pictorial features that
generate unusual public interest. Advertising revenues also vary from quarter to
quarter, depending on product introductions by advertising customers, changes in
advertising buying patterns and economic conditions. E-commerce revenues are
typically impacted by the year-end holiday buying season and decreased Internet
traffic during the summer months. Additionally, international TV revenues vary
due to the timing of recognizing library license fees from PTVI.

ENTERTAINMENT GROUP

The revenues and segment income of the Entertainment Group were as follows for
the periods indicated below (in millions):

                                                              Quarters Ended
                                                                  March 31,
                                                          ---------------------
                                                              2001         2000
-------------------------------------------------------------------------------
Revenues
Domestic TV networks                                      $   19.0    $    19.1
International TV                                               2.8          2.1
Worldwide home video                                           2.9          1.3
Movies and other                                                --          0.1
-------------------------------------------------------------------------------
Total revenues                                            $   24.7    $    22.6
===============================================================================
Segment income
Before programming expense                                $   14.6    $    11.6
Programming expense                                           (9.4)        (7.9)
-------------------------------------------------------------------------------
Total segment income                                      $    5.2    $     3.7
===============================================================================


                                       9
<PAGE>

      Entertainment Group revenues increased $2.1 million, or 9%, compared to
the prior year quarter primarily due to higher worldwide home video and
international TV revenues. Segment income increased $1.5 million, or 42%,
reflecting the higher worldwide home video and international TV revenues
combined with higher profit contribution from domestic TV networks, partially
offset by higher programming amortization expenses.

      The following discussion focuses on the profit contribution of each
business before programming expense.

Domestic TV Networks

      Revenues from domestic TV networks were basically flat compared to the
prior year quarter. Higher Spice revenues were offset by lower Playboy TV
revenues, as higher digital cable revenues were more than offset by lower analog
cable revenues. Profit contribution increased $1.1 million primarily as a result
of the higher Spice revenues combined with lower costs for both Spice and
Playboy TV, partially offset by the decrease in Playboy TV revenues.

The following is the approximate number of the Company's households for the
periods indicated below (in millions):

                                            March 31,     Dec. 31,     March 31,
                                                 2001         2000          2000
--------------------------------------------------------------------------------
Playboy TV (1):
    Cable analog addressable                     10.0         11.0          11.2
    Cable digital                                 4.5          3.2           1.5
    Satellite direct-to-home                     16.4         15.4          13.1
Spice (1):
    Cable analog addressable                     10.5         12.0          13.7
    Cable digital                                 5.3          4.5           2.9
--------------------------------------------------------------------------------

(1)   There is an overlap of cable analog addressable and digital households due
      to some cable operators offering both analog and digital platforms to the
      same households.

International TV

      For the current year quarter, both revenues and profit contribution from
the international TV business increased $0.7 million.

Worldwide Home Video

      For the current year quarter, profit contribution increased $1.3 million
on a $1.6 million, or 123%, increase in revenues. These increases were primarily
due to higher domestic DVD sales combined with higher international sales of The
Eros Collection titles through a one-time multi-territory deal.

Movies and Other

      For the current year quarter, both revenues and profit contribution from
movies and other businesses decreased $0.1 million. The Entertainment Group's
administrative expenses increased $0.1 million compared to the prior year
quarter.

Programming Expense

      Programming amortization expense increased $1.5 million for the current
year quarter primarily as a result of higher domestic TV networks amortization
related to Spice and Playboy TV live events. Also contributing to the increase
was higher amortization related to the higher PTVI and domestic home video
revenues.


                                       10
<PAGE>

PUBLISHING GROUP

The revenues and segment performance of the Publishing Group were as follows for
the periods indicated below (in millions):

                                                              Quarters Ended
                                                                 March 31,
                                                          ----------------------
                                                              2001          2000
--------------------------------------------------------------------------------
Revenues
Playboy magazine                                          $   23.2     $    25.4
Other domestic publishing                                      3.9           4.0
International publishing                                       2.7           2.7
--------------------------------------------------------------------------------
Total revenues                                            $   29.8     $    32.1
================================================================================
Segment income (loss)                                     $   (1.0)    $     1.6
================================================================================

      Publishing Group revenues for the quarter ended March 31, 2001 decreased
$2.3 million, or 7%, compared to the prior year quarter principally due to lower
revenues from Playboy magazine.

      Playboy magazine revenues decreased $2.2 million, or 9%, compared to the
prior year quarter. Circulation revenues decreased $1.8 million, or 10%,
primarily due to a $1.2 million, or 28%, decrease in newsstand revenues. The
lower newsstand revenues were primarily the result of an unfavorable variance
related to newsstand sales adjustments for prior issues combined with fewer U.S.
and Canadian newsstand copies sold. Additionally, subscription revenues
decreased $0.6 million, or 5%. Advertising revenues decreased $0.4 million, or
5%, due to fewer ad pages, partially offset by higher average net revenue per
page. Advertising sales for the second quarter magazine issues are closed and
the Company expects to report 10% higher ad revenues and 9% more ad pages
compared to the quarter ended June 30, 2000. As a result, ad revenues for the
first half of fiscal year 2001 are expected to be higher compared to the prior
year period.

      Revenues from the other domestic publishing and international publishing
businesses remained relatively flat compared to the prior year quarter.

      The Publishing Group's segment performance declined $2.6 million from the
prior year quarter primarily due to the lower Playboy magazine revenues.

PLAYBOY ONLINE GROUP

The revenues and segment losses of the Playboy Online Group were as follows for
the periods indicated below (in millions):

                                                              Quarters Ended
                                                                 March 31,
                                                          ---------------------
                                                              2001         2000
-------------------------------------------------------------------------------
Revenues                                                  $    6.8     $    5.8
===============================================================================
Segment loss                                              $   (5.4)    $   (5.7)
===============================================================================

      For the quarter ended March 31, 2001, Playboy Online Group revenues
increased $1.0 million, or 17%, compared to the prior year quarter due to higher
e-commerce and subscription revenues. Despite the absence of revenues from
CCVideo.com, which was sold in October 2000 as discussed below, e-commerce
revenues increased primarily due to higher revenues from the Playboy Store.
Partially offsetting the above were weaker advertising and sponsorships
revenues, an industry-wide issue.

      For the current year quarter, the Playboy Online Group's segment loss
decreased $0.3 million, or 5%, compared to the prior year quarter in spite of
higher administrative expenses principally due to arms-length trademark, content
and administrative fees to the parent company, most of which were not charged to
Playboy.com until the fourth quarter of fiscal year 2000.


                                       11
<PAGE>

CATALOG GROUP

The revenues and segment losses of the Catalog Group were as follows for the
periods indicated below (in millions):

                                                             Quarters Ended
                                                                March 31,
                                                         ----------------------
                                                             2001          2000
-------------------------------------------------------------------------------
Revenues                                                 $    3.0     $    10.8
===============================================================================
Segment loss                                             $   (0.1)    $    (0.4)
===============================================================================

      For the quarter ended March 31, 2001, revenues decreased $7.8 million, or
72%, and the segment loss decreased $0.3 million, or 64%, compared to the prior
year quarter. These changes were the result of management's decision to divest
this non-strategic business. In October 2000, the Company completed the sale of
its Critics' Choice Video businesses and fulfillment and customer service
operations to Infinity Resources, Inc.

      The Company expects to effect a sale of its Collectors' Choice Music
catalog and related Internet business in fiscal year 2001, at which time the
Company's presence in the catalog business will end.

OTHER BUSINESSES GROUP

The revenues and segment income of the Other Businesses Group were as follows
for the periods indicated below (in millions):

                                                             Quarters Ended
                                                                March 31,
                                                         ----------------------
                                                             2001          2000
-------------------------------------------------------------------------------
Revenues                                                 $    2.0     $     1.8
===============================================================================
Segment income                                           $    0.5     $     0.2
===============================================================================

      For the quarter ended March 31, 2001, segment income from the Other
Businesses Group increased $0.3 million on a $0.2 million, or 13%, increase in
revenues primarily due to growth in the Company's licensed branded products
business.

CORPORATE ADMINISTRATION AND PROMOTION

      For the quarter ended March 31, 2001, Corporate Administration and
Promotion expenses of $4.0 million decreased $1.4 million, or 26%, primarily
reflecting a reduction of expenses related to the arms-length trademark, content
and administrative fees from Playboy.com.

RESTRUCTURING EXPENSES

      For the quarter ended March 31, 2000, a $0.2 million restructuring charge
was recorded related to the termination of eight employees in that quarter.


                                       12
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      At March 31, 2001, the Company had $1.5 million in cash and cash
equivalents and $110.2 million in total financing obligations compared to $2.5
million in cash and cash equivalents and $103.3 million in total financing
obligations at December 31, 2000. The financing obligations at March 31, 2001
and December 31, 2000 included $15.0 million and $10.0 million, respectively, in
loans made directly to Playboy.com. Historically, the Company has financed its
working capital and capital expenditure requirements primarily from cash
generated from operations, short- and long-term borrowings and sales of equity.
The Company's current liquidity requirements are being provided by a $109.2
million credit facility, which is comprised of $74.2 million of term loans and a
$35.0 million revolving credit facility. At March 31, 2001, $21.0 million was
outstanding under the revolving facility.

      The credit agreement contains financial covenants requiring the Company to
maintain certain leverage, interest coverage and fixed charge coverage ratios.
The Company has continued to meet all of the financial covenants through March
31, 2001. It is currently in discussions with its lenders to amend future
financial covenant levels and other terms of the credit agreement.

      Playboy.com has been in active discussions with potential strategic
partners regarding private placement investments. On March 7, 2001 and April 2,
2001, Playboy.com received $5.0 million from each of two strategic investors.
Both amounts are represented by convertible promissory notes which will convert
into a new class of preferred stock of Playboy.com under certain circumstances.
The notes are due and payable on August 13, 2001 unless earlier converted. The
Company has agreed to repay the promissory notes in shares of its Class B common
stock upon the occurrence of specified events, including a failure by
Playboy.com to make principal or interest payments on the notes when due.
Playboy.com is currently in discussions with strategic investors to raise
additional capital.

CASH FLOWS FROM OPERATING ACTIVITIES

      Net cash used for operating activities was $7.3 million for the current
year quarter which reflected $10.3 million of investments in Company-produced
and licensed entertainment programming.

CASH FLOWS FROM INVESTING ACTIVITIES

      Net cash used for investing activities was $0.7 million for the current
year quarter primarily due to $0.9 million of additions to property and
equipment.

CASH FLOWS FROM FINANCING ACTIVITIES

      Net cash provided by financing activities was $7.0 million for the current
year quarter principally due to the $5.0 million loan from the strategic
investor and $2.8 million in borrowings from the Company's revolving credit
facility.

FORWARD-LOOKING STATEMENTS

      This Form 10-Q Quarterly Report contains "forward-looking statements,"
including statements in "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. These forward-looking statements involve risks and
uncertainties, which could cause actual results or outcomes to differ materially
from those expressed in the forward-looking statements. The following are some
of the important factors that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements: (1) foreign,
national, state and local government regulation, actions or initiatives,
including (a) attempts to limit or otherwise regulate the sale, distribution or
transmission of adult-oriented materials, including print, video and online
materials, (b) changes in or increased regulation of gaming businesses and the
impact of federal and state


                                       13
<PAGE>

laws on gaming businesses generally, (c) limitations on the advertisement of
tobacco, alcohol and other products which are important sources of advertising
revenue, or (d) substantive changes in postal regulations or rates which could
increase the Company's postage and distribution costs; (2) increases in paper or
printing costs; (3) changes in distribution technology and/or unforeseen delays
in the implementation of that technology by the cable and DTH industries, which
might affect the Company's plans and assumptions regarding carriage of its
networks; (4) increased competition for transponders and channel space and any
decline in the Company's access to, and acceptance by, cable and DTH systems or
any deterioration in the terms of fee arrangements with operators of these
systems; (5) increased 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; (6) effects of the national
consolidation of the single-copy magazine distribution system; (7) increasing
competition in the cable, DTH and Internet markets; (8) changes in consumer
purchasing habits, viewing patterns or fashion trends or changes in the retail
sales environment which could reduce demand for the Company's products and
impact its advertising revenues; (9) uncertainty of the viability of the online
gaming, e-commerce, advertising and subscription businesses; (10) the Company's
ability to obtain adequate third-party financing, including equity investments,
to fund the Company's online business, and the timing and terms of such
financing; (11) reliance on third parties for technology and distribution for
the online business; (12) the Company's ability to obtain licenses and approvals
under applicable jurisdictional gaming laws and regulations; (13) risks
associated with foreign operations, including market acceptance and demand for
the Company's products and the products of its licensees, the Company's ability
to protect its trademarks and other intellectual property and the Company's
ability to manage the risk associated with its exposure to foreign currency
exchange rate fluctuations; (14) changes in interest rates; (15) general
economic conditions which can negatively impact advertising and consumer
spending habits; and (16) attempts by consumers or citizens groups to exclude
the Company's programming from local pay television distribution.

                        EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

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

      10.1     SKYNET Transponder Service Agreement dated March 1, 2001 between
               Playboy Entertainment Group, Inc. and LORAL SKYNET

      10.2     First Amendment to Operating Agreement for Playboy TV
               International, LLC dated September 24, 1999

      10.3     Second Amendment to Operating Agreement for Playboy TV
               International, LLC dated December 28, 2000

     #10.4     Binding Letter of Intent dated March 7, 2001 amending the
               Operating Agreement, Program Supply Agreement and Trademark
               License Agreement relating to Playboy TV International, LLC

      10.5     First Amendment to December 29, 2000 Promissory Note dated
               February 15, 2001

     #10.6     Second Amendment to December 29, 2000 Promissory Note and
               Acknowledgement of Subordination Agreement dated March 7, 2001

      10.7     Playboy Enterprises, Inc. Severance Agreement

----------
#     Certain information omitted pursuant to a request for confidential
      treatment filed separately with the Securities and Exchange Commission

(b)   Reports on Form 8-K

      No reports on Form 8-K were filed during the quarter ended March 31, 2001.


                                       14
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 14, 2001                      By      s/ Linda Havard
      -------------                             --------------------------------
                                                   Linda G. Havard
                                                   Executive Vice President,
                                                   Finance and Operations,
                                                   and Chief Financial Officer
                                                   (Authorized Officer and
                                                   Principal Financial and
                                                   Accounting Officer)


                                       15