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 June 30, 2002

                                       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 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 July 31, 2002, there were 4,864,102 shares of Class A common stock,
par value $0.01 per share, and 21,171,988 shares of Class B common stock, par
value $0.01 per share, outstanding.
<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 June 30,
           2002 and 2001 (Unaudited)                                           3

           Condensed Consolidated Statements of Operations and
           Comprehensive Loss for the Six Months Ended June 30,
           2002 and 2001 (Unaudited)                                           4

           Condensed Consolidated Balance Sheets at June 30,
           2002 (Unaudited) and December 31, 2001                              5

           Condensed Consolidated Statements of Cash Flows for the
           Six Months Ended June 30, 2002 and 2001 (Unaudited)                 6

           Notes to Condensed Consolidated Financial Statements                7

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                   11

                                     PART II
                                OTHER INFORMATION

Item 1. Legal Proceedings                                                     17

Item 2. Changes in Securities and Use of Proceeds                             17

Item 4. Submission of Matters to a Vote of Security Holders                   17

Item 6. Exhibits and Reports on Form 8-K                                      18


                                       2
<PAGE>

                   PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                   for the Quarters Ended June 30 (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                           2002          2001
---------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>
---------------------------------------------------------------------------------------------
Net revenues                                                           $ 70,566      $ 71,889
Costs and expenses
   Cost of sales                                                        (54,417)      (62,766)
   Selling and administrative expenses                                  (13,981)      (13,859)
---------------------------------------------------------------------------------------------
      Total costs and expenses                                          (68,398)      (76,625)
---------------------------------------------------------------------------------------------
Operating income (loss)                                                   2,168        (4,736)
---------------------------------------------------------------------------------------------
Nonoperating income (expense)
   Investment income                                                         22           336
   Interest expense                                                      (3,575)       (2,737)
   Minority interest                                                       (421)          (52)
   Equity in operations of Playboy TV International, LLC and other         (143)          (38)
   Other, net                                                              (372)         (403)
---------------------------------------------------------------------------------------------
      Total nonoperating expense                                         (4,489)       (2,894)
---------------------------------------------------------------------------------------------
Loss before income taxes                                                 (2,321)       (7,630)
Income tax expense                                                         (743)         (340)
---------------------------------------------------------------------------------------------
Net loss                                                                 (3,064)       (7,970)
---------------------------------------------------------------------------------------------

Other comprehensive income (loss) (net of tax)
   Unrealized gain (loss) on marketable securities                         (238)          149
   Derivative loss                                                         (455)         (225)
   Foreign currency translation gain                                         --            14
---------------------------------------------------------------------------------------------
      Total other comprehensive loss                                       (693)          (62)
---------------------------------------------------------------------------------------------
Comprehensive loss                                                     $ (3,757)     $ (8,032)
=============================================================================================

Basic and diluted weighted average number
   of common shares outstanding                                          25,740        24,339
=============================================================================================

Basic and diluted earnings per common share                            $  (0.12)     $  (0.32)
=============================================================================================
</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 STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                  for the Six Months Ended June 30 (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                            2002           2001
-----------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>
Net revenues                                                           $ 136,713      $ 137,299
-----------------------------------------------------------------------------------------------
Costs and expenses
   Cost of sales                                                        (104,307)      (120,728)
   Selling and administrative expenses                                   (27,989)       (26,197)
   Loss on disposal                                                           --           (100)
-----------------------------------------------------------------------------------------------
      Total costs and expenses                                          (132,296)      (147,025)
-----------------------------------------------------------------------------------------------
Operating income (loss)                                                    4,417         (9,726)
-----------------------------------------------------------------------------------------------
Nonoperating income (expense)
   Investment income                                                          61            620
   Interest expense                                                       (8,047)        (5,370)
   Minority interest                                                        (842)           (48)
   Equity in operations of Playboy TV International, LLC and other           (94)           421
   Other, net                                                               (749)          (789)
-----------------------------------------------------------------------------------------------
      Total nonoperating expense                                          (9,671)        (5,166)
-----------------------------------------------------------------------------------------------
Loss before income taxes and cumulative effect of change
   in accounting principle                                                (5,254)       (14,892)
Income tax expense                                                        (7,197)          (654)
-----------------------------------------------------------------------------------------------
Loss before cumulative effect of change in accounting principle          (12,451)       (15,546)
Cumulative effect of change in accounting principle (net of tax)              --         (4,218)
-----------------------------------------------------------------------------------------------
Net loss                                                                 (12,451)       (19,764)
-----------------------------------------------------------------------------------------------

Other comprehensive income (loss) (net of tax)
   Unrealized loss on marketable securities                                 (197)          (143)
   Derivative loss                                                            (7)           (97)
   Foreign currency translation gain                                          --             64
-----------------------------------------------------------------------------------------------
      Total other comprehensive loss                                        (204)          (176)
-----------------------------------------------------------------------------------------------
Comprehensive loss                                                     $ (12,655)     $ (19,940)
===============================================================================================

Basic and diluted weighted average number
   of common shares outstanding                                           25,144         24,310
===============================================================================================

Basic and diluted earnings per common share
Loss before cumulative effect of change in accounting principle        $   (0.50)     $   (0.64)
Cumulative effect of change in accounting principle (net of tax)              --          (0.17)
-----------------------------------------------------------------------------------------------
Net loss                                                               $   (0.50)     $   (0.81)
===============================================================================================
</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 BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                    (Unaudited)
                                                                       June 30,       Dec. 31,
                                                                           2002           2001
----------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>
Assets
Cash and cash equivalents                                             $   2,260      $   4,610
Marketable securities                                                     2,995          3,182
Receivables, net of allowance for doubtful accounts of
   $5,504 and $6,406, respectively                                       34,317         41,846
Receivables from related parties                                         15,542         12,417
Inventories, net                                                         12,399         13,962
Deferred subscription acquisition costs                                  11,239         12,111
Other current assets                                                      7,412          7,857
----------------------------------------------------------------------------------------------
   Total current assets                                                  86,164         95,985
----------------------------------------------------------------------------------------------
Receivables from related parties                                         50,000         50,000
Property and equipment, net                                               9,316         10,749
Programming costs                                                        58,109         56,213
Goodwill                                                                111,893        112,338
Trademarks                                                               53,075         52,185
Distribution agreements acquired, net of accumulated amortization
   of $4,398 and $2,199, respectively                                    24,102         26,301
Other noncurrent assets                                                  20,554         22,469
----------------------------------------------------------------------------------------------
Total assets                                                          $ 413,213      $ 426,240
==============================================================================================

Liabilities
Financing obligations                                                 $   5,683      $   8,561
Financing obligations to related parties                                 15,000         15,000
Acquisition liability                                                    10,291         21,023
Accounts payable                                                         19,267         19,293
Accounts payable to related parties                                          55            169
Accrued salaries, wages and employee benefits                             5,973          8,717
Deferred revenues                                                        48,119         47,913
Deferred revenues from related parties                                    8,844          8,382
Other liabilities and accrued expenses                                   18,768         18,453
----------------------------------------------------------------------------------------------
   Total current liabilities                                            132,000        147,511
----------------------------------------------------------------------------------------------
Financing obligations                                                    65,695         73,017
Financing obligations to related parties                                  7,500          5,000
Acquisition liability                                                    31,777         41,079
Deferred revenues from related parties                                   43,500         44,350
Net deferred tax liabilities                                             11,833          5,313
Other noncurrent liabilities                                             28,809         28,445
----------------------------------------------------------------------------------------------
   Total liabilities                                                    321,114        344,715
----------------------------------------------------------------------------------------------

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 - 30,000,000 shares authorized; 21,419,665
     and 19,930,142 issued, respectively                                    214            199
Capital in excess of par value                                          146,090        123,090
Accumulated deficit                                                     (49,376)       (36,925)
Unearned compensation restricted stock                                   (2,805)        (3,019)
Accumulated other comprehensive loss                                     (2,073)        (1,869)
----------------------------------------------------------------------------------------------
   Total shareholders' equity                                            92,099         81,525
----------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                            $ 413,213      $ 426,240
==============================================================================================
</TABLE>

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


                                       5
<PAGE>

                   PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  for the Six Months Ended June 30 (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                           2002          2001
---------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>
Cash flows from operating activities
Net loss                                                               $(12,451)     $(19,764)
Adjustments to reconcile net loss to net cash provided by
  (used for) operating activities:
   Depreciation of property and equipment                                 2,087         1,944
   Amortization of intangible assets                                      3,624         4,184
   Equity in operations of Playboy TV International, LLC and other           94          (421)
   Loss on disposal                                                          --           100
   Cumulative effect of change in accounting principle                       --         4,218
   Deferred income taxes                                                  6,520          (355)
   Amortization of investments in entertainment programming              19,684        19,291
   Net change in operating assets and liabilities                         6,593        (3,483)
   Investments in entertainment programming                             (21,472)      (19,129)
   Other, net                                                               561           (13)
---------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities                      5,240       (13,428)
---------------------------------------------------------------------------------------------
Cash flows from investing activities
Payments for acquisition                                                   (353)           --
Proceeds from disposals                                                   1,118           186
Additions to property and equipment                                        (704)       (1,551)
Funding of equity interests                                                  --          (538)
Other, net                                                                  118           (19)
---------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities                        179        (1,922)
---------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from financing obligations                                       2,500        10,000
Repayment of financing obligations                                       (5,900)       (1,840)
Net proceeds from (payments on) revolving credit facility                (4,300)        5,000
Payment of financing fees                                                  (250)         (284)
Proceeds from stock plans                                                   181         1,805
Other, net                                                                   --          (207)
---------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities                     (7,769)       14,474
---------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                                (2,350)         (876)
Cash and cash equivalents at beginning of period                          4,610         2,534
---------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                             $  2,260      $  1,658
=============================================================================================
</TABLE>

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


                                       6
<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 our 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 our Annual Report on Form 10-K, as
amended, for the fiscal year ended December 31, 2001. Certain amounts reported
for prior periods have been reclassified to conform to the current year's
presentation.

(B)   ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

      On July 1, 2001, we adopted certain provisions of Statement of Financial
Accounting Standards No. 141, Business Combinations, or Statement 141, and on
January 1, 2002, we adopted the full provisions of Statement 141 and Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
or Statement 142. Under the new rules, goodwill and intangible assets with
indefinite lives are no longer amortized but are subject to annual impairment
tests. Other intangible assets continue to be amortized over their useful lives.
Amortization expense related to intangible assets with definite lives is
expected to total approximately $7.2 million, $3.8 million, $1.1 million, $0.6
million and $0.5 million for each of the next five years, respectively,
beginning in 2002. During the first quarter of 2002, we completed the first of
the required impairment tests for goodwill and indefinite-lived intangible
assets which did not result in an impairment charge. Deferred tax liabilities
related to these assets with indefinite lives now will be realized only if there
is a disposition or an impairment of the value of these intangible assets. We
currently have net operating loss carryforwards, or NOLs, available to offset
deferred tax liabilities realized within the NOL carryforward period. However,
we cannot be certain that NOLs will be available when the deferred tax
liabilities related to these intangible assets are realized. Therefore, in the
current year second quarter and six-month period, we recorded a noncash income
tax provision of $0.4 million and $6.5 million, respectively, for these deferred
tax liabilities. Of the $6.5 million, $5.8 million represents the cumulative
effect of the accounting change included in the first quarter 2002 income tax
provision.

The following table represents the pro forma effects as if we had adopted
Statement 142 as of January 1, 2001 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                         (Unaudited)                (Unaudited)
                                                        Quarters Ended            Six Months Ended
                                                           June 30,                   June 30,
                                                     --------------------      ----------------------
                                                        2002         2001          2002          2001
-----------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>           <C>
Net loss
As reported                                          $(3,064)     $(7,970)     $(12,451)     $(19,764)
   Amortization of goodwill and indefinite-lived
     intangible assets (net of tax)                       --        1,468            --         2,935
   Income tax provision                                   --         (392)        5,816        (6,520)
-----------------------------------------------------------------------------------------------------
Pro forma                                            $(3,064)     $(6,894)     $ (6,635)     $(23,349)
=====================================================================================================
Basic and diluted earnings per common share
As reported                                          $ (0.12)     $ (0.32)     $  (0.50)     $  (0.81)
Pro forma                                            $ (0.12)     $ (0.28)     $  (0.26)     $  (0.96)
=====================================================================================================
</TABLE>


                                       7
<PAGE>

(C)   RESTRUCTURING EXPENSES

      In 2001, we implemented a restructuring plan in anticipation of a
continuing weak economy. The plan included a reduction in work force coupled
with vacating portions of certain office facilities by combining operations for
greater efficiency, refocusing sales and marketing, outsourcing some operations
and reducing overhead expenses. Total restructuring charges of $3.7 million
related to this plan were recorded in 2001. The restructuring resulted in a work
force reduction of approximately 15%, or 104 employees, through Company-wide
layoffs and attrition. Approximately half of these employees were in the Playboy
Online Group. Of the $3.7 million charge, $2.5 million related to the
termination of 88 employees. Additionally, 16 positions were eliminated through
attrition. Also included in the charge were $1.2 million of expenses related to
the excess space in our Chicago and New York offices. Of the total $3.7 million
of costs related to this plan, approximately $2.5 million was paid by June 30,
2002, with approximately half of the remaining $1.2 million to be paid through
2002.

      In 2000, realignment of senior management, coupled with staff reductions,
led to a restructuring charge related to the termination of approximately 3% of
the work force, or 19 employees. Total restructuring charges of $3.8 million
were recorded, including in 2001 a $0.1 million unfavorable adjustment to the
original restructuring estimate. Substantially all of the amounts related to
this restructuring were paid by June 30, 2002.

(D)   EARNINGS PER COMMON SHARE

The following table represents the approximate number of shares related to
options to purchase our Class B common stock and Class B restricted stock awards
that were outstanding which were not included in the computation of diluted
earnings per common share as the inclusion of these shares would have been
antidilutive (in thousands):

                                          (Unaudited)             (Unaudited)
                                         Quarters Ended         Six Months Ended
                                            June 30,                June 30,
                                       -----------------       -----------------
                                        2002        2001        2002        2001
--------------------------------------------------------------------------------
Stock options                          2,735       2,330       2,615       2,345
Restricted stock awards                  250         240         255         240
--------------------------------------------------------------------------------
Total                                  2,985       2,570       2,870       2,585
================================================================================

      As a result, the weighted average number of basic and diluted common
shares outstanding for the quarters and six months ended June 30, 2002 and 2001
were equivalent.

(E)   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)
                                                         June 30,       Dec. 31,
                                                             2002           2001
--------------------------------------------------------------------------------
Paper                                                     $ 5,101        $ 5,189
Editorial and other prepublication costs                    5,410          6,140
Merchandise finished goods                                  1,888          2,633
--------------------------------------------------------------------------------
Total inventories, net                                    $12,399        $13,962
================================================================================


                                       8
<PAGE>

(F)   SEGMENT INFORMATION

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

<TABLE>
<CAPTION>
                                                                         (Unaudited)                  (Unaudited)
                                                                        Quarters Ended              Six Months Ended
                                                                           June 30,                     June 30,
                                                                    ----------------------      ------------------------
                                                                        2002          2001           2002           2001
------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>           <C>           <C>            <C>
Net revenues
Entertainment                                                       $ 30,727      $ 26,021      $  61,378      $  50,713
Publishing                                                            26,988        32,579         53,646         61,497
Playboy Online                                                         7,724         6,275         14,107         13,067
Licensing Businesses                                                   5,127         4,217          7,582          6,245
Catalog                                                                   --         2,797             --          5,777
------------------------------------------------------------------------------------------------------------------------
Total                                                               $ 70,566      $ 71,889      $ 136,713      $ 137,299
========================================================================================================================
Loss before income taxes and cumulative effect of change
  in accounting principle
Entertainment                                                       $  8,135      $  5,055      $  17,096      $  10,290
Publishing                                                              (973)          483         (1,341)          (531)
Playboy Online                                                        (2,858)       (6,032)        (6,446)       (11,467)
Licensing Businesses                                                   1,478           591          2,305          1,103
Catalog                                                                   --           (21)            --           (166)
Corporate Administration and Promotion                                (3,614)       (4,812)        (7,197)        (8,855)
Loss on disposal                                                          --            --             --           (100)
Investment income                                                         22           336             61            620
Interest expense                                                      (3,575)       (2,737)        (8,047)        (5,370)
Minority interest                                                       (421)          (52)          (842)           (48)
Equity in operations of Playboy TV International, LLC and other         (143)          (38)           (94)           421
Other, net                                                              (372)         (403)          (749)          (789)
------------------------------------------------------------------------------------------------------------------------
Total                                                               $ (2,321)     $ (7,630)     $  (5,254)     $ (14,892)
========================================================================================================================
EBITDA (1)
Entertainment                                                       $ 20,527      $ 16,495      $  40,949      $  32,790
Publishing                                                              (677)          625           (747)          (192)
Playboy Online                                                        (2,942)       (5,536)        (6,566)       (10,502)
Licensing Businesses                                                   1,525           645          2,400          1,210
Catalog                                                                   --           (15)            --           (153)
Corporate Administration and Promotion                                (2,939)       (3,879)        (5,837)        (7,145)
Loss on disposal                                                          --            --             --           (100)
------------------------------------------------------------------------------------------------------------------------
Total                                                               $ 15,494      $  8,335      $  30,199      $  15,908
========================================================================================================================
</TABLE>

(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, expenses related to the vesting of restricted stock awards
      and equity in operations of Playboy TV International, LLC, or PTVI, and
      other. You should not consider EBITDA an alternative to any measure of
      performance or liquidity under generally accepted accounting principles.
      Similarly, you should not infer that EBITDA is more meaningful than any of
      those measures.

(G)   SALE OF SECURITIES

      In connection with the Califa acquisition, we have the option of paying up
to $71 million of the scheduled payments in cash or Class B common stock through
2007. On April 17, 2002, a registration statement for the resale of
approximately 1,475,000 shares became effective. These shares were issued in
payment of the largest installment plus an additional installment of
consideration which totaled $22.5 million as well as $0.3 million of accrued
interest under the terms of the Califa asset purchase agreement. The Califa
principals elected to sell the shares and realized net proceeds from the sale of
$19.2 million. As a result, we are required to provide them with a make-whole
payment of approximately $3.6 million, plus interest through the date of the
next payment, in cash or stock. We have given the Califa principals notice that
we will add the make-whole amount plus interest to the February 2003 scheduled
payment, according to the terms of the asset purchase agreement.


                                       9
<PAGE>

(H)   CONTINGENCIES

      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 January 28, 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 was awarded
$4.1 million in out-of-pocket expenses. EC was awarded $0.3 million for lost
profits, even though the jury found that EC had failed to comply with the terms
of the License Agreement. We plan to file an appeal with the State Appellate
Court sitting in Corpus Christi challenging the verdict. Our management, on
advice of legal counsel, believes that it is not probable that a material
judgment against us will be sustained. In accordance with Statement of Financial
Accounting Standards No. 5, Accounting for Contingencies, or Statement 5, no
liability has been accrued.


                                       10
<PAGE>

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

RESULTS OF OPERATIONS

The following table represents our results of operations for the periods
indicated below (in millions, except per share amounts):

<TABLE>
<CAPTION>
                                                                       Quarters Ended         Six Months Ended
                                                                           June 30,                June 30,
                                                                     ------------------      ------------------
                                                                       2002        2001        2002        2001
---------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>         <C>         <C>         <C>
Net revenues
Entertainment
   Domestic TV networks                                              $ 23.4      $ 18.1      $ 48.2      $ 37.1
   International TV                                                     3.7         3.9         6.9         6.7
   Worldwide home video                                                 3.6         3.9         6.2         6.8
   Movies and other                                                     0.1         0.1         0.1         0.1
---------------------------------------------------------------------------------------------------------------
   Total Entertainment                                                 30.8        26.0        61.4        50.7
---------------------------------------------------------------------------------------------------------------
Publishing
   Playboy magazine                                                    23.5        26.0        46.2        48.8
   Other domestic publishing                                            2.3         3.2         5.0         6.6
   International publishing                                             1.1         3.4         2.4         6.1
---------------------------------------------------------------------------------------------------------------
   Total Publishing                                                    26.9        32.6        53.6        61.5
---------------------------------------------------------------------------------------------------------------
Playboy Online                                                          7.7         6.3        14.1        13.1
---------------------------------------------------------------------------------------------------------------
Licensing Businesses                                                    5.2         4.2         7.6         6.2
---------------------------------------------------------------------------------------------------------------
Catalog                                                                  --         2.8          --         5.8
---------------------------------------------------------------------------------------------------------------
Total net revenues                                                   $ 70.6      $ 71.9      $136.7      $137.3
===============================================================================================================
Net loss
Entertainment
   Before programming expense                                        $ 18.4      $ 15.0      $ 36.8      $ 29.6
   Programming expense                                                (10.3)       (9.9)      (19.7)      (19.3)
---------------------------------------------------------------------------------------------------------------
   Total Entertainment                                                  8.1         5.1        17.1        10.3
---------------------------------------------------------------------------------------------------------------
Publishing                                                             (0.9)        0.5        (1.3)       (0.5)
---------------------------------------------------------------------------------------------------------------
Playboy Online                                                         (2.9)       (6.1)       (6.5)      (11.5)
---------------------------------------------------------------------------------------------------------------
Licensing Businesses                                                    1.5         0.6         2.3         1.1
---------------------------------------------------------------------------------------------------------------
Catalog                                                                  --          --          --        (0.2)
---------------------------------------------------------------------------------------------------------------
Corporate Administration and Promotion                                 (3.6)       (4.8)       (7.2)       (8.8)
---------------------------------------------------------------------------------------------------------------
Total segment income (loss)                                             2.2        (4.7)        4.4        (9.6)
Loss on disposal                                                         --          --          --        (0.1)
---------------------------------------------------------------------------------------------------------------
Operating income (loss)                                                 2.2        (4.7)        4.4        (9.7)
---------------------------------------------------------------------------------------------------------------
Nonoperating income (expense)
   Investment income                                                     --         0.3         0.1         0.6
   Interest expense                                                    (3.6)       (2.8)       (8.1)       (5.4)
   Minority interest                                                   (0.4)         --        (0.8)         --
   Equity in operations of PTVI and other                              (0.2)         --        (0.1)        0.4
   Other, net                                                          (0.4)       (0.4)       (0.8)       (0.8)
---------------------------------------------------------------------------------------------------------------
Total nonoperating expense                                             (4.6)       (2.9)       (9.7)       (5.2)
---------------------------------------------------------------------------------------------------------------
Loss before income taxes and cumulative effect of change
   in accounting principle                                             (2.4)       (7.6)       (5.3)      (14.9)
Income tax expense                                                     (0.7)       (0.4)       (7.2)       (0.7)
---------------------------------------------------------------------------------------------------------------
Loss before cumulative effect of change in accounting principle        (3.1)       (8.0)      (12.5)      (15.6)
Cumulative effect of change in accounting principle (net of tax)         --          --          --        (4.2)
---------------------------------------------------------------------------------------------------------------
Net loss                                                             $ (3.1)     $ (8.0)     $(12.5)     $(19.8)
===============================================================================================================
Basic and diluted earnings per common share
Loss before cumulative effect of change in accounting principle      $(0.12)     $(0.32)     $(0.50)     $(0.64)
Cumulative effect of change in accounting principle (net of tax)         --          --          --       (0.17)
---------------------------------------------------------------------------------------------------------------
Net loss                                                             $(0.12)     $(0.32)     $(0.50)     $(0.81)
===============================================================================================================
</TABLE>


                                       11
<PAGE>

      Our revenues decreased slightly for the quarter and six-month period
reflecting the absence of catalog revenues due to the sale of our Collectors'
Choice Music business in November 2001. Domestic TV networks showed the most
growth, primarily as a result of the Califa acquisition in July 2001, and the
Licensing Businesses and Playboy Online Groups revenues were also higher.
Publishing revenues were down.

      The improvement in our operating performance for both of the current year
periods was due to better performance from all of our operating groups, except
Publishing. Corporate Administration and Promotion expenses were also lower.

      The net loss for the current year six-month period included a $5.8 million
noncash income tax charge related to our adoption of Statement 142, Goodwill and
Other Intangible Assets. The prior year six-month period included a $4.2 million
noncash charge representing a "Cumulative effect of change in accounting
principle" related to the adoption of Statement of Position 00-2, Accounting by
Producers or Distributors of Films, or SOP 00-2. Additionally, both of the
current year periods reflected higher interest expense due to primarily noncash
imputed interest related to the deferred payment of the purchase price for the
Califa acquisition.

      Several of our businesses can experience variations in quarterly
performance. As a result, our 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 economic conditions, product introductions by advertising customers
and changes in advertising buying patterns. E-commerce revenues are typically
impacted by the 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 following discussion focuses on the profit contribution of each of our
Entertainment businesses before programming expense.

      For the quarter and six-month period, profit contribution from our
domestic TV networks business increased $4.1 million and $8.4 million,
respectively, on revenue increases of $5.3 million, or 29%, and $11.1 million,
or 30%, respectively. These increases were primarily due to the Califa
acquisition combined with increases of $1.2 million for the quarter and $3.2
million for the six-month period in Playboy TV cable pay-per-view revenues.

Our networks were available as follows:

                                                June 30,    Dec. 31,    June 30,
Household Units (in millions)                       2002        2001        2001
--------------------------------------------------------------------------------
Playboy TV (1)
    DTH                                             19.6        18.1        16.7
    Cable digital                                   12.3        10.3         5.7
    Cable analog addressable                         6.5         7.8         9.8
Movie Networks (1) (2)
    DTH                                             38.0        35.3          --
    Cable digital                                   33.1        25.3        10.8
    Cable analog addressable                        12.9        17.0        13.9
--------------------------------------------------------------------------------

(1)   Each household unit is defined as one household carrying one given network
      per carriage platform. A single household can represent multiple household
      units if two or more of our networks and/or multiple platforms (i.e.
      digital and analog) are available to that household.

(2)   Includes The Hot Network, The Hot Zone and Vivid TV networks from the
      Califa acquisition in July 2001.


                                       12
<PAGE>

      Revenues from our worldwide home video business decreased $0.3 million, or
9%, for the quarter and $0.6 million, or 10%, for the six-month period,
primarily due to a change in accounting in accordance with SOP 00-2, Accounting
by Producers or Distributors of Films, which resulted in lower revenues of
approximately $1 million being recorded. The prior year six-month period also
reflected $0.8 million in international sales of The Eros Collection titles
through a one-time multi-territory sale. Partially offsetting the above were
revenues in both of the current year periods from a new continuity series and a
new international distribution agreement. Profit contribution from our worldwide
home video business increased $0.1 million for the quarter and decreased $0.5
million for the six-month period.

      Programming amortization expense increased $0.4 million for both the
quarter and six-month period. The increase for the quarter was primarily due to
higher amortization for domestic TV networks while the six-month comparison
principally reflected higher worldwide home video amortization.

PUBLISHING GROUP

      Playboy magazine revenues decreased $2.5 million, or 10%, for the quarter
and $2.6 million, or 5%, for the six-month period due to both lower newsstand
and advertising revenues. Advertising revenues decreased $1.3 million, or 13%,
for the quarter and $1.7 million, or 9%, for the six-month period due to fewer
ad pages, partially offset by higher average net revenue per page. Advertising
sales for the third quarter magazine issues are closed and we expect to report
9% lower ad revenues and 17% fewer ad pages compared to the 2001 third quarter.
These advertising declines are largely the result of continued industry-wide
softness. For both periods, subscription revenues were higher, but were more
than offset by lower newsstand sales of $1.2 million. A $0.4 million unfavorable
variance related to newsstand sales adjustments for prior years' issues also
contributed to the six-month comparison.

      Other domestic publishing revenues decreased $0.9 million, or 27%, for the
quarter and $1.6 million, or 24%, for the six-month period primarily due to
lower newsstand sales combined with an unfavorable variance related to newsstand
sales adjustments for prior issues in our special editions business.

      International publishing revenues decreased $2.3 million, or 66%, for the
quarter and $3.7 million, or 60%, for the six-month period due to the sale in
July 2001 of a majority of our interest in our Polish publishing joint venture,
and as a result we no longer consolidate its results.

      The group's segment performance for the quarter and six-month period was
$1.4 million and $0.8 million worse, respectively, compared to the prior year
periods primarily due to the lower Playboy magazine and special editions
newsstand sales, and the lower advertising revenues. Partially offsetting these
declines were lower manufacturing costs of $1.3 million for the quarter and $2.0
million for the six-month period primarily due to lower paper prices combined
with fewer printed pages in Playboy magazine due in part to the fewer ad pages.
The higher Playboy magazine subscription revenues and lower advertising
expenses, primarily due to cost reduction measures implemented in the prior
year, also favorably impacted the six-month comparison.

PLAYBOY ONLINE GROUP

      Playboy Online Group revenues increased $1.4 million, or 23%, for the
quarter and $1.0 million, or 8%, for the six-month period. Higher subscription
and international revenues drove the increases. E-commerce revenues were the
biggest contributor and were down year over year for both periods due in part to
the sale of Collectors' Choice Music in November 2001. Also, a more targeted
circulation plan and the timing of Playboy and Spice mailings unfavorably
impacted the six-month revenue comparison while improving the margin of the
business. In spite of higher trademark fees to the parent company of $0.5
million for the quarter and $1.0 million for the six-month period, the segment
loss decreased $3.2 million and $5.0 million for the quarter and six-month
period, respectively, primarily due to cost-saving initiatives implemented in
the prior year combined with the higher revenues.

LICENSING BUSINESSES GROUP

      For the quarter and six-month period, segment income from the Licensing
Businesses Group increased $0.9 million and $1.2 million, respectively, on
revenue increases of $1.0 million, or 22%, and $1.4 million, or 21%,
respectively. These increases were largely due to revenues of $0.9 million
related to an auction in June 2002 of a small portion of our art and memorabilia
collection. For both periods, higher royalties from our international licensed
branded products business combined with lower business development expenses were
also responsible for the improved performances.


                                       13
<PAGE>

CATALOG GROUP

      In November 2001, we sold our Collectors' Choice Music business, ending
our presence in the nonbranded print catalog business.

CORPORATE ADMINISTRATION AND PROMOTION

      Corporate Administration and Promotion expenses decreased $1.2 million, or
25%, for the quarter and $1.6 million, or 19%, for the six-month period. These
reductions were primarily due to lower marketing expenses, no longer amortizing
trademarks in the current year due to the adoption of Statement 142, Goodwill
and Other Intangible Assets and a greater reduction of expenses related to the
higher trademark fees from the Playboy Online Group. Additionally, the quarter
comparison reflected lower expense related to our deferred compensation plans,
as expense is inversely related to the performance of the stock market.

LIQUIDITY AND CAPITAL RESOURCES

      At June 30, 2002, we had $2.3 million in cash and cash equivalents and
$93.9 million in total financing obligations compared to $4.6 million in cash
and cash equivalents and $101.6 million in total financing obligations at
December 31, 2001. The financing obligations at June 30, 2002 and December 31,
2001 included $22.5 million and $20.0 million, respectively, in loans made
directly from Hugh M. Hefner to Playboy.com, Inc., or Playboy.com. On July 1,
2002, Mr. Hefner and Playboy.com amended an expiring $5.0 million note by
extending the maturity date to July 1, 2003. In September 2002, two additional
$5.0 million notes from Mr. Hefner are scheduled to mature.

      Our current liquidity requirements, excluding those of Playboy.com, are
being provided by a $100.2 million credit facility, comprised of $65.2 million
of term loans and a $35.0 million revolving credit facility. At June 30, 2002,
$6.2 million was outstanding under the revolving credit facility. The weighted
average interest rates as of June 30, 2002 were 5.97% for the term loans and
6.75% for the revolving credit facility. We plan to finance our working capital
requirements through cash generated from operations and our revolving credit
facility. If additional funds become necessary, we will seek additional capital
from the debt and/or equity markets. Playboy.com's funding requirements are
currently being obtained from loans made available by Mr. Hefner.

      In connection with the Califa acquisition, we have the option of paying up
to $71 million of the scheduled payments in cash or Class B common stock through
2007. On April 17, 2002, a registration statement for the resale of
approximately 1,475,000 shares became effective. These shares were issued in
payment of the largest installment plus an additional installment of
consideration which totaled $22.5 million as well as $0.3 million of accrued
interest under the terms of the Califa asset purchase agreement. The Califa
principals elected to sell the shares and realized net proceeds from the sale of
$19.2 million. As a result, we are required to provide them with a make-whole
payment of approximately $3.6 million, plus interest through the date of the
next payment, in cash or stock. We have given the Califa principals notice that
we will add the make-whole amount plus interest to the February 2003 scheduled
payment, according to the terms of the asset purchase agreement.


                                       14
<PAGE>

      In the international TV arena, PTVI's ability to finance its operations,
including making library license and programming output payments to us, will
depend principally on the ability of Claxson Interactive Group, Inc., or
Claxson, our venture partner, and also us to make capital contributions, until
PTVI generates sufficient funds from operations. In a June 27, 2002 filing with
the Securities and Exchange Commission, or the SEC, Claxson indicated that its
auditors have expressed a "going concern opinion." The reasons cited were
Claxson's losses from operations, working capital deficiency and its default on
debt. PTVI's independent auditors have also expressed a "going concern opinion"
in their report relating to PTVI's financial statements for the fiscal year
ended December 31, 2001. The reasons cited as the basis for raising substantial
doubt as to PTVI's ability to continue as a going concern are the potential
inability of Claxson to make required capital contributions combined with PTVI's
losses from operations. As of June 30, 2002, we had a $5.9 million net
receivable from PTVI related to programming output, including $3.2 million of
revenues recorded in the second quarter and $6.0 million for the six-month
period. In September 2002, we are scheduled to receive a $7.5 million library
license payment from PTVI. We do not expect to receive these amounts in cash.
However, we expect that if ongoing negotiations concerning the restructuring of
the PTVI joint venture with Claxson are successfully completed, we will receive
assets of greater value than these amounts. If we are unable to successfully
complete negotiations with Claxson and PTVI is unable to make these and other
required payments to us in a timely manner, either because of Claxson's failure
to fund its capital contribution obligations or otherwise, we will be required
to address this failure by, among other matters, exercising our remedies under
the PTVI joint venture agreements, reducing operating expenses, seeking
amendments to our credit facility or seeking additional capital. If these
efforts are not successful, our future financial condition and operating results
could be materially adversely affected.

CASH FLOWS FROM OPERATING ACTIVITIES

      Net cash provided by operating activities was $5.2 million for the six
months due to positive results (after adjusting for noncash items), principally
from the Entertainment Group, combined with $6.6 million of cash provided from
operating assets and liabilities, primarily due to collections of receivables
from Playboy magazine and DTH operators. Additionally, the six-month period
reflected $21.5 million of investments in produced and licensed entertainment
programming.

CASH FLOWS FROM INVESTING ACTIVITIES

      Net cash provided by investing activities was $0.2 million for the six
months primarily due to $1.1 million of proceeds from disposals, primarily
related to the sale of our Collectors' Choice Music businesses, mostly offset by
$0.7 million of additions to property and equipment.

CASH FLOWS FROM FINANCING ACTIVITIES

      Net cash used for financing activities was $7.8 million for the six months
principally due to $5.9 million in repayments of financing obligations and $4.3
million in payments on our revolving credit facility, partially offset by $2.5
million of proceeds related to a December 2001 promissory note issued by
Playboy.com to Mr. Hefner.

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 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. 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:


                                       15
<PAGE>

(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)   limitations on the advertisement of tobacco, alcohol and other
            products which are important sources of advertising revenue for us,

      (c)   substantive changes in postal regulations or rates which could
            increase our postage and distribution costs, or

      (d)   changes in or increased regulation of gaming businesses, which could
            limit our ability to obtain licenses, and the impact of any new
            legislation on gaming businesses generally;

(2)   risks associated with our foreign operations, including market acceptance
      and demand for our products and the products of our licensees and our
      ability to manage the risk associated with our exposure to foreign
      currency exchange rate fluctuations;

(3)   increases in interest rates;

(4)   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 revenues;

(5)   our ability to protect our trademarks 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 distributed;

(7)   the dilution from any potential issuance of additional common stock in
      connection with acquisitions we make or investments in Playboy.com;

(8)   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;

(9)   competition in the cable, DTH, men's magazine and Internet markets;

(10)  reliance on third parties for technology and distribution for the
      television video-on-demand and Internet businesses;

(11)  changes in distribution technology and/or unforeseen delays in the
      implementation of that technology by the cable and DTH industries, which
      might affect our plans and assumptions regarding carriage of our networks;

(12)  risks associated with losing access to transponders, competition for
      transponders and channel space and any decline in our access to, and
      acceptance by, cable and DTH systems or any deterioration in the terms or
      cancellation of fee arrangements with operators of these systems;

(13)  attempts by consumers or citizens groups to exclude our programming from
      pay television distribution;

(14)  risks associated with integrating the operations of the networks related
      to the Califa acquisition and the risks that we may not realize the
      expected operating efficiencies, synergies, increased sales and profits
      and other benefits from the acquisition;

(15)  PTVI's ability to finance its operations, including making library license
      and programming output payments to us, will depend principally on the
      ability of Claxson, our venture partner, and also us to make capital
      contributions, until PTVI generates sufficient funds from operations. If
      we are unable to successfully complete negotiations concerning the
      restructuring of the PTVI joint venture with Claxson and PTVI is unable to
      make required payments to us in a timely manner, either because of
      Claxson's failure to fund its capital contribution obligations or
      otherwise, we will be required to address this failure by, among other
      matters, excising our remedies under the PTVI joint venture agreements,
      reducing operating expenses, seeking amendments to our credit facility or
      seeking additional capital. If these efforts are not successful, our
      future financial condition and operating results could be materially
      adversely affected;

(16)  increases in paper or printing costs;

(17)  effects of the national consolidation of the single-copy magazine
      distribution system;

(18)  uncertainty of the viability of the Internet gaming, e-commerce,
      advertising and subscription businesses; and

(19)  our ability to obtain adequate third-party financing to fund our Internet
      business, and the timing and terms of such financing.


                                       16
<PAGE>

                                LEGAL PROCEEDINGS

      On February 17, 1998, Gongora filed suit in state court in Hidalgo County,
Texas against the Editorial Defendants and us. In the complaint, Gongora alleged
that he was injured as a result of the termination of the License Agreement
between us and EC for the publication of the Mexican Edition. We terminated the
License Agreement on January 28, 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 was awarded $4.1 million in
out-of-pocket expenses. EC was awarded $0.3 million for lost profits, even
though the jury found that EC had failed to comply with the terms of the License
Agreement. We plan to file an appeal with the State Appellate Court sitting in
Corpus Christi challenging the verdict. Our management, on advice of legal
counsel, believes that it is not probable that a material judgment against us
will be sustained. In accordance with Statement 5, Accounting for Contingencies,
no liability has been accrued.

                    CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)   Recent Sales of Unregistered Securities

      On April 18, 2002, we issued 1,475,459 shares of our Class B common stock
to Califa Entertainment Group, Inc., or Califa, and V.O.D., Inc., or VODI,
pursuant to an Asset Purchase Agreement dated as of June 29, 2001 by and among
us, Califa, VODI, Steven Hirsch, Dewi James and William Asher relating to our
acquisition of The Hot Network, The Hot Zone and the Vivid TV networks and
related assets. We issued the 1,475,459 shares in payment of the largest
installment plus an additional installment of consideration due under the
agreement in the amounts of $16.0 million and $6.5 million due in 2001 and 2002,
respectively, as well as interest on these installments in the amount of $0.3
million that was accrued but unpaid as of April 17, 2002. The issuance of shares
was not registered under the Securities Act of 1933, as amended, or the Act, in
reliance on Section 4(2) of the Act as a transaction not involving a public
offering of the shares.

               SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      Our annual meeting of shareholders was held on May 15, 2002. At the
meeting, the following director nominees were elected:

                                                         Votes             Votes
Nominee                                                    For          Withheld
--------------------------------------------------------------------------------
Dennis S. Bookshester                                4,642,469             3,584

David I. Chemerow                                    4,642,724             3,329

Donald G. Drapkin                                    4,642,749             3,304

Christie A. Hefner                                   4,634,376            11,677

Sol Rosenthal                                        4,642,456             3,597

Richard S. Rosenzweig                                4,634,477            11,576

Sir Brian Wolfson                                    4,642,473             3,580
--------------------------------------------------------------------------------

Also at the meeting, the shareholders approved, with voting as set forth below,
ratification of Ernst & Young LLP as independent auditors, or Auditors:

                         Votes            Votes          Votes
Matter                     For          Against       Withheld          Non-Vote
--------------------------------------------------------------------------------
Auditors             4,643,604            1,146            N/A             1,303
--------------------------------------------------------------------------------


                                       17
<PAGE>

                        EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

Exhibit Number                           Description

#10.1             Amended and Restated Affiliation and License Agreement dated
                  May 17, 2002 between DirecTV, Inc. and Playboy Entertainment
                  Group, Inc., Spice Entertainment, Inc., Spice Hot
                  Entertainment, Inc. and Spice Platinum Entertainment, Inc.
                  regarding DBS Satellite Exhibition of Programming

#10.2             Letter of Intent for Provision of Services dated May 3, 2002
                  between AT&T Digital Media Centers and Playboy Entertainment
                  Group, Inc.

10.3              First Amendment to September 20, 2001 Lease between Kingston
                  Andrita LLC and Playboy Entertainment Group, Inc. dated May
                  15, 2002

10.4              Agreement of Lease dated April 23, 2002 between Los Angeles
                  Media Tech Center, LLC and Playboy Enterprises, Inc.

10.5              Employment Agreement dated May 14, 2002 between David Zucker
                  and Playboy Enterprises, Inc.

10.6              Memorandum dated May 21, 2002 regarding severance agreement
                  for Linda Havard

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

---------

#     Certain information omitted pursuant to a request for confidential
      treatment filed separately with the SEC

(b)   Reports on Form 8-K

      On April 15, 2002, we filed an Amendment No. 2 on Form 8-K/A to amend
certain financial information included in Items 7(a) and 7(b) of our Amendment
No. 1 on Form 8-K/A filed on September 19, 2001. This Amendment No. 1 updated
the Form 8-K filed on July 23, 2001 relating to our acquisition of The Hot
Network, The Hot Zone and the Vivid TV networks and related assets to include
applicable financial statements.


                                       18
<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 August 12, 2002                    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)


                                       19