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Playboy Buys Out U.K. Partner, Plans Merger

Anaheim, Calif. -- Playboy Enterprises Inc. has taken full
ownership of the British version of the Playboy Channel, which it plans to merge with
another U.K. adult service next year.

Before the announcement, the satellite platform British Sky
Broadcasting had owned 30 percent of the channel, U.K. programmer Flextech plc owned 51
percent and Playboy owned 19 percent.

"Sky and Flextech have sold their shares to
Playboy," Jim English, president of Playboy TV Networks, said last week at the
Western Show here. Playboy said it paid $9 million for the 81 percent of the channel it
didn't own.

English also disclosed that once Playboy's acquisition of
Spice Entertainment Cos. Inc. is completed, the U.K. version of Playboy will be merged
with Spice's The Adult Channel. The acquisition is expected to be completed in the first
quarter of next year, and the service is being inherited by Playboy as part of the deal.

The merger of Playboy and The Adult Channel should be
completed as early as mid-spring, he added.

The Adult Channel is a homegrown U.K. service, which
launched before Playboy entered the British market.

As a combined service, the new channel will compete with a
third U.K. adult programmer, Television X.

"We will wind up being a much stronger, much more
cohesively programmed service," said English, who declined to provide subscriber
counts for either Playboy or The Adult Channel in Britain.

Playboy Channel in the United Kingdom is still losing
money, but the losses are moderate, according to public financial documents from Flextech.
English described the channel as "making headway."

He wouldn't say whether Playboy expects to take on
additional investors again in its U.K. operations.