Notice of the 2005 Annual Meeting of Stockholders

May 11, 2005

      The Annual Meeting of Stockholders of Playboy Enterprises, Inc. will be held at Michael’s Restaurant, located at 24 W. 55th Street, New York, New York 10019, on Wednesday, May 11, 2005, at 9:00 a.m., local time, for the following purposes:

      All holders of record of Playboy Class A common stock at the close of business on March 14, 2005 are entitled to notice of and to vote at the meeting. An alphabetical list of those stockholders, their addresses and the number of shares owned by each will be on display for all purposes germane to the meeting at Playboy’s New York office during normal business hours from May 1, 2005 to May 10, 2005. This list will also be on display at the meeting. Holders of Playboy Class B common stock on the record date are also welcome to attend the meeting but are not entitled to vote.

      WE HOPE THAT YOU WILL BE PRESENT AT THE MEETING. IF YOU CANNOT ATTEND AND YOU ARE A HOLDER OF CLASS A COMMON STOCK, WE URGE YOU TO VOTE YOUR SHARES BY DATING, SIGNING AND MAILING THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. The envelope requires no postage if it is mailed in the United States.

April 8, 2005

Chicago, Illinois

PLAYBOY ENTERPRISES, INC.

680 North Lake Shore Drive

Chicago, Illinois 60611

Proxy Statement

GENERAL INFORMATION

Annual Meeting Time, Location and Admission Procedure

      The Annual Meeting of Stockholders of Playboy Enterprises, Inc. will be held on Wednesday, May 11, 2005, at 9:00 a.m., local time, at Michael’s Restaurant, located at 24 W. 55th Street, New York, New York 10019.

      All stockholders of record on March 14, 2005, the record date for the Annual Meeting, are invited to attend the Annual Meeting. If you attend, you may be asked to present valid picture identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not be permitted at the meeting. Please note that if you hold your shares in “street name” (that is, through a bank, broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting.

Securities Entitled to Be Voted at the Meeting

      Only shares of our Class A common stock held by stockholders of record on March 14, 2005, the record date for the Annual Meeting, are entitled to be voted at the meeting. Each share of Class A common stock is entitled to one vote. On March 14, 2005, 4,864,102 shares of Class A common stock were outstanding. The Class B common stock is not entitled to be voted at the Annual Meeting. Holders of Class B common stock are receiving this proxy statement for informational purposes only and will not receive a proxy card.

Information About This Proxy Statement

      We sent you these proxy materials because Playboy’s Board of Directors is soliciting your proxy to vote your shares of Class A common stock at the Annual Meeting. This proxy statement summarizes the information you need to vote at the Annual Meeting. On April 8, 2005, we began mailing these proxy materials to all of our holders of record of Class A common stock and Class B common stock, as of the close of business on March 14, 2005.

Information About Voting

      Holders of Class A common stock can vote in person at the Annual Meeting or by proxy. If you want to vote by proxy, please complete, sign and date the enclosed proxy card and return it promptly in the accompanying envelope, which is postage paid if mailed in the United States. If your shares of Class A common stock are held in the name of a bank, broker or other holder of record, you will receive instructions from that holder of record that you must follow in order for your shares to be voted at the Annual Meeting.

      If you plan to attend the meeting and vote in person, we will give you a ballot when you arrive. If your shares of Class A common stock are not registered in your own name, and you plan to attend the Annual Meeting and vote your shares in person, you will need to contact the broker or agent in whose name your shares are registered to obtain a broker’s proxy card and bring it with you to the Annual Meeting.

      If you vote by proxy, the individuals named on the proxy card (your proxies) will vote your shares in the manner you indicate. You may specify whether your shares should be voted “for” or “withheld” with respect to all, some or none of the nominees for director and whether your shares should be voted “for,” “against” or

“abstain” with respect to the ratification of the appointment of our independent registered public accounting firm. If you sign, date and return the card without indicating your instructions on how to vote your shares, they will be voted as follows:

      If any other matter is presented at the meeting, the holders of your proxy will vote in accordance with his or her best judgment. At the time this proxy statement went to press, we knew of no other matters to be acted upon at the meeting.

      Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares by completing, signing, dating and mailing the proxy card enclosed in the accompanying envelope. Voting by proxy will not affect your right to attend the meeting and vote your shares in person.

      You may revoke or change a proxy at any time before it is exercised by any of the following methods:

      Your most current vote is the one that is counted.

Quorum Requirement

      A quorum is necessary to hold a valid Annual Meeting. A majority of the shares of our Class A common stock, present in person or represented by proxy, shall constitute a quorum at the Annual Meeting. Proxies marked “withheld” or “abstain” are counted as present for establishing a quorum.

Information About Votes Necessary for Action to Be Taken

      All matters to be considered at the Annual Meeting require an affirmative vote of the majority of all shares of Class A common stock present in person or represented by proxy. Proxies marked “withheld” or “abstain” will have the same effect as a vote against the proposals described in this proxy statement. If your shares are held in “street name,” the broker or bank who holds your shares will have the authority to vote your shares with respect to the proposals without your instructions.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

      Playboy’s directors are elected by the stockholders each year at our Annual Meeting. Our directors are elected to serve one-year terms. Our bylaws allow the Board of Directors to fix the number of directors to be elected at each Annual Meeting at not fewer than five and not more than ten. The Board of Directors currently consists of eight members. The Board of Directors has nominated eight individuals for election at the Annual Meeting. Each of the director nominees presented in this proxy statement is currently a director. If reelected, each director’s term will last until the 2006 Annual Meeting or until he or she is succeeded by another qualified director who has been elected.

      Your proxy will vote for each of the nominees unless you specifically withhold authority to vote for a particular nominee. If a nominee is unavailable for election, the holders of your proxy may vote for another nominee proposed by the Board of Directors, or the Board of Directors may reduce the number of directors to be elected at the Annual Meeting. Your proxy may not be voted for more than eight nominees.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES.

      The following information is provided with respect to each nominee for election as a director. The ages of the nominees are as of April 1, 2005.

CHRISTIE HEFNER

Director since 1979

Age 52

      Ms. Hefner was appointed to her present position as Chairman of the Board and Chief Executive Officer of Playboy in November 1988. She joined Playboy in 1975 and worked in a variety of the Company’s businesses before being named president in 1982. She is also a board member of the Playboy Foundation, the Company’s philanthropic arm. In addition, Ms. Hefner is a member of the Board of Directors of Magazine Publishers of America, the industry association for consumer magazines; the Business Committee for the Arts, an organization helping businesses establish alliances with the arts that meet business objectives; Museum of Television & Radio Media Center; and RUSH University Medical Center. Ms. Hefner is also on the Advisory Boards of the American Civil Liberties Union and the Creative Coalition, and is a founding member of The Chicago Network, an organization of professional women from the Chicago metropolitan area who have reached the highest echelons of business, the arts, government, the professions and academia, and The Committee of 200, an international organization of preeminent women business owners and executives. She is also a member of the Chicago Council on Foreign Relations and the National Cable Television Associations Diversity Committee. Ms. Hefner is the daughter of Hugh M. Hefner, Editor-in-Chief.

DENNIS S. BOOKSHESTER

Director since 1990

Age 66

      Mr. Bookshester has served as the Chief Executive Officer of Turtle Wax Inc., a company specializing in auto appearance chemistry, since January 2004. He has been Chairman of the Board of Cutanix Corporation, a company principally engaged in scientific skin research, since November 1997. Concurrently, Mr. Bookshester was the Chief Executive Officer of Fruit of the Loom, Inc. from June 1999 to May 2002. From December 1990 to May 1991, he served as Chief Executive Officer of Zale Corporation, a company principally involved in the retail sale of jewelry. Mr. Bookshester was Corporate Vice Chairman, Chairman and Chief Executive Officer of the Retail Group of Carson Pirie Scott & Co., positions he held from 1984 to 1989. In addition, Mr. Bookshester is the Chairman of the Illinois Racing Board and a member of the board of directors of Northwestern Hospital Foundation. He is on the Visiting Committee of the University of Chicago

Graduate School of Business, the University of Chicago Visiting Committee to Biological Sciences and Pritzker School of Business. Mr. Bookshester is a member of the Audit Committee of the Board.

DAVID I. CHEMEROW

Director since 1996

Age 53

      Mr. Chemerow is the managing director and founder of Blue Hill Associates, a consulting firm. He was the Chief Operating Officer for TravelCLICK, Inc., a leading provider of solutions that help hotels maximize profit from electronic distribution channels, from December 2003 through August 2004. Prior to that, he was the Chief Operating Officer of ADcom Information Services, Inc., which provides ratings for viewership of TV programs to cable operators, from July 2002 through December 2003. He served as President and Chief Executive Officer of Soldout.com, Inc. from May 2000 through July 2000 and was President and Chief Operating Officer from September 1999 through April 2000. Soldout.com, Inc. was a premium event and entertainment resource, specializing in sold out and hard-to-obtain tickets and personalized entertainment packages for sports, theater, cultural and other events. Mr. Chemerow was President and Chief Operating Officer of GT Interactive Software Corp., a company principally engaged in publishing computer games, from April 1998 to September 1999; he served as Executive Vice President and Chief Operating Officer from May 1997 to April 1998. From April 1996 to May 1997, he was Executive Vice President and Chief Financial Officer of ENTEX Information Services, Inc., a company principally engaged in providing distributed computing management solutions. Beginning in 1990 and prior to joining ENTEX, he was Executive Vice President, Finance and Operations, and Chief Financial Officer of Playboy. Mr. Chemerow is also a member of the Board of Directors of Dunham’s Athleisure Corporation, a sporting goods retailer. Mr. Chemerow is the Chairman of the Audit Committee of the Board.

DONALD G. DRAPKIN

Director since 1997

Age 57

      Mr. Drapkin has been Vice Chairman and a Director of MacAndrews & Forbes Holdings Inc. and various affiliates since 1987. Prior to joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP for more than five years. Mr. Drapkin is also a Director (or member of the Board of Managers, as applicable) of the following corporations which file reports pursuant to the Securities Exchange Act of 1934: Allied Security Holdings, LLC, Anthracite Capital, Inc., Nephros, Inc., Revlon Consumer Products Corporation, Revlon, Inc. and SIGA Technologies, Inc. Mr. Drapkin is a member of the Compensation Committee of the Board.

JEROME H. KERN

Director since 2002

Age 67

      Mr. Kern has been the Chairman of Symphony Media Systems, LLC since 2003 and President of Kern Consulting, LLC since 2001. Prior to that, Mr. Kern was Chairman and Chief Executive Officer of On Command Corporation. Prior to his position at On Command, he served as Vice Chairman and a member of the Board of Directors of Tele-Communications, Inc. (TCI). For more than 20 years, Mr. Kern was the principal outside legal counsel to TCI and Liberty Media Corporation (Liberty Media), including from 1992 to 1998, when he served as senior partner of Baker & Botts, L.L.P. Mr. Kern is on the board of Volunteers of America (Colorado Chapter). He also serves as Chairman of the Institute for Children’s Mental Disorders and is Co-Chairman of Board of Trustees for the Colorado Symphony Association. He is a trustee of City Meals-on-Wheels in New York and a trustee of the New York University School of Law Foundation. Mr. Kern is a member of the Audit Committee of the Board.

RUSSELL I. PILLAR

Director since 2003

Age 39

      Mr. Pillar is Co-Founder and Managing Director of Catalytic Capital and its predecessor and related entities, all investment and advisory vehicles focused on maximizing the value of consumer brands. He has served in that and similar capacities since October 1991. He also is Senior Advisor at Viacom, where he provides insight on media, technology, and communications industry developments and their implications for Viacom’s global strategy. From January 2000 until April 2004 he was President of the Viacom Digital Media Group and its predecessor entities, where he served as Viacom’s chief digital media strategy and execution executive. From November 1998 to January 2000 he was President, Chief Executive Officer, and a Director of Richard Branson’s Virgin Entertainment Group, a diversified international entertainment content retailer. From September 1997 to August 1998 he was President and Chief Executive Officer of Prodigy Internet, an Internet service provider, and was a member of Prodigy Inc.’s board of directors, including having served as its Vice Chairman, from October 1996 (when he helped lead the leveraged buy-out of the company) to February 2000. Mr. Pillar, a Crown Fellow at the Aspen Institute, graduated Phi Beta Kappa, cum laude with an A.B. in East Asian Studies from Brown University. Mr. Pillar is a member of the Compensation Committee of the Board.

SOL ROSENTHAL

Director since 1985

Age 70

      Mr. Rosenthal has been Of Counsel to the Los Angeles office of the law firm of Arnold & Porter LLP since July 2000. Prior to that he was Of Counsel to the Los Angeles law firm of Blanc Williams Johnston & Kronstadt, L.L.P. from May 1996 through June 2000. Prior to that, he was a senior partner in the law firm of Buchalter, Nemer, Fields & Younger from 1974 through April 1996. He has served as an arbitrator in entertainment industry disputes since 1977 and as the Writers Guild-Association of Talent Agents Negotiator since 1978. Mr. Rosenthal is a former member of the Board of Governors, Academy of Television Arts & Sciences, on which he served from 1990 to 1992; he is a former President of the Beverly Hills Bar Association and a former President of the Los Angeles Copyright Society. Mr. Rosenthal is the Chairman of the Compensation Committee of the Board.

RICHARD S. ROSENZWEIG

Director since 1973

Age 69

      Mr. Rosenzweig has been Executive Vice President of Playboy since November 1988. From May 1982 to November 1988, he was Executive Vice President, Office of the Chairman, and from July 1980 to May 1982, he was Executive Vice President, Corporate Affairs. Before that, from January 1977 to June 1980, he had been Executive Vice President, West Coast Operations. His other positions with Playboy have included Executive Vice President, Publications Group, and Associate Publisher, Playboy Magazine. He has been with Playboy since 1958.

MEETINGS AND COMMITTEES OF THE BOARD

      The Board of Directors held eight meetings during 2004. In addition to meetings of the full Board, directors also attend meetings of Board committees on which they serve. Each of our directors attended at least 75% of all the meetings of the Board and of the Board committees on which he or she served during 2004. The non-management directors also meet periodically in executive sessions without management. The non-management director designated to preside at such executive sessions rotates among such non-management directors. Information with respect to Playboy’s policy for communication with directors, including the non-management directors, is described in the section of this proxy statement titled “Stock-

holder Communications with Directors.” The Board of Directors has a standing audit committee and a standing compensation committee, which are described below. The Board does not have a standing nominating committee.

      Our Board of Directors is composed of eight individuals. The Board of Directors has affirmatively determined that all directors, other than Ms. Hefner and Mr. Rosenzweig, are “independent directors” under the listing requirements of the New York Stock Exchange. Specifically, these six directors have no material relationship with Playboy, either directly or as a partner, shareholder or officer of an organization that has a relationship with Playboy. In making these determinations, the Board of Directors considered the fact that none of these directors had any relationships with Playboy of the types set forth in the listing requirements of the New York Stock Exchange nor any other relationships that in the Board’s judgment would interfere with the director’s independence. Ms. Hefner and Mr. Rosenzweig are both executive officers of Playboy and, therefore, are not independent directors.

Audit Committee

      The audit committee of the Board is currently comprised of three directors, Messrs. Chemerow (who serves as Chairman), Bookshester and Kern. The functions of the audit committee and its activities during 2004 are described in the section of this proxy statement titled “Report of the Audit Committee.”

      During 2004, the Board of Directors examined the composition of the audit committee and confirmed that all members of the audit committee are “independent” and “financially literate” and that Mr. Chemerow qualifies as an “audit committee financial expert,” in each case under the applicable New York Stock Exchange listed company rules and the Securities and Exchange Commission regulations governing audit committees. Mr. Chemerow acquired his financial expert attributes principally through years of experience as chief financial officer or controller of several companies as well as president and chief operating officer of several companies where he actively supervised principal financial officers and actively oversaw the preparation and evaluation of financial statements. Mr. Chemerow’s experiences are described in the section of this proxy statement titled “PROPOSAL NO. 1—ELECTION OF DIRECTORS.”

      The audit committee met seven times during 2004.

Compensation Committee

      The compensation committee of the Board is currently comprised of three directors, Messrs. Rosenthal (who serves as Chairman), Drapkin and Pillar. The key functions of the compensation committee include reviewing and approving our goals and objectives concerning compensation of corporate officers and certain other key employees, evaluating the performance of our Chief Executive Officer in light of these goals and objectives and determining and approving her compensation level based on this evaluation, evaluating the performance of other corporate officers in light of these goals and objectives, reviewing the competitiveness of our compensation practices and determining and approving salary and termination arrangements for, and all proposed contracts and transactions with, all of our employees whose salaries and bonuses are more than $350,000 but less than $500,000 per year, excluding corporate officers.

      Other key responsibilities of the compensation committee include reviewing and making recommendations to the Board concerning our employee benefit programs, making recommendations to the Board concerning compensation, salary or termination arrangements for, and all proposed contracts and transactions with, corporate officers, other than our Chief Executive Officer, and any employee of Playboy (including Mr. Hefner) whose salary and bonus equals or exceeds $500,000 per year, administering our stock incentive plans for key employees and non-employee directors and determining which of our employees are eligible to participate in those plans and administering our employee stock purchase plan.

      The compensation committee met four times during 2004.

Board Nominations

      Playboy is committed to having a Board of Directors comprised of individuals who are accomplished in their fields, have the ability to make meaningful contributions to the Board’s oversight of the business and affairs of Playboy and have an impeccable record and reputation for honest and ethical conduct. Our Board of Directors is composed of eight individuals, six of whom the Board of Directors have affirmatively determined to be “independent” directors under the listing requirements of the New York Stock Exchange. Because more than fifty percent of our voting shares are owned by a single individual, the NYSE listing requirements do not require us to have a separate nominating committee composed solely of independent directors to identify and select individuals to serve on our Board. However, we believe the independent composition of our Board of Directors enables us to achieve the purposes of an independent nominating committee by using the full Board. Accordingly, each member of the Board of Directors participates in the consideration of director nominees.

      Our Board of Directors will consider director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Board of Directors will take into consideration its needs and the qualifications of the candidate. To have a candidate considered by the Board of Directors, a stockholder must submit the recommendation in writing and must include the following information:

      The stockholder recommendation and information described above must be sent to the Secretary at Playboy Enterprises, Inc., 680 N. Lake Shore Drive, Chicago, Illinois 60611 and must be received by the Secretary not less than 120 days prior to the anniversary date of Playboy’s most recent annual meeting of stockholders.

      In addition to the factors described above, the Board of Directors examines a candidate’s specific experiences and skills, time availability in light of other commitments, potential conflicts of interest and independence from management, Playboy and its principal stockholder. The Board of Directors also seeks to have its members represent a diversity of backgrounds and experience.

      The Board of Directors identifies potential nominees by asking current directors and executive officers to identify people meeting the criteria described above that are available to serve on the Board. As described above, the Board of Directors will also consider candidates recommended by stockholders.

      Once a person has been identified as a potential candidate, the Board of Directors may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Board of Directors determines that the candidate warrants further consideration, the Chairman or another member of the Board contacts the person. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Board of Directors requests information from the candidate, reviews the person’s accomplishments and qualifications, including in light of any other candidates that the Board of Directors might be considering, and conducts one or more interviews with the candidate. In certain instances, the Chairman or another member of the Board may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Board’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, the Board of Directors may take into consideration the number and class of shares held by the recommending stockholder and the length of time that such shares have been held and the needs of the Board at the time.

STOCKHOLDER COMMUNICATIONS WITH DIRECTORS

      The Board of Directors has established a process to receive communications from stockholders. Stockholders may contact any member (or all members) of the Board, any Board committee or any chair of any such committee by mail. To communicate with the Board of Directors, any individual directors or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent “c/o Secretary” at Playboy Enterprises, Inc., 680 N. Lake Shore Drive, Chicago, Illinois 60611.

      All communications received as set forth in the preceding paragraph will be opened by the office of our General Counsel for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the General Counsel’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed.

      We also have a 24-hour toll-free telephone number (1-866-376-4117) and a dedicated email address (pla@openboard.info) for receiving complaints or concerns regarding accounting and auditing matters. There is also a secure web page at www.openboard.info/ PLA providing the ability to access an Internet-based message interface that will deliver a secure message. In addition, we have a secure post office box (P.O. Box 11177, Chicago, IL 60611) for the same purpose. Complaints or concerns regarding accounting and auditing matters will be handled in accordance with procedures adopted by the audit committee.

      It is Playboy’s policy that each of our directors should attend the Annual Meeting absent circumstances which makes attendance impossible. All of our directors were in attendance at the 2004 Annual Meeting.

AVAILABILITY OF CERTAIN DOCUMENTS

      Posted on our website www.playboyenterprises.com in the “Investor Relations—Corporate Governance” section are the charters of the audit committee and compensation committee of our Board of Directors, our Code of Business Conduct and our Corporate Governance Guidelines. Copies of these documents are also available free of charge by sending a request to Investor Relations, Playboy Enterprises, Inc., 680 North Lake Shore Drive, Chicago, Illinois 60611. Information made available on our website does not constitute a part of this document.

DIRECTOR COMPENSATION

      Directors who are Playboy employees receive no compensation for their services as directors. During 2004, non-employee directors earned an annual fee of $36,000. This annual fee was payable in quarterly installments. At least half of this annual fee is payable in shares of Class B common stock. The Chairman of our compensation committee earns an additional fee of $5,000 per year and the Chairman of our audit committee earns an additional fee of $10,000 per year. Each member of our audit committee other than the Chairman of the audit committee earns an additional fee of $5,000 per year. At least half of these additional fees to the Chairman of our compensation committee and the Chairman and members of our audit committee are paid in shares of our Class B common stock. In addition, each non-employee director earned a fee of $1,000, payable in shares of Class B common stock, for each Board meeting in which he participated, except that no fee was paid in connection with telephonic only Board meetings. All of our non-employee directors participated in all five of the Board meetings for which fees were paid. Messrs. Bookshester, Chemerow, Drapkin, Kern, Pillar and Rosenthal earned total compensation of $46,000, $51,000, $41,000, $46,000, $41,000 and $46,000, respectively, in 2004.

      Since October 1992, non-employee directors have also been eligible to participate in Playboy’s Deferred Compensation Plan for Non-Employee Directors, which we call the DCP, under which they may elect to

defer receipt of part or all of their annual fees, committee fees and per-meeting payments. All amounts deferred and earnings credited are 100% vested immediately and are general unsecured obligations of Playboy.

      Each non-employee director other than Mr. Pillar is also a participant in the Playboy Enterprises, Inc. 1991 Non-Qualified Stock Option Plan for Non-Employee Directors. We call this stock option plan the 1991 Directors’ Stock Option Plan. Under the 1991 Directors’ Stock Option Plan, each director is granted a non-qualified stock option to purchase shares of Class B common stock. Each option is exercisable in four equal annual installments, beginning on the first anniversary of the date that options were initially granted, unless accelerated according to the terms of the 1991 Directors’ Stock Option Plan. All installments are cumulative and may be exercised in whole or in part. Options granted under the 1991 Directors’ Stock Option Plan generally expire ten years after the date of grant, although they may expire earlier. Shares issued upon the exercise of options granted under the 1991 Directors’ Stock Option Plan may be either treasury shares or newly-issued shares.

      Each non-employee director other than Mr. Kern is also a participant in the Amended and Restated 1997 Equity Plan for Non-Employee Directors of Playboy Enterprises, Inc., as amended. We call this equity plan the 1997 Equity Plan. Under the 1997 Equity Plan, we from time to time grant non-employee directors non-qualified stock options to purchase shares of Class B common stock and/or shares of restricted stock. Each option is generally exercisable in four equal annual installments, beginning on the first anniversary of the date that options were initially granted, unless accelerated according to the terms of the 1997 Equity Plan. All installments are cumulative and may be exercised in whole or in part. Options granted under the 1997 Equity Plan generally expire ten years after the date of grant, although they may expire earlier. Shares issued upon the exercise of options granted under the 1997 Equity Plan may be either treasury shares or newly-issued shares.

EXECUTIVE OFFICERS

      The following information is provided with respect to Playboy’s executive officers, except for Ms. Hefner and Mr. Rosenzweig, whose information is provided in the section of this proxy statement titled “PROPOSAL NO. 1—ELECTION OF DIRECTORS.” Playboy’s officers hold their offices until their successors are chosen and qualified.

JAMES F. GRIFFITHS

Senior Executive Vice President and

  President, Entertainment Group

Age 51

      Mr. Griffiths was appointed to his position as Senior Executive Vice President in January 2004 and was appointed to his additional position as President, Entertainment Group in June 2004. He joined Playboy from Metro-Goldwyn-Mayer (MGM) where he spent six years as President, Worldwide Television Distribution. He oversaw the global distribution of movies and television programs and supervised MGM Networks, Inc., the company’s cable and satellite channel ventures. Mr. Griffiths joined MGM from Creative Artists Agency where he served as Director of the Entertainment Ventures Group and helped create Tel-TV and the Sundance Channel as well as other business and content opportunities. He began his professional career as a Senior Accountant with Price Waterhouse and was recruited to Home Box Office where he spent eight years. Mr. Griffiths later served as President of Worldwide Pay Television and International Home Video at Twentieth Century Fox before joining Star Television in 1993 as Managing Director in Hong Kong.

LINDA G. HAVARD

Executive Vice President, Finance and Operations,

  and Chief Financial Officer

Age 50

      Ms. Havard was appointed to her present position in May 1997. From August 1982 to May 1997, she held various financial and management positions at Atlantic Richfield Company or ARCO. From October 1996 to May 1997, Ms. Havard served as ARCO’s Senior Vice President in the Global Energy Ventures division. She also served as ARCO’s Vice President of Corporate Planning from January 1994 to December 1996. Her other positions with ARCO included Vice President, Finance, Planning and Control, ARCO Transportation Co. and President, ARCO Pipe Line Co. Ms. Havard serves as a member of the Board of Directors of Playboy.com, Inc. (Playboy.com). Ms. Havard is also a member of the UCLA Foundation Board of Councillors, a member of the Board of Trustees of the Chicago School of Professional Psychology, a member of the Chicago Club of the Council on Foreign Relations and a member of Chicago Finance Exchange.

HUGH M. HEFNER

Editor-in-Chief

Age 78

      Mr. Hefner founded Playboy in 1953. He assumed his present position in November 1988. From October 1976 to November 1988, Mr. Hefner served as Chairman of the Board and Chief Executive Officer, and before that he served as Chairman, President and Chief Executive Officer. Mr. Hefner is the father of Christie Hefner, Chairman of the Board and Chief Executive Officer.

MARTHA O. LINDEMAN

Senior Vice President, Corporate Communications

  and Investor Relations

Age 54

      Ms. Lindeman was appointed to her present position in September 1998. From 1992 to 1998, she served as Vice President, Corporate Communications and Investor Relations. From 1986 to 1992, she served as Manager of Communications at the Tribune Company, a leading information and entertainment company.

HOWARD SHAPIRO

Executive Vice President, Law and Administration,

  General Counsel and Secretary

Age 57

      Mr. Shapiro was appointed to his present position in May 1996. From September 1989 to May 1996, he served as Executive Vice President, Law and Administration, and General Counsel. From May 1985 to September 1989, Mr. Shapiro served as Senior Vice President, Law and Administration, and General Counsel. From July 1984 to May 1985, he served as Senior Vice President and General Counsel. From September 1983 to July 1984, he served as Vice President and General Counsel. From May 1981 to September 1983, he served as Corporate Counsel. From June 1978 to May 1981, he served as Division Counsel. From November 1973 to June 1978, he served as Staff Counsel.

ALEX VAICKUS

Executive Vice President and President,

  Global Licensing

Age 45

      Mr. Vaickus was appointed to his present position in November 2002. From August 2000 to November 2002, Mr. Vaickus served as Senior Vice President and President of the Licensing Group. Mr. Vaickus previously served as Playboy’s Senior Vice President of Strategy, Planning and Operations and was responsible for managing the strategic planning process and all corporate level business development activities, including the evaluation of acquisitions and new business opportunities. Prior to joining Playboy in 1998, Mr. Vaickus was Vice President of Business Development with ConAgra Refrigerated Prepared Foods and Vice President of Business Planning and Finance for Sara Lee/ DE, a division of Sara Lee Corporation. He spent 12 years at Sara Lee, where he held various positions, including Executive Director of U.S. Foods and Director of Business Planning.

PLAYBOY STOCK OWNERSHIP

Playboy Stock Ownership by Certain Beneficial Owners

      The following table provides information about each person who we believe, based on a review of filings with the Securities and Exchange Commission, as of February 28, 2005, beneficially owns more than 5% of our outstanding Class A common stock.

Playboy Stock Ownership by Directors and Executive Officers

      The following table shows, as of February 28, 2005, the amount of common stock beneficially owned by each of our directors and by each individual named in the Summary Compensation table on page 17 of this proxy statement, and by all directors and executive officers as a group. In general, “beneficial ownership” includes those shares over which a person has the power to vote, or the power to transfer, and stock options that are currently exercisable or will become exercisable within 60 days of February 28, 2005. Except as

otherwise noted, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

EXECUTIVE COMPENSATION

Report of the Committee on Executive Compensation

      This report by the compensation committee and the Performance Graph on page 23 shall not be deemed to be incorporated by reference by any general statement that incorporates by reference these proxy materials into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and they shall not otherwise be deemed to be “soliciting material” or to be “filed” thereunder.

      Playboy’s executive compensation programs are administered by the compensation committee of the Board of Directors. Messrs. Rosenthal (who is the Chairman), Drapkin and Pillar served as members of the compensation committee during 2004. None of these three directors has ever served as an officer of Playboy.

      Playboy’s executive compensation programs are designed to help Playboy achieve its business objectives by:

      Therefore, the compensation committee’s primary mission is to structure and administer a range of compensation programs designed to enable Playboy to attract and retain executive talent in a marketplace that is both highly competitive and well-known for its individually tailored compensation packages. To help it fulfill this mission, the compensation committee periodically evaluates the competitiveness of Playboy’s executive compensation programs, using information drawn from a variety of sources, such as published survey data, information supplied by consultants and its own experience in recruiting and retaining executives. A list of the criteria the compensation committee considers when it establishes compensation programs and the factors it considers when it determines an executive’s compensation is supplied in this report.

      The compensation committee sets the base salaries and salary ranges for executives based primarily on competitive market data and the executive’s level of responsibility. The committee uses outside executive compensation consultants to periodically review these salaries and salary ranges. The committee reviews salary ranges once a year, and adjusts them as necessary, considering a number of factors including Playboy’s financial performance. The committee also reviews executives’ salaries once a year, and bases any adjustments on each executive’s individual performance, while also considering his or her total compensation package and external market data. While some of the companies in the peer group chosen for comparison of stockholder returns in the Performance Graph on page 23 may be included in the surveys and information the compensation committee considers in setting executives’ salaries, there is no set peer group against which those salaries are measured. Instead, the committee reviews broad-based industry salary data, which typically exclude financial services and not-for-profit companies, and industry-specific data relative to a particular position when they are available. For 2004, the committee continued its practice of restraining base salaries and salary grade ranges. This is consistent with the committee’s current philosophy of focusing less on fixed compensation and more on variable performance-based compensation in the form of short-term and long-term incentives.

      Playboy executives are eligible for annual bonuses under Playboy’s Executive Incentive Compensation Program. For 2004, participants in this program could earn an annual bonus with a value ranging from 25% to 100% of their base salaries. We calculated the total bonus amount each executive earned based on Playboy’s

EBITDA as well as group and/or individual segment profitability objective goals. For each portion of the bonus, there is a range of bonus amounts paid based on the level of achievement with respect to that portion, with a minimum threshold level of performance required before earning each portion of the bonus. Additionally, except for Mr. Hefner and Ms. Hefner, a portion of the bonus is based on the achievement of non-financial goals. For 2004, the compensation committee determined that Mr. Griffiths, Ms. Havard, Ms. Hefner, Mr. Hefner and Mr. Vaickus should receive payouts under the Executive Incentive Compensation Program.

      Playboy provides long-term incentive awards through its 1995 Stock Incentive Plan, which the compensation committee administers for Playboy. Subject to the terms of that plan, the compensation committee determines the “key employees” to whom options and other awards may be granted, the number of shares of our Class B common stock covered by each option or other stock award, the time or times at which the options may be exercised, the vesting of options and other awards and other administrative functions. Since the inception of the 1995 Stock Incentive Plan, the compensation committee has granted incentive stock options, non-qualified stock options, restricted stock awards and performance awards. These grants are designed to further the growth, development and financial success of Playboy by providing key employees with strong additional incentives to maximize long-term stockholder value. The committee believes that this objective can be best achieved through assisting key employees to become owners of Playboy stock, which aligns their interests with Playboy’s interests. As stockholders, key employees will benefit directly from Playboy’s growth, development and financial success. Stock option grants and restricted stock awards also enable Playboy to attract and retain the services of those executives whom we consider essential to Playboy’s long-range success by providing these executives with a competitive compensation package and an opportunity to become owners of Playboy stock.

      Ms. Hefner’s annual base salary for 2004 was $675,000 (she was paid $700,962 in 2004 as a result of 2004 having 27 pay periods as compared to fiscal years 2003 and 2002 in which there were 26 pay periods). In determining Ms. Hefner’s salary, the compensation committee considered a number of factors, including Playboy’s overall financial and operational performance over the last few fiscal years. The compensation committee also reviewed competitive market data and, consistent with its general approach to salaries, attempted to place Ms. Hefner’s salary slightly above the median of the data reported in relevant compensation surveys and other information it considered.

      The compensation committee calculated Ms. Hefner’s bonus payout of $118,706 according to the terms of Playboy’s Executive Incentive Compensation Program. Ms. Hefner’s maximum bonus opportunity was 100% of her base salary. Her bonus was based on achievement of the EBITDA and the group profitability targets described above for 2004, and since Playboy achieved only a portion of these targets, only a portion of the maximum bonus was paid to her.

      In 1993, changes were made to the federal corporate income tax law that limit Playboy’s ability to deduct compensation in excess of $1 million paid annually to certain of Playboy’s most highly compensated executive officers. There are exemptions from this limit, including compensation that is based on the attainment of performance goals established by the compensation committee and approved by the stockholders. The committee’s policy is to seek to qualify all executive compensation for deductibility to the extent that this policy is consistent with Playboy’s overall objectives in attracting, motivating and retaining its executives. However, Playboy may make non-conforming grants from time to time.

Submitted by the compensation committee:

Sol Rosenthal, Chairman

Donald G. Drapkin

Russell I. Pillar

Executive Compensation

      The following tables set forth information regarding the compensation earned by Ms. Hefner, who served as Playboy’s Chairman of the Board and Chief Executive Officer throughout 2004, the four other most highly compensated executive officers of Playboy, other than our Chief Executive Officer, for 2004 and James L. English, who was an executive officer during a portion of the fiscal year ended December 31, 2004 and would have been one of the four other most highly compensated executive officers for 2004 but for the fact that he was not an executive officer as of December 31, 2004. We refer to these individuals as our Named Executives. The Summary Compensation table details the salary and bonus earned by and the stock option grants made to and restricted stock payouts to each Named Executive during each of the last three fiscal years. The Option Grants in Last Fiscal Year table explains in more detail the terms and hypothetical values of stock options granted during 2004 to the Named Executives. Finally, the Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values table reflects certain information regarding vested and unvested stock options held by the Named Executives as of December 31, 2004, and the value of those options as of that date.

Summary Compensation

Option Grants in Last Fiscal Year

Aggregate Option Exercises in Last Fiscal Year

and Fiscal Year-End Option Values

Equity Compensation Plan Information

      The following table sets forth information regarding outstanding options and shares reserved for future issuance as of December 31, 2004.

Change In Control Agreements

      To help us retain our most senior executive officers, the Board of Directors has approved Playboy entering into agreements with certain officers that provide for the payment of specified benefits if their employment terminates after a “change in control” of Playboy. Mr. Griffiths, Ms. Havard, Ms. Hefner, Mr. Rosenzweig and Mr. Vaickus currently are parties to such agreements. Each agreement provides that:

      These change-in-control agreements provide that a “change in control” takes place whenever any of the following events occur:

      Under the agreements, “cause” is defined as conviction of a crime involving dishonesty, fraud or breach of trust, or willful engagement in conduct materially injurious to Playboy.

Employment Agreements

      James F. Griffiths. Effective January 8, 2004, Playboy entered into an employment agreement with Mr. Griffiths and hired Mr. Griffiths as Senior Executive Vice President, reporting to our Chief Executive Officer and serving as Playboy’s most senior executive in regard to his responsibilities. Mr. Griffiths’ employment agreement will terminate on January 19, 2007, unless sooner terminated by us or Mr. Griffiths. The employment contract entitles Mr. Griffiths to an annual base salary of $650,000. For 2005, Mr. Griffiths’ annual salary has been set at $675,000. Under the employment agreement, Mr. Griffiths is eligible to participate in Board-approved incentive plans at a maximum level of 100% of his base salary. In 2004, Mr. Griffiths was guaranteed an annual bonus of 25% of his maximum potential under this plan. If Mr. Griffiths is employed on December 31, 2006, he will receive whatever incentive compensation payout he is entitled to for fiscal 2006 at the time such payout is made to other executives of Playboy, even if the payout is made after the term of the agreement. The employment agreement provides that, in each year from 2004 to 2006, Mr. Griffiths will be granted non-qualified options to purchase 45,000 shares of our Class B common stock and 15,000 restricted stock units, subject to the Playboy’s stock option plan and as determined by Playboy’s compensation committee, which will be consistent with the terms and conditions of grants and awards made to other executive officers of Playboy. Accordingly, Mr. Griffiths received such grants for 2004 and 2005. Mr. Griffiths also received a one-time grant of 25,000 restricted shares of our Class B common stock, which were forfeited when a specified operating income objective for 2004 was not achieved.

      Under the employment agreement, in the event that we terminate the employment agreement for “cause” (as such term is defined in the employment agreement), Mr. Griffiths will not be entitled to any compensation or other amount from us from the effective date of the termination. In the event that the employment agreement is terminated by us without “cause” or by Mr. Griffiths in the event that he is asked to report to anyone other than our Chief Executive Officer, Playboy hires a President or Chief Operating Officer, his duties are materially diminished or his principal place of business is changed to a location more than 50 miles from Glendale, California, Mr. Griffiths will be entitled to receive a severance payment in the sum of

12 months of his then base salary. If Mr. Griffiths’ employment agreement is terminated on account of his disability or death, he (or his estate or personal representative) will be entitled to receive a payment in the sum of six months of his then base salary and a pro rata payout under the incentive compensation plan for him in the year of such termination.

      Linda G. Havard. In May 2002, we agreed to severance arrangements with Ms. Havard. In the event that Ms. Havard is terminated at any time not “for cause,” Ms. Havard will be entitled to receive 12 months severance pay based on her salary at that time. In the event of such termination, Ms. Havard will have no duty to mitigate damages and will be free to accept other employment at her discretion.

      James L. English. Effective June 4, 2004, Playboy entered into an on-call employee agreement with Mr. English in connection with the termination of his prior employment agreement. In connection therewith, Playboy paid Mr. English $650,000 relating to the termination of his prior employment agreement. The initial term of the on-call employee agreement is one year, unless sooner terminated by Playboy or Mr. English. Under the on-call employee agreement, Mr. English will provide those services reasonably requested by Playboy in connection with the production and marketing of programming for Playboy’s domestic and international television networks worldwide and worldwide DVD/home video products and the associated production, programming and distribution activities related thereto. Under the on-call employee agreement, Playboy pays English for the term of the agreement at the rate of $650,000 per annum, payable on a biweekly basis in accordance with Playboy’s standard payroll practices. The on-call employee agreement contains non-competition and non-solicitation provisions that are effective during the term of the agreement. The on-call employee agreement also contains indemnity and confidentiality provisions. The on-call employee agreement provides that any stock options issued to Mr. English by Playboy will cease vesting as of the effective date of the agreement and any vested but unexercised options held by Mr. English will expire ten days after the end of the term of the agreement. Mr. English will not receive or be entitled to receive any compensation under the Executive Incentive Compensation Plan for 2004 or subsequent years. As of the effective date of the on-call employee agreement, any restricted stock units granted to Mr. English were terminated. Playboy has the right to terminate the on-call employee agreement at any time only “for cause” immediately upon written notice to Mr. English, in which event Mr. English will not be entitled to any compensation that could have been earned after the effective date of termination. Subject to the non-competition provisions of the on-call employee agreement, Mr. English has the right to terminate the agreement at any time on not less than 60 days’ prior written notice only to take a full-time position.

1995 Stock Incentive Plan

      The 1995 Stock Incentive Plan provides that the compensation committee may grant or issue stock options, restricted stock, deferred stock, performance awards and stock payments, or any combination of them. Awards under the 1995 Stock Incentive Plan may be granted to individuals who are then officers or other employees of Playboy or any of its present or future subsidiaries and who are determined by the compensation committee to be key employees. Notwithstanding the foregoing, Mr. Hefner is not eligible to receive options under the 1995 Stock Incentive Plan. A total of approximately 5.5 million shares of Class B common stock are authorized for issuance under the 1995 Stock Incentive Plan, of which approximately 4.2 million shares are subject to outstanding or exercised options or restricted stock awards. If any portion of an option, restricted stock grant or other award terminates or lapses unexercised or unvested, or is cancelled, the shares which were subject to the unexercised portion of option, restricted stock or other award, will again be available for issuance under the 1995 Stock Incentive Plan.

      The 1995 Stock Incentive Plan contains a change of control provision. In the event of a change of control of Playboy, options that are unvested on the effective date of the change of control will become immediately exercisable. For purposes of the 1995 Stock Incentive Plan, a “change of control” means the occurrence of any of the following events: (i) except in a transaction described in clause (iii) below, Mr. Hefner, Ms. Hefner, the Hugh M. Hefner 1991 Trust (for so long as Mr. Hefner and Ms. Hefner are joint trustees or one of them is sole trustee), and the Hugh M. Hefner Foundation (for so long as Mr. Hefner and Ms. Hefner are joint trustees or one of them is sole trustee) cease collectively to own a majority of the total number of votes that

may be cast for the election of directors of Playboy; or (ii) a sale of Playboy magazine by Playboy; or (iii) the liquidation or dissolution of Playboy, or any merger, consolidation or other reorganization of Playboy unless (x) such transaction is initiated by Playboy, and (y) is one in which the stockholders of Playboy immediately prior to the reorganization become the majority stockholders of a successor or ultimate parent corporation of Playboy resulting from the transaction and (z) in connection with the event, provision is made for an assumption of outstanding options and rights or a substitution for them of a new option or right in the successor or ultimate parent of substantially equivalent value.

PERFORMANCE GRAPH

      The following graph compares the yearly percentage change in total stockholder return on our Class B common stock with the cumulative total return of the Russell 2000 Stock Index and with our peer group, which is comprised of Time Warner Inc., Meredith Corporation, Metro-Goldwyn-Mayer Inc., Playboy Enterprises, Inc., Primedia, Inc., The Walt Disney Company, World Wrestling Entertainment, Inc. and Viacom Inc.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

AMONG PLAYBOY ENTERPRISES, INC., THE RUSSELL 2000 INDEX AND A PEER GROUP

TRANSACTIONS WITH MANAGEMENT

      Playboy owns a 29-room mansion, commonly known as the “Playboy Mansion,” located on five and one-half acres in Los Angeles, California. The Playboy Mansion is used for various corporate activities, including serving as a valuable location for video production, magazine photography, online events, and sales events. It also enhances Playboy’s image as host for many charitable and civic functions. The Playboy Mansion generates substantial publicity and recognition which increases public awareness of Playboy and Playboy’s products and services. Facilities at the Playboy Mansion include a tennis court, swimming pool, gymnasium and other recreational facilities as well as extensive film, video, sound and security systems. The Playboy Mansion also includes accommodations for guests and serves as an office and residence for Hugh M. Hefner, our founder and Editor-in-Chief. The Playboy Mansion has a full-time staff which performs maintenance, serves in various capacities at the functions held at the Playboy Mansion and provides guests of Playboy and Mr. Hefner with meals, beverages and other services.

      Under a 1979 lease Playboy entered into with Mr. Hefner, the annual rent Mr. Hefner pays to us for his use of the Playboy Mansion is determined by independent experts who appraise the value of Mr. Hefner’s basic accommodations and access to the Playboy Mansion’s facilities, utilities and attendant services based on comparable hotel accommodations. In addition, Mr. Hefner is required to pay the sum of the per-unit value of non-business meals, beverages and other benefits he and his personal guests receive. These standard food and beverage per-unit values are determined by independent expert appraisals based on fair market values. Valuations for both basic accommodations and standard food and beverage units are reappraised every three years, and between appraisals are annually adjusted based on appropriate consumer price indexes. Mr. Hefner is also responsible for the cost of all improvements in any Hefner residence accommodations, including capital expenditures, that are in excess of normal maintenance for those areas.

      Mr. Hefner’s usage of Playboy Mansion services and benefits is recorded through a system initially developed by the auditing and consulting firm of PricewaterhouseCoopers LLP and now administered by Playboy, with appropriate modifications approved by the audit and compensation committees of the Board of Directors. The lease dated June 1, 1979, as amended, between Mr. Hefner and Playboy renews automatically at December 31 each year and will continue to renew unless either Playboy or Mr. Hefner terminate it. The rent charged to Mr. Hefner during 2004 included the appraised rent and the appraised per-unit value of other benefits, as described above. Within 120 days after the end of Playboy’s fiscal year, the actual charge for all benefits for that year is finally determined. Mr. Hefner pays or receives credit for any difference between the amount finally determined and the amount he paid over the course of the year. We estimated the sum of the rent and other benefits payable for 2004 to be $1.3 million, and Mr. Hefner paid that amount during 2004.

      Playboy purchased the Playboy Mansion in 1971 for $1.1 million and in the intervening years has made substantial capital improvements at a cost of $13.8 million through 2004 (including $2.5 million to bring the Hefner residence accommodations to a standard similar to the Playboy Mansion’s common areas). The Playboy Mansion is included in Playboy’s Consolidated Balance Sheet at December 31, 2004 at a net book value of $1.6 million, including all improvements and after accumulated depreciation. Playboy incurs all operating expenses of the Playboy Mansion, including depreciation and taxes, which were $3.0 million in 2004, net of rent received from Mr. Hefner.

      From time to time, Playboy enters into barter transactions in which Playboy secures air transportation for Mr. Hefner in exchange for advertising pages in Playboy magazine. Mr. Hefner reimburses Playboy for the direct costs of providing these ad pages. Playboy receives significant promotional benefit from these transactions. There were no such transactions in 2004.

      In May 2003, we exchanged shares of Series A preferred stock of our subsidiary, PEI Holdings, Inc., held by Mr. Hefner with an aggregate stated value of $10.0 million, plus accumulated dividends, for 1,122,209 shares of our Class B common stock and exchanged shares of Series B preferred stock of PEI Holdings, Inc. held by Mr. Hefner with an aggregate stated value of $16.7 million for 1,674 shares of preferred stock of Playboy with an aggregate stated value of $16.7 million, in each case pursuant to the terms of an exchange agreement between Playboy, PEI Holdings, Inc., Playboy.com, Inc. and Mr. Hefner and the

certificates of designations governing the Series A and Series B preferred stock of PEI Holdings, Inc. The Playboy preferred stock accrued dividends at a rate of 8.00% per annum, which were paid semi-annually. The Playboy preferred stock was convertible at the option of Mr. Hefner, as the holder, into shares of our Class B common stock at a conversion price of $11.2625, which was equal to 125% of the weighted average closing price of our Class B stock over the 90-day period prior to the exchange of the PEI Holdings Series B preferred stock for the Playboy preferred stock.

      On April 20, 2004, Playboy, Mr. Hefner and Ms. Hefner entered into an underwriting agreement with the underwriters of our public offering that closed on April 26, 2004. Included in the offering were 4,385,392 shares sold by Playboy, 1,485,948 shares sold by Mr. Hefner and 150,000 shares sold by Ms. Hefner. The shares sold by Mr. Hefner consisted of all of the shares of Class B common stock he received upon conversion, at the time of the offering, of all of the outstanding shares of Playboy preferred stock. Mr. Hefner and Ms. Hefner paid for expenses related to this transaction proportionate to the number of shares each sold to the total number of shares sold in the offering.

CERTAIN BUSINESS RELATIONSHIPS

      The law firm of Arnold & Porter provided legal services to Playboy for which we paid $47,418 during 2004. Mr. Rosenthal is Of Counsel to the Los Angeles office of Arnold & Porter.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      The members of the compensation committee during 2004 were Messrs. Rosenthal (Chairman), Drapkin and Pillar, none of whom has (i) served at any time as an officer or employee of Playboy or our subsidiaries, (ii) any relationship with Playboy or our subsidiaries other than service as a director or (iii) received any compensation from Playboy or our subsidiaries other than in his capacity as a member of the Board of Directors or a committee thereof.

      None of our executive officers served as a member of the compensation committee of another entity, or as a director of another entity, one of whose executive officers served on the compensation committee of Playboy.

REPORT OF THE AUDIT COMMITTEE

      The audit committee of the Board of Directors is currently made up of Messrs. Chemerow (who is the Chairman), Bookshester and Kern. As set forth in more detail in the audit committee’s charter, the primary responsibilities of Playboy’s audit committee fall into three broad categories:

      The audit committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to each of the matters assigned to it under the audit committee’s charter. To carry out its responsibilities, the audit committee met seven times during 2004.

      In overseeing the preparation of Playboy’s financial statements, the audit committee met with both management and Playboy’s independent registered public accounting firm to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the audit committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the audit committee discussed the statements with both management and the independent

registered public accounting firm. The audit committee’s review included discussion with the independent registered public accounting firm of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication with Audit Committees), Securities and Exchange Commission rules and other professional standards.

      With respect to Playboy’s independent registered public accounting firm, the audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as amended, and has discussed with the independent registered public accounting firm the firm’s independence.

      The audit committee has also considered whether the provision of services by Ernst & Young LLP that are not related to the audit of the financial statements referred to above is compatible with maintaining Ernst & Young LLP’s independence.

      Based on the reviews and discussions referred to above, the audit committee recommended to the Board of Directors that the financial statements referred to above be included in Playboy’s Annual Report on Form 10-K for the year ended December 31, 2004, for filing with the Securities and Exchange Commission. The audit committee also selected Ernst & Young LLP to serve as Playboy’s independent registered public accounting firm for 2005. The Board of Directors is recommending that stockholders ratify that appointment at the annual meeting.

      Management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. Playboy’s independent registered public accounting firm is responsible for auditing those financial statements.

      Members of the committee rely, without independent verification, on the information provided to them and on the representations made by management and the independent registered public accounting firm.

Submitted by the audit committee:

     David I. Chemerow (Chairman)

     Dennis S. Bookshester

     Jerome H. Kern

      The foregoing Report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall the Report be deemed to be incorporated by reference in any previous or future documents filed by Playboy with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically request the Report to be treated as soliciting material or specifically incorporate the Report by reference in any such document.

PROPOSAL NO. 2

APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR

RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2005

      The audit committee has appointed Ernst & Young LLP to serve as our independent registered public accounting firm for 2005. The Board of Directors is recommending that stockholders ratify that appointment at the annual meeting. Ernst & Young LLP served as our independent registered public accounting firm for the fiscal years ended December 31, 2004 and 2003. Representatives of Ernst & Young LLP will be present at the Annual Meeting and will be available to respond to questions from stockholders and to make a statement, should they wish to do so. Although we are not required to seek stockholder approval of the appointment of our independent registered public accounting firm, we believe it to be sound corporate governance to do so. If the appointment of Ernst & Young LLP is not ratified by the stockholders, our audit committee will investigate the reasons for the stockholder rejection and will consider appointing a different independent registered public accounting firm.

      The following table sets forth in more detail the fees incurred for the professional services of Ernst & Young LLP in 2004 and 2003.

      The audit committee is responsible for the appointment, retention, compensation and oversight of our independent registered public accounting firm. The audit committee has adopted policies and procedures for pre-approving services (audit and non-audit) performed by the independent registered public accounting firm. In accordance with such policies and procedures, the audit committee is required to pre-approve the audit and non-audit services performed by the independent registered public accounting firm in order to assure that the provision of such services do not impair the firm’s independence. These services may include audit services, audit-related services, tax services and other services. Unless a type of service to be provided by our independent registered public accounting firm has received general pre-approval, it will require specific pre-

approval by the audit committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the audit committee. The audit committee has delegated to the Chairman of the audit committee specific pre-approval authority provided that the estimated fee for any such engagement is de minimis. The Chairman of the audit committee must report, for information purposes only, any pre-approval decisions to the audit committee at its next scheduled meeting. Requests or applications to provide services that require separate approval by the audit committee shall be submitted to the audit committee by both the independent registered public accounting firm and our Chief Financial Officer and must include a joint statement as to whether, in their view, the request or application is consistent with the Securities and Exchange Commission’s rules on independence.

      With respect to each proposed pre-approved service, our independent registered public accounting firm must provide detailed back-up documentation regarding the specific services to be provided. Periodically, but not less than quarterly, our Chief Financial Officer will provide the audit committee with a report of audit and non-audit services provided and expected to be provided by our independent registered public accounting firm. All of the services of Ernst & Young LLP in 2004 described above were pre-approved by our audit committee in accordance with our Audit and Non-Audit Services Policy.

OTHER INFORMATION

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission, the New York Stock Exchange and the Pacific Exchange. Officers, directors and greater than 10% beneficial owners are required by Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) forms that they file. Based solely on our review of the copies of the forms we have received and on written representations from certain reporting persons that no other reports were required during 2004, all of our officers, directors and greater than 10% beneficial owners complied with their Section 16(a) filing requirements, except that a From 4 for each of Ms. Hefner and Mr. Hefner reporting the sale of shares was not timely filed.

Stockholder Proposals for the 2006 Annual Meeting

      If you wish to submit a proposal for us to consider for inclusion in our 2006 proxy materials and for presentation at our 2006 Annual Meeting of Stockholders, you must send the proposal so that we receive it no later than December 9, 2005, unless the 2006 Annual Meeting will be held on a date that is more than 30 days before or after May 11, 2006, the anniversary of the date of the 2005 Annual Meeting, in which case we must receive your proposal within a reasonable time before we mail the proxy materials for the 2006 Annual Meeting. Stockholder proposals to be presented at our 2006 Annual Meeting of Stockholders that are not intended to be considered for inclusion in our 2006 proxy materials must be received by us no later than February 22, 2006. Stockholder proposals received after that date will be considered untimely. Proposals should be addressed to the Secretary, Playboy Enterprises, Inc., 680 North Lake Shore Drive, Chicago, Illinois 60611. We recommend that you send your stockholder proposals via certified mail, return receipt requested, so that you will have confirmation of the date we received your proposal.

Playboy’s Annual Report and Financial Information

      A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 has been filed with the Securities and Exchange Commission, including financial statements and the certifications of our Chief Executive Officer and Chief Financial Officer required to be filed as exhibits to the Form 10-K under Section 302 of the Sarbanes-Oxley Act of 2002. You may obtain our Annual Report on Form 10-K over the Internet at the Securities and Exchange Commission’s website, www.sec.gov. In addition, we submitted to the New York Stock Exchange and the Pacific Exchange the required annual certifications of our Chief Executive

Officer relating to compliance by us with the exchanges’ corporate governance listing standards. Copies of these certifications are available to stockholders upon written request addressed to Investor Relations, Playboy Enterprises, Inc., 680 North Lake Shore Drive, Chicago, Illinois 60611.

Expenses of Solicitation

      We are soliciting proxies primarily by mailings such as this one, but we may also solicit proxies personally and by telephone calls placed by our officers and employees (without additional compensation). We will bear the expenses of all solicitations, which may also include the reimbursement of brokerage firms, nominees, custodians and fiduciaries for their out-of-pocket expenses incurred in forwarding proxy materials to beneficial owners of our common stock and seeking instruction from those beneficial owners with respect to the proxy materials.

Other Business

      As of the date of these proxy materials, management knows of no other business that will be presented for consideration at the Annual Meeting.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR

     The undersigned hereby constitutes and appoints CHRISTIE HEFNER and HOWARD SHAPIRO, and each of them, as Proxies, each with full power of substitution, and hereby authorizes each of them to represent and to vote, as designated on the reverse side, all of the shares of Class A Common Stock of PLAYBOY ENTERPRISES, INC. registered in the name of the undersigned, as of March 14, 2005, at the 2005 Annual Meeting of Stockholders of Playboy Enterprises, Inc. to be held May 11, 2005 and at any and all adjournments or postponements of that meeting. The undersigned hereby further authorizes such Proxies to vote in their discretion upon such other matters as may properly come before such Annual Meeting and at any and all adjournments or postponements thereof. Receipt of the Notice of the 2005 Annual Meeting of Stockholders and Proxy Statement is hereby acknowledged.

     The right to revoke this proxy at any time before it is voted is reserved. When properly executed, this proxy will be voted or withheld in accordance with the specifications made in this proxy. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF MS. HEFNER AND MESSRS. BOOKSHESTER, CHEMEROW, DRAPKIN, KERN, PILLAR, ROSENTHAL AND ROSENZWEIG AS DIRECTORS; “FOR” RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2005; AND IN THE DISCRETION OF THE PROXIES UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.

PLAYBOY ENTERPRISES, INC.

The Board of Directors recommends a vote FOR proposals (1) and (2):

YOUR VOTE IS IMPORTANT!

PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.