The multi-million dollar glamour empire, which publishes the world's most widely read adult entertainment magazine, is to stop production of the DVDs in order to save around $12million (£7million) a year.
Playboy Enterprises Inc have said they will now focus on distributing their content online.
The move will cost the company 80 jobs and $2m (around £1m) in restructuring charges.
Playboy said that it expects to see some benefits from the cuts in the fourth quarter of 2008, and the full effects next year.
Last month, tycoon Hugh Hefner was advised to cut back on staff as his empire struggled to cope during the deepening economic gloom.
The 82-year-old was told to lay off some of his staff at his Los Angeles and New York offices as soon as possible or go bankrupt.
The company has recently seen shares fall from £6.20 to £1.55.
And his financial woes have not been the only thing troubling Hefner.
Only last week his "No 1 girlfriend" Holly Madison walked out on him.
The tycoon said his failed efforts to have a baby with Madison, 28, contributed to the split.
Despite the 54-year age gap, Hefner said he had "planned to spend the rest of my life with Holly", adding that he was "down in the dumps" about the break-up.
However, he does not have to contemplate singledom just yet. He still has two other live-in girlfriends, Kendra Wilkinson, 23, and Bridget Marquadt, 35, installed at the Playboy Mansion in Beverly Hills. Hefner has scaled down his coterie - a few years ago the mansion was home to no less than seven Playmates.
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