PRIVATE MEDIA GROUP REPORTS SECOND QUARTER RESULTS – COMPANY BUSINESS MODEL SUCCESSFULLY FOCUSED ON NEW MEDIA DISTRIBUTION PLATFORMS WITH RELATED SALES REPRESENTING 67% OF TOTAL SALES

9 August, 2007 - Barcelona, Spain

PR Newswire/ -- Private Media Group Inc.(NASDAQ: PRVT) a worldwide leader in premium-quality adult entertainment products today announced its results for the three months ending June 30, 2007.

 

DVD & Magazine sales decreased by 38% to 2.0 million euro due to an industry wide decrease in DVD sales, see discussion below, and as a result this and continued strategic transitional factors, the Company reported a decrease in net sales of 21% to 6.0 million euro compared to the same period last year.

 

New Media sales: Wireless sales increased 73% to 0.7 million euro. The increase in wireless sales was the result of better performance with our carriers and our content going live with significantly more international carriers. Internet sales was 1.0 million euro, which represented no change. During the period, our Internet sites have not been working at full capacity since they have been going through a major restructuring in order to handle the pressure from increased traffic.  Broadcasting sales decreased 0.7 million euro to 2.3 million euro primarily as a result of the absence of; a one off 1.0 million euro content license sale in Germany, in 2006, and 0.2 million euro from US pay-per-view distribution with Echo Star which was cancelled in favour of the recently announced distribution deal with New Frontier Media. The new deal with New Frontier Media is projected to give a significantly better contribution to profit both in a short- and long-term perspective, see discussion below. The decrease in broadcasting was offset by an increase of 0.5 million euro in Pay-TV and Video-On-Demand sales in Europe. Total New Media sales reached 4.0 million euro, representing 67% of total net sales.

 

Going forward, the Company expects wireless and broadcasting sales to increase significantly given the rapid growth of these platforms and our leadership role in the adult entertainment category, (see comment on the business going forward below).

 

The Company reported nominal net income for the three months ended June 30, 2007 compared to 0.5 million euro for the three months ended June 30, 2006.

 

Commenting on some important factors relating to the business going forward, Private Media Group, Inc., CFO, Johan Gillborg stated: “We are continuing to shift our business model towards new media distribution platforms, which are projected to consistently grow exceptionally well. In the interim, this will have a somewhat negative impact on our overall short term sales and operating profit. However, in view of the extraordinary high margins, and in particular the rapid expansion taking place in the European IPTV market(i), this will impact our business very positively during the remainder of the year and going forward.

 

The Company is aggressively targeting all major IPTV and cable based True Video on Demand “TVOD”(ii) platforms and we are currently in the process of contracting with several major international operators. Most of these platforms are relatively new, but as they are operated by major multinational corporations, showing high adoption rates and rapid expansion, it is clear that these are compelling and significant new distribution opportunities for content providers and we are securing our place as a dominant provider in this new arena. In France and Germany, we have already secured 75-100% of the current and future market.

 

As of December 2006, our content was available with nine TVOD platforms and during the first six months of 2007 we added nine more platforms, including three in Germany, three in France and one each in the Netherlands, Belgium and Spain. The platform operators include leading telecoms in the Netherlands, Germany, Belgium and France, which all offer Triple-Play featuring IPTV based TVOD. As of March 31, 2007, one of the French platforms ranked as the world’s largest platform of this kind.

 

During the second half of 2007 we expect to add at least 16 new TVOD platforms, including territories such as: Italy, Greece, Poland, Portugal, the Netherlands, Belgium, Denmark and Switzerland. By the end of 2007, the Company expects to reach a minimum of 32 TVOD platforms represented by: Europe (24), North America (7), the Far East and Australia (1). We believe that our revenue from TVOD platforms will grow in line with the addition of platforms and their subscriber growth and consequently we expect a significant contribution to operating profit going forward.

 

In order to increase growth and profitability in broadcasting, we have restructured our trademark and content licensing business with respect to the operation and distribution of Private branded TV channels carrying our content in Europe and Latin America. The restructuring included finding new partners in these markets and subsequently we entered into agreements with Playboy TV International, Playboy TV Latin America and The Portland Television Group. During the first six months of 2007, all three partners have expanded their reach for the Private branded TV channels significantly and we expect revenues and operating profit to grow significantly going forward. In addition, we recently partnered with New Frontier Media for the exclusive distribution of Private content to the U.S. broadcast market, including video-on-demand, pay-per-view, IPTV and television. New Frontier Media is a leading provider of adult-themed Video-on-Demand content to cable and satellite platforms. Its services reach over 139 million network homes.

 

With respect to Wireless (content delivery via mobile phones), our content is currently available to over 765 million handsets in 34 countries via 80 operators, of which 20 operators went live during 2007. The Company is projecting to grow steadily with at least 10 additional operators going live each remaining quarter of 2007. Asia and the Americas are currently underexploited and therefore represent a significant growth opportunity to the Company. More distribution channels, advanced wireless platform technology development, and the implementation of age verification systems offer further significant growth potential with both current and future operators in 2007 and beyond(iii).

 

In addition, we recently entered into an exclusive global partnership with Mobile Streams to distribute our premium adult content through their proprietary “Vuesia” technology platform for off-portal mobile services. Mobile Streams is a premier global mobile media and content provider to handsets and other wireless devices, and through this partnership we are aggressively positioning the company to maximize our impact and revenues generated from off-portal mobile content delivery.

 

As we are moving further into a world of global digital content delivery, DVD pricing and volume is being affected considerably and as a result the industry in general is experiencing a severe downturn in DVD sales. In view of the aforementioned, during the first quarter of 2007 we started a reorganization of our distribution of DVDs and Magazines. Through this reorganization, we expect to maximize existing sales and over time reduce the revenue impact of this on our overall business.” Mr. Gillborg concluded.

 

Financial Highlights

 

(In thousands of euro, except per share amounts)	Three months ended
	June 30,
	2007		2006
Net Sales	6,031		7,665
Net Income	23		520
Weighted average common and common equivalent shares outstanding:
Basic	53,148,166		52,751,892
Diluted	53,216,639		53,560,034
Earnings per share:
Basic	0.00		0.01
Diluted	0.00		0.01

 

NOTES TO THE EDITOR:

 

Footnotes

i According to Global IPTV Forecasts made by MRG (Multimedia Research Group, Inc.), the number of global IPTV subscribers is estimated to grow from 8.0 million in 2006 to 63.6 million in 2011. Europe continues to be the biggest market for IPTV, with France significantly leading the growth projections through its principal telcos. The number of IPTV subscribers in Europe is forecasted to grow from approximately 4 million in 2006 to 27.5 million in 2011, a compound annual growth rate of 47 percent.

ii True Video On Demand - (TVOD) - TVOD is the ideal VOD service where individual users get immediate responses when interacting with the VOD system. With TVOD, the user can not only get instant access to the program online and watch it on TV, but also be able to do any VCR or DVD-like commands on the VOD system with the same quick response time as it is when working a VCR or DVD.

iii Juniper Research estimates in its white paper Adult to Mobile: Personal Services – Third Edition (September 2006) that the global mobile adult content market will more than double over the next five years, to nearly US$3.3 billion by 2011.

 

About Private Media Group

With its 40 year track record, NASDAQ listed Private Media Group is a brand-driven world leader in proprietary content delivery in its genre and distributes premium quality content globally via a wide range of platforms including; more than 765 million mobile telephone handsets, broadband Internet, television broadcasting, DVDs and Magazines. Private Media Group owns the worldwide rights to its extensive archive of top-quality content, and also licenses its Private and “Silver Girls” trademarks internationally for a range of luxury consumer products.

 

Disclaimer
This release contains, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company's current judgments of those issues. However, because those statements are forward-looking and apply to future events, they are subject to such risks and uncertainties, which could lead to results materially different than anticipated by the Company.

 

For further information please contact:

Johan Gillborg

Chief Financial Officer

Private Media Group
Tel +34 93 590 70 70
johan.gillborg@private.com

 

SOURCE: Private Media Group