PRIVATE REPORTS NET SALES 7.5 MILLION EURO AND NET INCOME 0.5 MILLION EURO FOR Q3/07 – NEW MEDIA SALES UP 8% - 74% COVERAGE ACHIEVED IN THE WORLD’S BIGGEST AND FASTEST GROWING IPTV MARKET
12 November, 2007 - Barcelona
PR Newswire/ -- New Media sales: Wireless sales increased 19% 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 were 1.4 million euro, which represented an increase of 12% as a result of our ability to attract more traffic. Broadcasting sales increased 3% to 2.5 million euro despite the absence of 0.4 million euro from; a one off 0.2 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 favor of our more profitable distribution deal with New Frontier Media. Total New Media sales reached 4.5 million euro, representing 60% of total net sales, an increase of 8% in sales compared to the same period last year. DVD & Magazine sales decreased by 18% to 3.0 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 4% to 7.5 million euro compared to the same period last year. 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). During the three month period, we realized a gross profit of 3.5 million euro, or 46% of net sales compared to 4.6 million euro, or 60% of net sales for same period last year. The decrease in gross profit was primarily the result of a 1.5 million euro decrease in gross profit from DVD & Magazine sales offset by a 0.4 million euro increase in gross profit from Internet, Broadcasting and Wireless sales. With respect to the decrease in gross profit percentage in relation to net sales, it was the result of higher DVD & Magazine sales volume at lower margins. The Company expects margins on DVD & Magazine sales to return to normal levels already in the fourth quarter of 2007. The Company reported 0.5 million euro in net income for the three months ended September 30, 2007 compared to 1.0 million euro for the three months ended September 30, 2006. Commenting on some important factors relating to the business going forward, While European broadband users are signing up for IPTV(i) services in the hundreds of thousands each month, making Europe the biggest and fastest growing IPTV region in the world (ii), we have successfully implemented part of our new media strategy and contracted for supplying content for TVOD services (iii) with 23 major platform operators in 11 territories in the region. With respect to these new IPTV platforms, it is important to note that our content has only been launched recently on relatively few of them and subsequently we have not seen any impact on our bottom line from this high-margin business yet. However, during Q4/07 and Q1/08 we are building up shelf-space on all platforms and by the end of the first quarter 2008 we will have full exposure of our content on these fast growing IPTV platforms. By the end of 2008 and 2009, the Company expects to have its content available to 7.3 million and 12.0 million European IPTV subscribers, respectively. In order to increase growth and profitability in our other types of 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 Latin America and Playboy TV International. During the first nine months of 2007, both partners have expanded their reach for the Private branded TV channels. In particular we have seen significant growth in sales in With respect to mobile content, we believe this market is still in its infancy. As of September 2007, Private content was available to over 783 million handsets in 34 countries via 81 operators, of which 21 operators went live during 2007. The markets of Asia and the Furthermore, we recently entered into an exclusive global partnership with Mobile Streams to distribute our premium adult content through their platform for off-portal mobile services. Mobile Streams is a premier global mobile music and media provider and through this partnership we are entering a new dimension of mobile content delivery. The Company believes the user behavior for mobile content will migrate from on-portal to off-portal. The off-portal business will be the principal revenue generator going forward. 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 September 30, 2007 2006 Net Sales 7,453 7,772 Net Income 457 978 Weighted average common and common equivalent shares outstanding: Basic 53,148,166 53,037,036 Diluted 53,164,670 53,549,826 Earnings per share: Basic 0.01 0.02 Diluted 0.01 0.02
NOTES TO THE EDITOR:
Footnotes
i IPTV - Internet Protocol Television - A system where a digital television service is delivered using packets over a network infrastructure. For residential users, IPTV is often provided in conjunction with Video on Demand and may be bundled with Internet services such as Internet access and VoIP. Despite its name, IPTV typically does not come to consumers over the Internet, but over carrier owned fiber optic, or coaxial cables to a TV-Set. IPTV is provided by Internet service providers, telephone operators and cable TV companies.
ii According to Global IPTV Forecasts made by MRG (Multimedia Research Group, Inc.), the number of global IPTV subscribers is estimated to grow from 13.5 million in 2007 to 72.6 million in 2011. Europe continues to be the biggest market for IPTV, with
iii 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.
iv 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.
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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:
Chief Financial Officer
Private Media Group
Tel +34 93 590 70 70
johan.gillborg@private.com
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