Private Media Group Reports Mixed 2007 Results

Tom Hymes
BARCELONA, Spain — Private Media Group Inc. (NASDAQ:PRVT) has announced mixed financial results for the twelve months ending December 31, 2007.

As a result of transitional factors and the weakening dollar-euro exchange rate, Private reported decreased sales of 14% to 25.0 million euro for the twelve-month period ended December 31, 2007, compared to 2006.

The decrease was primarily due to decreased DVD & Magazine and Broadcasting sales, offset by increased Internet and Wireless sales, Private asserted. Net sales in general were affected by changes in exchange rates.

Despite the weakening dollar, Private reported that Internet sales had increased 3% to 4.4 million euro, while broadcasting sales decreased 1.0 million euro, or 12%, to 7.1 million euro.

The decrease was seen as primarily the result of the combined effect of the discontinuing of low margin pay-per-view sales in the US and a 2006 non-recurring Pay-TV license sales in Europe totaling 2.3 million euro, offset by an increase of 1.3 million euro, primarily from new broadcasting business in Europe, such as IPTV/VOD and the PrivateSpice TV channel.

Wireless sales increased 32% to 2.6 million euro as a result of increased distribution and consumer buy rates.

Total New Media sales was 14.1 million euro, or 57% of total net sales. 2007 is the first year these new media distribution platforms represent more than half of Private's business. The Company expects Internet, wireless and broadcasting sales to increase significantly, given the rapid growth of these platforms and its leadership role in the adult entertainment category.

"During 2007, the combined sales from broadcasting, wireless and Internet was 57% of total sales," Private Media Group, Inc., CFO Johan Gillborg said. "This represents a major shift in our business model and we expect aggressive growth in this area going forward, which will significantly affect the overall growth and operating profit of the Company's business."

Overall, the Company reported a net loss of 0.4 million euro for the twelve months ended December 31, 2007 compared to a net income of 0.5 million euro for the twelve months ended December 31, 2006.

The company remains extremely bullish on the future of IPTV, and is situating itself to take advantage of anticipated growth in that sector, especially in Europe.

"By the end of 2008 and 2009, we expect to have our content available to 7.9 million and 12.0 million European IPTV subscribers, respectively, and the monetization of these subscribers will significantly increase our top line revenues and overall profitability," said Gilborg.

Private is realistic about the future downward trend of DVD sales, but reports increased reorganization to stem losses.

"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 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 any further negative impact of this downward DVD trend on our overall business," Gillborg said.