“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,” Private Media Group CFO Johan Gillborg said.
“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,” he said.
Private reported net sales of $2,738,986 in the DVD and magazine sector. The figure was down from $8,216,978 in net sales in that sector from the same period last year.
“We are continuing to shift our business model towards new media distribution platforms, which are projected to consistently grow exceptionally well,” Gillborg said. “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, this will impact our business very positively during the remainder of the year and going forward.”
Better performance with carriers and increasing affiliations with global carriers were said to have driven the boost in net sales of mobile product to $963,000 million Euros for the quarter.
There was a slight decrease in broadcast sales due to the absence of a one-off content licensing sale worth $1,369,000 with a German company. Broadcast sales were affected further by the cancellation of distribution deal for the U.S. with company Echo Star.
Private said that a distribution deal with New Frontiers Media promised greater short-term and long-term benefits in terms of revenue. New Frontier Media is a leading provider of adult-themed video-on-demand content to cable and satellite platforms.
The company said also that the decrease in broadcast sales was offset by revenue from pay-TV and video-on-demand sales in Europe.
Gillborg went on to state that Private Media is aggressively moving forward to pursue interests in new media distribution platforms and accessing global markets through several emergent mobile and IPTV-based platforms.
“The company is aggressively targeting all major IPTV and cable-based true-video-on-demand or ‘TVOD’ platforms and we are currently in the process of contracting with several major international operators,” Gillborg said. “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 percent of the current and future market.”
TVOD is a TV-based video-on-demand platform in which individual users get immediate responses when interacting with the VOD system. With TVOD, the user can not only order the program, but be able to do any VCR-like commands on the VOD system with the same quick response time as is the case when working a VCR.
According to Gillborg, in the first six months of 2006, the company added nine new TVOD platforms in Germany, France, the Netherlands, Belgium and Spain. In the last half of the year, Private anticipates adding 16 more, with TVOD platforms in Italy, Greece, Poland, Belgium, Denmark and Switzerland, bringing the company to a total of 32 TVOD platforms globally.
Overall, total New Media sales reached $5,477,614, representing 67% of total net sales for the quarter.
