Nov. 17, 2009 (PR Newswire) --
BARCELONA, Spain, Nov. 17 /PRNewswire-FirstCall/ -- Private Media Group, Inc. (Nasdaq: PRVT) a worldwide leader in premium-quality adult entertainment products today announced its results for the three months ended September 30, 2009.
Net sales. For the three months ended September 30, 2009, we had net sales of EUR 5.8 million compared to net sales of EUR 4.6 million for the three months ended September 30, 2008, an increase of EUR 1.2 million, or 26%. The increase was the result of increased Internet sales offset by decreases in sales of DVD & Magazines and broadcasting. Internet sales increased EUR 1.7 million to EUR 2.9 million, which represents an increase of 151% compared to the same period last year. The increase in Internet sales was primarily the result of the acquisition of GameLink. DVD & Magazine sales decreased EUR 0.1 million, or 5%, to EUR 1.5 million. The reduction in DVD & Magazine sales was primarily attributable to an industry wide decrease in DVD sales (see discussion below). Broadcasting sales decreased EUR 0.4 million, or 31%, to EUR 1.0 million primarily as a result of a decrease in hotel and title sales, offset by increases in TV-channel and VOD (video-on-demand) sales. Wireless sales remained at EUR 0.4 million in the period. Going forward, we expect Internet, wireless and Broadcasting sales to increase (see discussion below).
Our cost of sales was EUR 3.6 million for the three months ended September 30, 2009 compared to EUR 3.4 million for the three months ended September 30, 2008, an increase of EUR 0.2 million, or 7%. Included in cost of sales is Internet, broadcasting and wireless, printing, processing and duplication and amortization of library. Internet cost was EUR 1.5 million for the three months ended September 30, 2009 compared to EUR 0.3 million for the three months ended September 30, 2008. Internet cost as a percentage of related sales in the period was 51% compared to 25% in the same period last year. The increase of EUR 1.2 million was primarily the result of the acquisition of GameLink. Broadcasting and wireless cost was EUR 0.2 million for the three months ended September 30, 2009 compared to EUR 0.4 million for the three months ended September 30, 2008. Broadcasting and wireless cost as a percentage of related sales in the period was 13% compared to 21% in the same period last year. The decrease of EUR 0.2 million was primarily the result of lower wireless and broadcasting cost as result of more cost efficient content delivery. Printing, processing and duplication cost was EUR 0.5 million for the three months ended September 30, 2009 compared to EUR 1.2 million for the three months ended September 30, 2008, a decrease of EUR 0.7 million, or 60%. Printing, processing and duplication cost as a percentage of DVD & Magazine sales was 33% for the three months ended September 30, 2009 compared to 77% in the same period last year. Amortization of library was EUR 1.5 million for the three months ended September 30, 2009 compared to EUR 1.5 million for the three months ended September 30, 2008, which represents no change. Amortization of library does not vary with sales since it reflects the amortization of our investments in content which has been available for sale for a period of three to five years.
In the three months ended September 30, 2009, we realized a gross profit of EUR 2.2 million, or 38% of net sales compared to EUR 1.2 million, or 26% of net sales for the three months ended September 30, 2008. The increase in gross profit was the result of the acquisition of GameLink.
Our selling, general and administrative expenses were EUR 3.6 million for the three months ended September 30, 2009 compared to EUR 2.6 million for the three months ended September 30, 2008, an increase of EUR 1.0 million, or 39%. The increase was the result of the acquisition of GameLink.
We reported a loss of EUR 1.2 million for the three months ended September 30, 2009, compared to EUR 1.0 million for the three months ended September 30, 2008.
Commenting on some important factors relating to the business going forward, Private Media Group, Inc., CFO, Johan Gillborg stated: "We have been transitioning our business model from linear to digital content production and distribution over the last 18 months and this has affected our margins. As DVD and magazines sales have declined, we have made great progress moving to digital business with significant new media distribution deals and the monetization of our expansive library of content. We are now a leading adult content provider on all major digital platforms in Europe, and as they continue to build out and get larger, we project significant growth in both sales and net income. Specifically, we project the biggest gains to be achieved through: Internet, broadcasting and wireless. During the nine-month period ending September 30, 2009, these platforms were responsible for 77% percent of our sales. Following is a discussion highlighting some of the important factors of our business going forward.
On January 20, 2009 we expanded our Internet operations through the acquisition of Game Link LLC and its affiliates, companies engaged in digital distribution of adult content over the Internet and eCommerce development. GameLink is a leading US adult entertainment VOD and eCommerce platform through its GameLink.com website. The site's installed user base represents over one million domestic and international customers and it serves over 100,000 users daily. Including 70,000 video titles, GameLink has the largest library of digital and physical adult media and novelties in the United States. The Company offers VOD in multiple media formats including streaming and downloads to computers and iPhones. GameLink's infrastructure is the most robust in the industry and is highly flexible, customizable and scalable designed to support multiple retail strategies and products simultaneously. Additionally, through its related companies, GameLink offers third-party and white-label ecommerce solutions and development. For the year ended 2008 Gamelink and its affiliates reported consolidated net sales of USD 16.4 million.
On October 29, 2009 we continued the ongoing expansion of our global digital media platform through the acquisition of Sureflix Digital Distribution and its affiliates, companies engaged in the business of digital distribution of premium gay adult content. Sureflix is a leading global supplier of adult programming. The company operates a vast network of more than 100 pay-per-view VOD websites and has a North American broadcast presence. It represents premium production studios in global television broadcast (cable, satellite), mobile, IPTV and Internet VOD markets. Sureflix has not only in-depth knowledge of adult programming, but also significant VOD technology and marketing expertise. For the year ended 2008, Sureflix and its affiliates reported consolidated net sales of USD 8.5 million.
The acquisitions of GameLink and Sureflix are a significant development that will substantially contribute to our growth, while creating economies of scale. As part of our digital strategy, we have established that the combination of Private with major online retailers and accomplished platform developers is the approach to achieving our goals in the rapidly changing business landscape. The combined content assets of Private and core competencies of GameLink and Sureflix offer a compelling new business model. We will be expanding our joint Internet strategies globally with new formats and applications to be launched in 2010. Additionally, we will be developing improved interactive functionality for new media platforms such as IPTV and mobile, and maximizing our content monetization with the existing vast Private library as well as aggregation of select international studios offering a wide range of content and genres for all platform needs.
We are successfully implementing our new media strategy for growth of VOD (Video-on-Demand) via IPTV and to date we have contracted with 38 major platform operators in 24 countries in Europe, as the leading supplier of adult content. Currently we have gained more than 75% coverage of the European IPTV market(i) and across all platforms, quarter by quarter, sales are growing continuously in line with the general growth of the market, or faster. Going forward, we expect to increase our market coverage in this rapidly expanding market, which compared to traditional pay-TV generates substantially higher sales per subscriber at a considerably better margin and subsequently this will contribute significantly to operating profit going forward.
Furthermore, the introduction of IPTV in Europe has challenged the Cable-TV industry and subsequently cable operators are rapidly upgrading their systems to provide the same functionality as IPTV. Recently we have contracted with two leading cable operators in Western Europe and going forward we expect to add further Cable/VOD platforms to our portfolio.
In relation to Private branded TV channels carrying our content in Europe and Latin America our partners Playboy TV Latin America and Playboy TV International continue to improve distribution. During the past twelve months, Playboy TV Latin America increased the distribution significantly in Brazil, Argentina and Central America and we expect to see positive impact from this going forward.
With respect to mobile content, Private content is available to 1.2 billion handsets via 104 mobile network operators in 45 countries. In the end of 2008, we started optimizing our content delivery network of aggregators in order to secure a more aggressive long-term growth. Now this process is completed and consequently we expect sales to increase significantly going forward. Additionally, we are implementing a new off-portal strategy in 2009 to capitalize on the expected transition and growth with this new consumer access to mobile content.
The markets of Asia and the North America are still underexploited by us and therefore represent a significant growth potential. In addition, Mobile TV, increased penetration of smart-phones and the implementation of age verification systems offer additional significant growth potential with both current and future operators in 2009 and beyond(ii).
As we further transition into 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, we continue to re-strategize our distribution of DVDs and Magazines to reduce any further negative impact of this downward DVD trend," Mr. Gillborg concluded.
Financial Highlights
(In thousands of euro, except per share amounts) three months ended
September 30,
-------------
2008 2009
---- ----
Net Sales 4,557 5,757
Net loss 1,039 1,205
Weighted average common and common
equivalent shares outstanding:
Basic 53,580,494 62,114,803
Diluted n/a -
Loss per share:
Basic 0.02 0.02
Diluted 0.02 0.02
NOTES TO THE EDITOR:
Footnotes
(i) According to Global IPTV Forecasts made by MRG (Multimedia Research
Group, Inc.) in 2008, the number of global IPTV subscribers is
estimated to grow from 20.4 million in 2008 to 89.1 million in 2012,
a compound annual growth rate of 45 percent. 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 10.5
million in 2008 to 36.4 million in 2012.
(ii) Juniper Research estimates in its white paper Monetising Adult
Content on the Mobile (December 2008) that the global mobile adult
content market will increase from US$2.2 billion in 2008 to US$4.9
billion by 2013.
About Private Media Group
Founded in 1965, NASDAQ listed Private Media Group (PRVT) is a brand-driven world leader in adult entertainment, operating a global content distribution network with a wide range of platforms including mobile telephone handsets via 104 network operators in 45 countries, digital TV via 38 platforms in 24 countries, broadband Internet, television broadcasting, DVDs and magazines. Private Media Group owns the worldwide rights to its extensive archive of high-quality content, and also licenses its Private and "Silver Girls" trademarks internationally for a select range of luxury consumer products. Private is the world's preferred content provider of adult entertainment to consumers anywhere, at any time and across all distribution platforms and devices.
Corporate site: prvt.com, consumer site: private. com
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. Forward-looking statements in this press release include expectations about the timing of the merger and the satisfaction of closing conditions to the transaction, including the receipt of regulatory approvals. Actual results may differ materially from those contained in the forward-looking statements in this press release. Private undertakes no obligation to, and does not intend to, update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. In addition, 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:
Simon Jordan
Marketing Department
Private Media Group
Tel +34 93-620 80 90
simon.jordan@private.com
SOURCE Private Media Group
