BARCELONA, Spain, Aug. 16, 2011 /PRNewswire/ -- Private Media
Group, Inc. (Nasdaq: PRVT) a worldwide leader in premium-quality
adult entertainment products today announced its results for the
three-month period ended June 30,
2011.
For the three months ended June 30,
2011, we had net sales of EUR 4.7
million compared to net sales of EUR
6.0 million for the three months ended June 30, 2010, a decrease of EUR 1.3 million, or 22%. Internet sales decreased
EUR 0.6 million to EUR 3.1 million, which represents a decrease of
17% compared to the same period last year. The reduction in
Internet sales was attributable to a decrease in sales from our
North American websites as a result of foreign exchange rate
changes and a reduction in sales from our Gay Content division.
Broadcasting sales decreased EUR 0.3
million to EUR 0.8 million,
which represents a decrease of 24% compared to the same period last
year. The decrease was primarily the result of fewer newly released
titles being broadcasted. Wireless sales decreased EUR 0.2 million to EUR 0.2
million, which represents a decrease of 53% compared to the
same period last year. The decrease was primarily the result of
migration from on-portal sales to off-portal sales from Smart Phone
users which is included in Internet sales. DVD & Magazine sales
decreased EUR 0.2 million, or 29%, to
EUR 0.5 million. The reduction in DVD
& Magazine sales was primarily attributable to an industry-wide
decrease in DVD sales. Going forward, we expect Internet, Wireless
and Broadcasting sales to increase, see comment below.
For the three months ended June 30,
2011 the average U.S. dollar exchange rate was 13% less
compared to the three months ended June 30,
2010, which decreased all our sales, cost, and expenses
denominated in U.S. dollars by the same percentage.
Our cost of sales was EUR 3.1
million for the three months ended June 30, 2011 compared to EUR 4.0 million for the three months ended
June 30, 2010, a decrease of
EUR 0.9 million, or 23%. Included in
cost of sales is Internet, broadcasting and wireless, printing,
processing and duplication and amortization of library. Internet
cost was EUR 1.8 million for the
three months ended June 30, 2011
compared to EUR 2.4 million for the
three months ended June 30, 2010.
Internet cost as a percentage of related sales in the period was
57% compared to 63% in the same period last year. The decrease of
EUR 0.6 million was primarily the
result of reduced sales and reduced website amortization as a
result of an old website which was decommissioned in May 2010. There was no broadcasting and wireless
cost for the three months ended June 30,
2011 compared to EUR 0.1
million for the three months ended June 30, 2010. The reduction in cost was due to
the reversal of provisions for expected cost. Printing, processing
and duplication cost was EUR 0.2
million for the three months ended June 30, 2011 compared to EUR 0.3 million for the three months ended
June 30, 2010, a decrease of
EUR 0.1 million, or 38%. The decrease
was primarily a reflection of the decrease in sales. Printing,
processing and duplication cost as a percentage of DVD &
Magazine sales was 34% for the three months ended June 30, 2011 compared to 38% in the same period
last year. Amortization of library was EUR
1.1 million for the three months ended June 30, 2011 compared to EUR 1.2 million for the three months ended
June 30, 2010. 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 June 30,
2011, we realized a gross profit of EUR 1.6 million, or 35% of net sales compared to
EUR 2.0 million, or 34% of net sales
for the three months ended June 30,
2010. The increase in gross profit as a percentage of sales
was primarily the result of reduced amortization of library and
websites.
Our selling, general and administrative expenses were
EUR 2.7 million for the three months
ended June 30, 2011 compared to
EUR 3.4 million for the three months
ended June 30, 2010, a decrease of
EUR 0.7 million, or 21%. The decrease
was primarily the result of reduced payroll, general expenses and
depreciation by EUR 0.7 million,
EUR 0.3 million and EUR 0.1 million, respectively. The decrease was
offset by increased legal expenses and bad debt provision of
EUR 0.3 million and EUR 0.1 million, respectively.
We reported an operating loss of EUR 1.0
million for the three months ended June 30, 2011 compared to an operating profit of
EUR 1.0 million for the three months
ended June 30, 2010. Discounting the
effect of EUR 2.4 million in gain
from change in fair value of contingent consideration payable in
the three month period ended June 30,
2010, the operating result improved by EUR 0.3 million in the three month period ended
June 30, 2011 as a result of
reduced selling, general and administrative expenses offset
by reduced gross profit.
We reported a net loss of EUR 1.1
million for the three months ended June 30, 2011, compared to net income of
EUR 0.9 million for the three months
ended June 30, 2010.
Commenting on some important factors relating to the business
going forward, Private Media Group, Inc., CFO, Johan Gillborg stated: "During the past
two years, we have developed Internet solutions for critical new
markets: gay, international and mobile. Furthermore, as a response
to decreased margins in the adult entertainment industry, we have
reviewed, analyzed and continued to restructure the operations of
the non-online part of the business in order to become more cost
effective. The 2009 acquisitions of GameLink and Sureflix have also
presented a challenge in terms of integration. All the
aforementioned processes have had impact both in terms of lost
sales and additional selling, general and administrative expenses.
However, as part of these processes, during 2010 we reduced our
workforce by 34% from 168 to 112 employees and we expect to
continue this process as we become more efficient and enjoy
economies of scale from the aforementioned acquisitions. In 2011,
we are starting to benefit from the restructuring and will continue
to reduce costs while increasing sales as we implement, launch and
market new initiatives."
"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 additional
formats and applications to be launched in 2011. Currently we are
reformatting and migrating all content on the GameLink VOD platform
to a Content Delivery Network (CDN) and we expect this to enhance
the user experience substantially and therefore improve both
conversion and retention rates in general, but particularly in
eastern North America and in
Europe. This is a paramount
initiative which is expected to increase sales significantly and
also make it possible to expand our cooperation with affiliates
worldwide. In addition, this initiative is crucial for the
development and distribution of apps which will enable consumer
access from the growing market of SMART TVs. The completion of the
CDN initiative is expected to take place in the second half of
2011. In addition, during 2011 we will continue to aggressively
market our recently launched cutting-edge Internet assets discussed
below."
"In May 2010, we launched our
new private.com membership platform. The new platform features a
number of proprietary sites and it is also available as a white
label(1) version, which we expect will attract adult content
providers and affiliates worldwide. In addition, the new platform
has been built to be substantially less labor intensive to operate
compared to the old one. The new platform also has improved
conversion rates and attracts more traffic. During the six months
ended June 30, 2011 the new
membership pay-site attracted 8.1 million absolute unique visitors,
which represents an increase of 70% compared to for the old site
during the same period in 2010."
"In April 2010, GameLink,
launched a proprietary mobile solution enabling users to instantly
stream over 15,000 movies. The platform is available to Smart
Phones at the url: www.gamelink.com. The mobile
Internet platform allows consumers to purchase and consume content
instantly. All content is available for future viewing in the
customer's virtual media center, stored in the company's "Cloud".
The platform has been optimized to work with Apple devices
including the iPhone, iPod, the iPad as well as Android devices.
Furthermore, in 2010, Apple's OS upgrade to iOS4.3 for iPhones,
iPads and iPod touches made it possible to watch GameLink's mobile
library on Apple TV by allowing users to redirect content streaming
from those devices to their Apple TV. In addition to streaming,
consumers can choose to download their movies or purchase DVDs and
novelties from the globally accessible platform. A white label
version of the mobile platform is available and is being marketed
to adult studios and affiliates worldwide. Our objective is to
become the main provider of an off-portal mobile platform solution
to all major content providers in our industry. In contrast to
Private's existing mobile content business, which is based on an
on-portal model going through content aggregators and carriers,
this new business is off-portal and provides substantially improved
margins as content is sold directly by ourselves to the consumer.
Our weekly sales for the GameLink VOD mobile solution has been
steadily increasing since its launch and current weekly sales
represents a USD 1.0 million
twelve-month run rate. In August
2010, Sureflix introduced mobile VOD on its existing
platform for its Maleflixxx network of hundreds of sites. The new
mobile platform, Maleflixxx Mobile, allows consumers to view gay
content on all mobile devices, including the iPad, iPod Touch,
iPhone and Android handsets. Furthermore, in Q4, 2010, we released
a number of Smart Phone apps with an end to increase traffic to our
mobile assets. With the Smart Phone market growing rapidly(2), we
expect to generate substantial growth from our mobile VOD
initiatives going forward."
"With respect to broadcasting, we are continuing to implement
our media growth strategy across all delivery systems, including:
DTT, satellite, cable and IPTV. Private content is currently
broadcasted via 194 platforms in 42 countries. While European
broadband users are signing up for IPTV services in the hundreds of
thousands each month, making Europe the biggest and fastest growing IPTV
region in the world, we have successfully implemented part of our
new media strategy and contracted for supplying content for VOD
services to a total of 26 major platform operators in 18 countries
in the region. During 2010 the European IPTV market grew by 25% to
20.7 million IPTV subscribers(3) and by the end of the year
we had more than 75% market coverage. France remains the "world champion" IPTV
country with 10.3 million subscribers and we cover 100% of this
market. Furthermore, it is forecasted(4) that the number of global
IPTV subscribers will grow from 44 million at the end of 2010 to
111.5 million in 2014, a compound annual growth rate of 26%. The
forecast shows that Europe will be
the regional leader, with 42% of the worldwide IPTV subscribers
total in 2014. In relation to Private branded TV channels carrying
our content in Europe and
Latin America, our partners
Playboy TV International and Playboy TV Latin America continue to
improve distribution. In 2010, the Private Spice agreement with
Playboy TV International was renewed for another five years. The
channel is receivable in all of Europe and it currently has distribution in 22
countries via 101 cable, satellite, DTT and IPTV platforms. During
the past twelve months, Playboy TV Latin America continued to
increase the distribution of the Private Channel. The channel is
receivable in all of Latin America
and it currently has distribution in 19 countries via 63 cable,
satellite and IPTV platforms and reaches 38 million platform
subscribers. Going forward, we expect to grow our broadcasting
distribution both on existing and additional platforms that are
using any available technology."
"During the six month period ending June 30, 2011, we have released fewer new titles
compared to the same period 2010 and this has had an impact on both
broadcasting and DVD & Magazine sales. As from the fourth
quarter of 2011, we are increasing the number of new titles
released."
"Private's mobile "on portal" revenues declined in the first
quarter of 2011 and the main reason for the decrease is that this
business is migrating to "off portal" and is included in our
Internet sales where these sales are increasing. We expect this
trend to continue with the increased penetration of Smart Phones.
Whether it is on or off portal, the growing use of Smart Phones,
the introduction of Mobile VOD and TV, and the implementation of
age verification systems offer additional growth potential for the
combined markets in 2011 and beyond(5)." Mr. Gillborg
concluded.
Financial Highlights
|
|
(In thousands of euro, except
per share amounts)
|
Three month
period ended
|
|
|
June
30,
|
|
|
2010
|
|
2011
|
|
|
|
|
|
|
Net Sales
|
6,037
|
|
4,705
|
|
Net income (loss)
|
931
|
|
(1,108)
|
|
|
|
|
|
|
Weighted average common and
common equivalent shares outstanding:
|
|
|
|
|
Basic
|
22,005,816
|
|
22,005,824
|
|
Diluted
|
-
|
|
-
|
|
|
|
|
|
|
Income (loss) per
share:
|
|
|
|
|
Basic
|
0.04
|
|
(0.05)
|
|
Diluted
|
0.04
|
|
(0.05)
|
|
|
|
|
|
|
|
NOTES TO THE EDITOR:
Footnotes
- A white label product or service is a product or service
produced by one company that other companies rebrand to make it
appear as if they made it.
- According to Parks Associates report of March, 2010, "Smart
Phone: King of Convergence": the number of Smart Phone users is
expected to quadruple, exceeding 1 billion worldwide by 2014.
- According to Point Topic's report of March, 2011, "IPTV Q4 2010
Short Report".
- According to MRG's IPTV Global Forecast (December 2010).
- Juniper Research estimates in its 2010 study 'Mobile Adult
Strategies: Downloads, Video Chat, Apps & Messaging 2010-2015.'
that global revenues from all mobile adult services will rise from
$1.7 billion in 2009 to $2.8 billion by 2015.
About Private Media Group
Founded in 1965, NASDAQ listed Private Media Group is a
brand-driven world leader in adult entertainment, operating a
global content distribution network with a wide range of platforms
including; the Internet, broadcasting via cable, satellite, digital
TV and IPTV on 194 platforms in 42 countries, mobile content
delivery via 114 network operators in 37 countries and retail sale
of 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 products and services. 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. 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 93 620 80 90
johan.gillborg@private.com
SOURCE Private Media Group