BARCELONA, Spain, June 6, 2011 /PRNewswire/ -- Private Media Group,
Inc. (NASDAQ: PRVT) a worldwide leader in premium-quality adult
entertainment products today announced its results for the year
ended December 31, 2010.
For the twelve months ended December 31,
2010, we had net sales of EUR 23.3
million compared to net sales of EUR
23.1 million for the twelve months ended December 31, 2009, an increase of EUR 0.2 million, or 1%. The increase was the
result of increased Internet sales offset by decreases in sales of
DVD & Magazines, broadcasting and wireless. Internet sales
increased EUR 1.6 million to EUR 14.8
million, which represents an increase of 12% compared to the
same period last year. The increase in Internet sales was the
result of our acquisitions last year. Discounting EUR 3.4 million in impact from acquisitions,
Internet Sales decreased EUR 1.8
million as a result of the rebuilding of our website
private.com. Broadcasting sales decreased EUR 0.6 million, or 14%, to EUR 3.9 million. Wireless sales in the period
decreased EUR 0.1 million, or 6%, to
EUR 1.5 million as a result of a
reduced share in the consumer spend provided to aggregators and
content providers by telecom operators in general in this business.
DVD & Magazine sales decreased EUR 0.7
million, or 18%, to EUR 3.2
million. The reduction in DVD & Magazine sales was
primarily attributable to an industry wide decrease in DVD
sales.
Net sales in general were affected by changes in exchange rates.
The annual average U.S. dollar exchange rate for the fiscal year
2010 compared to 2009 increased 4.2% which increased all our sales,
cost and expenses denominated in U.S. dollars by the same
percentage. Fluctuations in exchange rates between the euro and the
dollar can affect the comparability of our results from year to
year. We translate our consolidated subsidiaries whose functional
currency is not the euro into the euro for reporting purposes.
Income statement amounts are translated into euro using the average
exchange rate for the fiscal year. The balance sheet is translated
at the year-end exchange rate.
Overall, net sales and margins were affected by the impact of
free adult content on the Internet. Going forward, we expect
Internet, wireless and Broadcasting sales to increase.
In the twelve months ended December 31,
2010, we realized a gross profit of EUR 6.4 million, or 28% of net sales compared to
EUR 6.2 million, or 27% of net sales
for the twelve months ended December 31,
2009.
Our selling, general and administrative expenses were
EUR 13.1 million for the twelve
months ended December 31, 2010
compared to EUR 23.9 million for the
twelve months ended December 31,
2009, a decrease of EUR 10.8
million, or 45%. Adjusting the difference for
indemnification expense of EUR 0.5
million, impact from last year's acquisitions of
EUR 1.8 million offset by the absence
of EUR 9.5 million of
non-recurring expenses in 2009 made up of: provision against
related party receivable of EUR 7.3
million, investment write-off of EUR
1.0 million, expense related to closing down subsidiary of
EUR 0.6 million and acquisition
related expenses of EUR 0.6 million,
we reduced selling, general and administrative expenses by
EUR 3.6 million as a result of our
restructuring program, see Restructuring above for additional
discussion. Considering indications during the three month period
ending December 31, 2010, we expect
to continue to reduce our selling, general and administrative
expenses in 2011, significantly.
We reported a loss of EUR 4.3
million for the twelve months ended December 31, 2010, compared to EUR 20.5 million for the twelve months ended
December 31, 2009. The decrease of
EUR 16.2 million was primarily the
result of decreased operating loss and deferred tax.
Liquidity
In each of the past three years we have experienced losses from
operations. At December 31, 2010, we
had cash and cash equivalents of EUR
370,000 and a working capital deficit of EUR 1,102,000. As a result, our independent
registered public accounting firm has concluded that there is
substantial doubt as to our ability to continue as a going concern,
and has modified its report in the form of an explanatory paragraph
describing the events that have given rise to this uncertainty. Our
ability to continue as a going concern is based on our ability to
generate or obtain sufficient cash to meet our obligations on a
timely basis and ultimately to attain profitable operations. We
currently expect future growth and to return to profitability
provided we are successful with the following objectives:
- the continued rollout and successful marketing of our Internet
platforms, including: a) our newly built signature property and
membership platform private.com, b) our cutting edge mobile
platforms for Smart Phones and c) our multinational eCommerce VOD
platform;
- the successful marketing of our affiliate programs for all our
properties to compete aggressively for, and attract, affiliate
traffic;
- continuing the rollout of our content on cable and IPTV
video-on demand platforms;
- completing the integration of businesses acquired in 2009;
- consolidating and restructuring our operations into an
efficient new media business;
- outsourcing of non-cost effective parts of our operations;
and
- identifying and exploring new online business opportunities
which are less dependent on content.
If we are not successful in implementing the above objectives,
or if we otherwise do not successfully respond to changing
conditions in the adult entertainment industry, we may continue to
incur significant losses. There can be no assurance that we
will be able to operate profitably in the future.
Commenting on some important factors relating to the business
going forward, Private Media Group, Inc., CFO, Johan Gillborg stated: "During 2009 and
2010, 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. Last year's 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 have 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. During
2011, we will start benefiting from the restructuring and 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 which we have been building
since mid 2009. 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
previous one. The new platform has already proved to have improved
conversion rates and during the second half of 2010 the new
membership pay-site attracted 73% more unique visitors compared to
the previous one in the same period in 2009.
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, Private content is currently
broadcasted via 194 platforms in 42 countries. We are continuing to
implement our media growth strategy across all delivery systems,
including: DTT, satellite, cable and IPTV. 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 TVOD(3) 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(4) 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. 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.
Private's mobile 'on portal' revenues declined again in 2010.
We are still the most distributed adult brand in the world and will
monetize existing distribution as best as we can by going live with
the few outstanding carriers and replacing non-performing content
aggregators with new ones. During 2010, the distribution of Private
content continued to increase and by the end of the year it was
available to 1.5 billion handsets via 114 mobile network operators
in 37 countries. The markets of Asia and the Americas are still underexploited
by us and therefore represent a significant growth potential.
Furthermore, Mobile TV, increased penetration of Smart Phones and
the implementation of age verification systems offer additional
growth potential with both current and future operators in 2011 and
beyond(5).
During 2010, the DVD market has continued to shrink, with
sales for our physical products declining by 18%. However, the DVD
business is by no means dead even in this competitive landscape.
The content providers that manage to survive the current 'clean
out' will control the DVD market going forward," Mr.
Gillborg concluded.
Financial Highlights
|
|
(In thousands of euro, except
per share amounts)
|
twelve
months ended
|
|
|
December
31,
|
|
|
2009
|
|
2010
|
|
|
|
|
|
|
Net Sales
|
23,061
|
|
23,270
|
|
Net loss
|
20,510
|
|
4,335
|
|
|
|
|
|
|
Weighted average common and
common equivalent shares outstanding:
|
|
|
|
|
Basic
|
20,773,440
|
|
22,005,569
|
|
Diluted
|
n/a
|
|
n/a
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
Basic
|
0.99
|
|
0.20
|
|
Diluted
|
0.99
|
|
0.20
|
|
|
|
|
|
|
|
NOTES TO THE EDITOR:
Footnotes
1. A white label product or service is a product or service
produced by one company (the producer) that other companies (the
marketers) rebrand to make it appear as if they made it.
2. 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.
3. 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.
4. According to Point Topic's report of March, 2011, "IPTV Q4
2010 Short Report".
5. 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