Private Media Group Returns to Growth With a 20% Increase in Sales for the Three Month Period Ending December 31, 2005

Private Media Group Returns to Growth With a 20% Increase in Sales for the Three Month Period Ending December 31, 2005

Company comments on business outlook

BARCELONA, Spain, April 3 /PRNewswire-FirstCall/ -- Private Media Group Inc. (NASDAQ:PRVT) a worldwide leader in premium-quality adult entertainment products, services and mobile and Internet content, today announced its positive results for the three-month period ending December 31, 2005.

The Company reported an increase in sales of 1.1 million euro, to 7 million euro for the three month period ended December 31, 2005. Net income was 0.1 million euro for the three month period compared to a loss of 2.4 million euro for the same period last year.

DVD sales increased 0.2 million euro, or 5%, to 3.7 million euro. The increase in DVD sales was primarily due to more new movie titles being released. Video sales decreased 0.2 million euro, 0.0 million euro compared to the same period in 2004. The decrease in sales was the result of a general industry decrease in Video sales due to the consumer migration from Video to DVD. Magazine sales decreased 0.5 million euro, or 45% to 0.7 million euro as a result of lower quantities sold during certain retail channels during the three month period. Internet sales increased 0.2 million euro, or 23%, to 1.0 million euro as a direct result of the Company's search engine optimization program.

New Media sales: Broadcasting increased 0.8 million euro, or 297%, to 1.0 million euro as a result of increased VOD sales in the period (see discussion under comment below) and Wireless increased 0.4 million euro, or 259%, to 0.5 million euro. The increase in Wireless sales was primarily due to our content availability with additional operators.

For the three months ended December 31, 2005, the Company achieved a gross profit of 4.2 million euro, or 60% of net sales, compared to 1.5 million euro, or 26% of net sales for the same period last year. The increase in gross profit as a percentage of sales was primarily the result of higher margin sales via Internet, Broadband, Wireless and Broadcasting platforms.

Selling, general and administrative expenses were 4.0 million euro for the period compared to 4.6 million euro year-on-year, a decrease of 0.6 million euro, or 14%. The decrease is primarily the result of reductions in bad debt expense, depreciation and the effects of outsourcing which was offset by start-up cost relating to our Asian subsidiary and Lifestyle division.

Operating profit. The Company reported an operating profit of 0.2 million euro for the three months ended December 31, 2005 compared to an operating loss of 3.1 million euro for the same period last year. The increase is the result of higher gross profit and reduced selling, general and administrative expenses.

Commenting on some important factors relating to the business going forward, Private Media Group, Inc., CFO, Johan Gillborg stated: "During 2005 we increased our investment in our library of photographs and videos by 69% compared to the same period in 2004 and subsequently we will release more new proprietary movie titles in 2006 compared to 2005(1). We expect the increase of new movie releases in 2006 to result in increased DVD sales. We do also

expect margins on DVD sales to improve since additional new releases available for sale increases the average sales price per unit.

"In addition to the increase of proprietary movie titles available for sale, we are also consolidating the distribution in Europe of third party DVD content from Tera Patrick's Teravision as from January 2006. This third party content distribution requires no investment from us and positively complements our proprietary content. We expect this to increase DVD sales and contribute to gross profit.

"We expect magazine sales to remain steady at the current three-month period level going forward. With Internet, a high-margin business, we have contracted a third-party to increase profitable traffic to our sites through a program that commenced running in May. It involves developing our sites from a Search Engine Optimization (SEO) perspective and creating an affiliate program for webmasters around the world, called Private Cash. During the second half of 2005 the number of unique visits to our main sites increased by 50% compared to the same quarter period in 2004. Historically, we have not carried out any of the above activities and going forward we expect the SEO and the affiliate program to increase Internet sales from both memberships and our online shop.

"During the second quarter of 2005, we made an agreement with Playboy TV Latin America for the operation and distribution of Private branded TV channels in Latin America. With this new agreement we are significantly increasing our broadcasting presence in this region and in 2006 we will start seeing an impact on our revenues from the region.

"In the third quarter of 2005 we made an agreement with a member of the Portland Television Group of companies for the launch of a new Private channel in the UK. This fresh new channel will be launched in the first half of 2006 and replace the Private Blue channel, which was established in the UK in 2000. The new channel will primarily be available as a pay-per-view channel via the BSkyB Digital Satellite platform. The BSkyB platform currently carries more than 7.4 million subscribers. This new channel will start having an impact on profits during the first half of 2006.

"In November 2005 we signed a five-year agreement with Playboy TV International to merge our two adult pay-TV channels, Private Gold and Spice Platinum in Europe and thereby consolidating market leadership in the region. The new channel is called Private Spice and will launch in May 2006. There is very little overlap between the two channels and subsequently the new channel will significantly increase the distribution in the region. This new channel will start having an impact on profits during the second half of 2006.

"During the second half of 2005 we have also seen evidence of an emerging new source of significant future profits in the True Video on Demand (TVOD(2)) market in Europe. Revenues from our first distributor on this type of platform have increased steadily during 2005 and the growth in our revenues has been in line with the subscriber growth on this new VOD platform. During the fourth quarter of this year, revenues from this platform increased 86% compared to the preceding quarter. We have reason to believe that our revenue will continue to grow in line with the forecasted subscriber growth on this new VOD platform and subsequently we expect a contribution to operating profit for 2006 from this new distributor. Furthermore, we expect to contract additional TVOD platforms in Europe in 2006, however, we are currently unable to determine the future potential contribution to operating profit from these platforms.

"During the fourth quarter of 2005, we opened up a subsidiary in Hong Kong to respond to an ever-increasing local demand in Asia for the Private brand, including licensing of content for broadcast TV, VOD online, IPTV and mobile as well as brand licensing for clubs and retail outlets. Immediate interest in Private is principally stemming from Korea, China, Japan and Hong Kong. Nonetheless the whole consumer culture in this region is ripe for superior adult-oriented products with a strong brand identity and we believe that sales from this region will start having an impact in the second quarter of 2006.

"During the fourth quarter we also started up Private Lifestyle. Private Lifestyle is a division of Private Media Group which coordinates a range of products associated with the Private brand: a trend and lifestyle magazine; Private Lifestyle Productions, a music label that produces Electronic and Dance music compilations; and Private Lifestyle Merchandising, which includes the Private Clothing Line, Private Beverages (Private Energy Drink, Private Wines and Private Vodka) amongst others. The division also coordinates, manages and produces high-end special events worldwide.

"During the second quarter of 2005, we created a dedicated mobile content department headed up by Tim Clausen. This new development has launched us into a new era, gaining carriage with both national and international mobile carriers, and we are currently in the process of expanding our business in this market via several new operators. This will enable us to leverage our unique range of content, our trademarks and our huge existing customer base to take our mobile presence in Europe to a truly market dominant position. In 2005, the revenues from this distribution channel increased 83% compared to 2004. The increase in revenues is related to our content being available with additional new mobile phone operators.

"As of December 31, 2005 Private's content was available to mobile consumers via 33 operators in 19 countries, of which 9 operators went live since September 2005. During the first quarter 2006, the Company went live with 8 additional operators and have contracted to go live with 14 additional in the second quarter. The Company is expecting to go live with additional operators during the remainder of 2006. We expect the creation of our dedicated mobile content department to have a significant impact on broadcasting revenues and operating profit in 2006.

"We are currently unable to determine what our potential revenue will be from the marketing of our content to the mobile adult content market. However, we believe that adult content, as it has done with other new technologies, will help to drive the sale of content on mobile devices(3)," Mr. Gillborg concluded.

(1) The window from investment in a movie title to release is typically
six to eight months.
(2) 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 order the program online, but
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.
(3) Juniper Research estimates in its white paper Adult to Mobile:
Personal Services - Second Edition (February 2005) that the global
mobile adult content market will more than triple over the next five
years, to nearly US$2.1 billion by 2009.

Financial Highlights
(In thousands of euro, except per share amounts)
Three months ended
December 31,
2005 2004

Revenue 6,956 5,815
Net Income (loss) 94 (2,405)
Weighted average common and common
equivalent shares outstanding:
Basic 52,182,053 50,140,526
Diluted 53,187,430 N/A
Net Income per common and common
equivalent share:
Basic 0.00 (0.06)
Diluted 0.00 (0.06)

(In thousands of euro, except per share amounts)
Twelve months ended
December 31,
2005 2004

Revenue 27,772 29,798
Net Income (loss) 50 2,643
Weighted average common and common
equivalent shares outstanding:
Basic 51,720,180 50,136,203
Diluted 53,155,311 N/A
Net Income per common and common
equivalent share:
Basic 0.00 (0.02)
Diluted 0.00 (0.02)

About Private Media Group

With its 40 year track record, Private is a leading global adult entertainment company that distributes its content over a wide range of media platforms, including narrow and broadband Internet, DVD and video, magazines, broadcasting and wireless technologies. It owns the worldwide rights to the largest archive of high quality adult content in the world, which it physically distributes in over 40 countries.

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
Alejandra Moore Mayorga
Tel +34 91 531 23 88
amoore@grupoalbion.net
www.private .com

Source: Private Media Group, Inc.

CONTACT: Alejandra Moore Mayorga, Tel +34-91-531-23-88,
amoore@grupoalbion.net

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Profile: intent