Private Reports Year-to-Year Gains on Internet Sales

BARCELONA, Spain—Private Media Group has released comparative 2008-9 results, claiming an overall increase in new sales of 17 percent.

“For the year ended December 31, 2009, we reported net sales of EUR 23.1 million compared to EUR 19.7 million for the year ended 2008, an increase of EUR 3.4 million, or 17 percent. The increase was the result of increased internet sales offset by decreases in sales of DVD and magazines, broadcasting and wireless,” the company stated in a press release issued Wednesday. “Internet sales increased EUR 8.9 million to EUR 13.1 million, which represents an increase of 211 percent compared to the same period last year. The increase in Internet sales was the result of the acquisition of GameLink and Sureflix which contributed EUR 10.2 million and was offset by a decrease of EUR 1.3 million in our prior internet business.” The company added that the decrease was the result of a complete reorganization of the business as a result of the rebuilding of the Private websites.

While acknowledging that “the current state of the world economy and the impact of free adult content on the Internet” have impacted Private’s net sales and margins, the company said it expects internet, wireless and broadcasting sales to increase.

The company’s optimism is in large part due to its restructuring over the last year, including reducing its investment in its DVD library by 46 percent over the previous year, and also reducing the number of titles it released by 17 percent compared with 2008.

“Results indicated that a revised content strategy based on fewer releases and a different mix would have the desired effect on margins since, unlike our traditional business, digital new media distribution is mainly dependent on our expansive library and not on new releases,” said the announcement. “In reducing our investment in library, we also renegotiated content acquisition and post-production agreements with third parties on favorable conditions to us. We expect to maintain our revised content strategy going forward.”

Other changes involved restructuring the company’s affiliates programs, including bringing on new resources “highly skilled in affiliate traffic development and shifted our emphasis from account management towards sales. We have also developed 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.”

Going forward, the company says it will continue to put much of its focus on new media platforms, including IPTV and mobile.

”We are continuing to implement 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, stated Private CFO Johan Gillborg. “Currently we have gained more than 75 percent coverage of the European IPTV market and across all platforms. Going forward, we expect to increase our market coverage in this expanding market.”

Private Media Group, which is traded on Nasdaq, closed Wednesday at $2/share, down 4.76 percent.