Private Media Group (PRVT)

Digital Cable and Satellite Development in the United States

According to the National Cable and Telecommunications Association (“NCTA”), Cable MSOs deliver service to approximately 73 million basic households in the United States as of September 2005 and approximately 27.6 million received digital cable service. Kagan World Media (“Kagan”) estimates that by 2014 there will be 64.9 million digital cable subscribers. According to public information provided by DirecTV and EchoStar Communications Corporation (“EchoStar”) there was a total of 27.1 million DBS households as of end of 2005 with DirecTV and EchoStar’s DISH Network (“DISH”) providing services to 15.1 and 12 million households, respectively. During 2005, DirecTV and DISH gained approx. 2 million net new subscribers. Kagan estimates that the number of DBS subscribers will grow to 32.6 million by the year 2014. Based on the above, we estimate the number of digital cable and satellite subscribers for 2014 to be approximately 97.5 million households, a growth of 78%.

VOD availability is becoming increasingly widespread and is now on its way to becoming a mainstream content-delivery

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platform. Kagan estimates that there were 19.8 million VOD enabled households at the end of 2004, compared to only 2.6 million VOD enabled households at the end of 2003. Kagan projects that there will be 62.9 million VOD enabled households by the end of 2014.

Kagan estimate that VOD revenue and cable VOD revenue from movies and TV series more than doubled from $157 million in 2003 to $318 million in 2004. By 2006, VOD revenue will comprise the majority of the PPV/VOD revenue sector. In 2007, Kagan estimates that cable VOD revenue (from all sources, including adult and SVOD) will cross the $2 billion mark on its way to $6 billion in 2013.

With respect to IP-VOD Kagan estimates the number of subscribers to IP-VOD services to increase from about ten thousand in 2004 to nearly seven million in 2013, while the number of households renting’ films a la carte via Internet protocol could grow from nearly one million in 2004 to more than ten million in 2013. Kagan projects total IP-VOD revenues could grow from $5.5 million in 2004 to more than $860 million in 2013 better than 75% compound annual growth.

Turning to the adult entertainment segment, content distribution has evolved over the past twenty-five years from home video platforms (videocassette) to cable television systems and DBS providers via PPV, and more recently to VOD. In the early 1980’s, cable television operators began offering subscription and PPV adult programming from network providers such as Playboy Enterprises, Inc. Kagan estimates that adult PPV and VOD revenue generated by cable systems and DBS providers in 2004 was $761 million. As more cable operators add adult and distributors continue to expand their offerings, Kagan projects revenues from the adult category will grow to $1.4 billion by the year 2014.

Digital Cable and Satellite Development in the United States

According to the National Cable and Telecommunications Association (“NCTA”), Cable MSOs (multiple-systems-operators) deliver service to approximately 72 million basic households in the United States as of September 2004 and approximately 24.3 million received digital cable service. The NCTA estimates that by 2006 there will be 48.6 million digital cable subscribers. NCTA reported in its 2004 Year-End Industry Overview that there were a total of 24 million DBS households as of September 2004 (DirecTV provides services to 13.5 million households and EchoStar Communications Corporation’s DISH Network (“DISH”) provides services to 10.5 million households). During 2004, DirecTV and DISH gained 3 million net new subscribers. Kagan estimates that DBS will grow to 26 million subscribers by the year 2006. Based on the above sources, the total estimated number of digital cable and satellite subscribers for 2006 is approximately 75 million households, a growth of 54%.