Private Media Group (PRVT)

Digital IPTV, Cable and Satellite Development in the United States

According to the National Cable and Telecommunications Association (“NCTA”), Cable MSOs deliver service to approximately 65.4 million basic households in the United States as of December 2005 and approximately 28.5 million received digital cable service. Kagan World Media (“Kagan”) estimates that by 2015 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 27.2 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. Based on the above, we estimate the number of digital cable and satellite subscribers for 2015 to be approximately 98.6 million households, a growth of 77%.

VOD availability is becoming increasingly widespread and is now on its way to becoming a mainstream content-delivery platform. Kagan research indicates that nearly 20 mil. homes had VOD by the end of 2004, a number that is on track to nearly double to 39.2 mil. by the end of 2008. Kagan further projects that there will be 62.9 million VOD enabled households by the end of 2014. In addition, Kagan estimates that in 2007 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 mil. in 2004 to more than $860 mil. 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.

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