Private Media Group (PRVT)

Effects of the Reverse Stock Split Proposal

General

If the reverse stock split proposal is approved and implemented, the principal effect will be to proportionately decrease the number of outstanding shares of our common stock based on the reverse stock split ratio selected by our Board of Directors. Our common stock is currently registered under Section 12(b) of the Securities Exchange Act of 1934, or the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act. The reverse stock split will not affect the registration of our common stock under the Exchange Act or the listing of our common stock on the NASDAQ Global Market. Following the reverse stock split, we expect that our common stock will continue to be listed on the NASDAQ Global Market under the symbol “PRVT”.

Proportionate voting rights and other rights of the holders of our common stock will not be affected by the reverse stock split, other than as a result of the treatment of fractional shares by rounding them up to the nearest whole share, as described below. For example, a holder of 5% of the voting power of the outstanding shares of our common stock immediately prior to the effectiveness of the reverse stock split will generally continue to hold 5% of the voting power of the outstanding shares of our common stock after the reverse stock split. The number of shareholders of record will not be affected by the reverse stock split. If approved and implemented, the reverse stock split may result in some shareholders owning “odd lots” of less than 100 shares of our common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. Our Board of Directors believes, however, that these potential effects are outweighed by the benefits of the reverse stock split.

Effectiveness of Reverse Stock Split

The reverse stock split proposal, if approved by our shareholders, would become effective upon the filing and effectiveness (the “Effective Time”) of a Certificate of Amendment to our Restated Articles of Incorporation with the Secretary of State of the State of Nevada. If the Amendment is not effective by December 31, 2010, the authority of the Board of Directors to effect the reverse stock split will expire. However, the exact timing of the filing and effectiveness of the amendment will be determined by our Board of Directors based on its evaluation as to when such action will be the most advantageous to our Company and our shareholders. In addition, our Board of Directors reserves the right, notwithstanding shareholder approval and without further action by the shareholders, to elect not to proceed with the reverse stock split proposal if, at any time prior to filing the Certificate of Amendment, our Board of Directors, in its sole discretion, determines that it is not in our Company’s best interests and the best interests of our shareholders to proceed with the implementation of the reverse stock split proposal.

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Effect on Authorized but Unissued Shares

As set forth above, the reverse stock split proposal will increase the number of authorized shares of common stock available for future issuance. The Company has no present plans, proposals or arrangements to issue the additional authorized shares of its common stock at this time, other than (i) 52,000 shares reserved for issuance in connection with outstanding stock options, (ii) rights to acquire up to 4,595,397 Earnout Shares in connection with the GameLink companies acquisition, (iii) 6,200,000 shares available for issuance under the 2009 Equity Incentive Plan(subject to shareholder approval), and (iv) up to 6,000,000 shares of common stock in connection with the pending acquisition of the business of Sureflix Digital Distribution. The Board of Directors does not intend to seek shareholder approval of any future issuances of authorized common stock unless required by the laws of Nevada, the Company’s state of incorporation, or listing requirements of NASDAQ or other applicable exchange.

Potential Anti-Takeover Effect

Although the reverse stock split proposal is not intended to have any anti-takeover effect, the Company’s shareholders should note that the availability of additional authorized and unissued shares of common stock could make any attempt to gain control of the Company or the Company’s Board of Directors more difficult or time consuming, and that the availability of additional authorized and unissued shares might make it more difficult to remove management. Although the Board of Directors currently has no intention of doing so, shares of common stock could be issued by the Board of Directors to dilute the percentage of common stock owned by a significant shareholder and increase the cost of, or the number of, voting shares necessary to acquire control of the Board of Directors or to meet the voting requirements imposed by applicable law with respect to a merger or other business combinations involving the Company.

As described under “Proposal No. 1 - Certain Transactions,” the Company and one of its shareholders have entered into an agreement regarding the composition of the Company’s Board of Directors. This agreement could limit any efforts to effect a takeover or otherwise gain control of the Company or the Company’s Board of Directors.

Effect on Stock Options, Stock Option Plans and Rights

If the reverse stock split proposal is effected and the shareholders vote to approve the 2009 Equity Incentive Plan, the number of shares of common stock reserved for issuance under the Company’s 2009 Incentive Equity Plan will be reduced proportionately based upon the reverse split ratio selected by the Board of Directors. In addition, the number of shares issuable upon exercise of outstanding options will be decreased proportionately and the exercise price for such options will be increased proportionately based upon the reverse split ratio selected by the Board of Directors. Moreover, if the reverse stock split is effected, the number of Earnout Shares issuable will be reduced in proportion to the reverse split ratio.

Effect on Par Value

The reverse stock split will not affect the par value of our common stock, which will remain at $0.001, or the par value of our preferred stock, which will remain at $0.001.

Reduction in Stated Capital

As a result of the reverse stock split, upon the Effective Time the stated capital on our balance sheet attributable to our common stock, which consists of the par value per share of our common stock multiplied by the aggregate number of shares of our common stock issued and outstanding, will be reduced in proportion to the size of the reverse stock split. Correspondingly, our additional paid-in capital account, which consists of the difference between our stated capital and the aggregate amount paid to us upon issuance of all currently outstanding shares of our common stock, will be credited with the amount by which the stated capital is reduced. Our shareholders’ equity, in the aggregate, will remain substantially unchanged.

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No Going Private Transaction

Notwithstanding the decrease in the number of outstanding shares following the proposed Reverse Split, our Board of Directors does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.

Exchange of Stock Certificates

If the reverse stock split proposal is effected, shareholders holding certificated shares (i.e. shares represented by one or more physical stock certificates) will be required to exchange their existing certificates (“Old Certificate(s)”) for new certificate(s) representing the appropriate number of shares of our common stock resulting from the reverse stock split (“New Certificates”). Shareholders of record upon the effective time of the reverse stock split proposal will be furnished the necessary materials and instructions for the surrender and exchange of their Old Certificate(s) at the appropriate time by our transfer agent. Shareholders will not have to pay any transfer fee or other fee in connection with such exchange. As soon as practicable after the effective time, our transfer agent will send a transmittal letter to each shareholder advising such holder of the procedure for surrendering Old Certificate(s) in exchange for New Certificate(s).