Private Media Group (PRVT)

Restructuring

During the first quarter of 2008 restructuring plans were developed in response to the shift of the Company’s business model from traditional physical delivery of our content to digital new media distribution. The plans consist of three main features: a) reorganizing distribution of physical products, b) reviewing and revising content requirements and related costs, and c) consolidating operations in line with our new business model.

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With respect to the reorganization of distribution of physical products, we have outsourced our DVD distribution in France to a third party and re-organized our French subsidiary. As a result, starting 2009, we will make savings of EUR 0.5 million per year in overhead and we expect sales volumes to increase significantly. We are continuing to review our model for distribution of physical products and additional changes are expected.

With respect to revising content requirements and related costs we have analyzed sales statistics for newly produced content vs. compilations, reviewed demand for newly produced content from digital new media distribution vs. traditional physical delivery and analyzed sales statistics with respect to our content mix. The result of this review is a reduction in the average number of releases per month by 2.5, a change in the mix and an expected average saving in investment in video library of approximately EUR 0.5 million per quarter, starting in the second quarter of this year. We do not believe that the revised content strategy will have any impact on sales since our digital new media distribution is mainly dependent on our expansive library and not on new releases, unlike the traditional business. We have also renegotiated agreements with third parties relating to content acquisition and post-production cost.

We have also reviewed our magazine production and distribution and reduced the number of new publications from four to two, as from the third quarter 2008. We have replaced the two cancelled publications with back catalogue magazines. We do not believe this will have any material impact on sales since we distribute all our magazines together with back catalogue DVDs and research has indicated that consumers are primarily interested in the DVDs.

With respect to consolidating operations, we are reviewing all our processes in order to take advantage of technological advances and potential outsourcing opportunities, and in order to eliminate duplicate functions. During 2008 we have reduced the Company’s headcount, including employees and temporary agency employees, by 26 to 97.

During 2009, we expect to reduce our selling administrative and general expense by EUR 2.6 million as a result of restructuring efforts.

We expect to continue to focus on cost reductions and expect additional restructuring actions in the near term.

Restructuring

Restructuring

During the first quarter of 2008 restructuring plans were developed in response to the shift of the Company’s business model from traditional physical delivery of our content to digital new media distribution. The plans consist of three main features a) reorganizing distribution of physical products, b) reviewing and revising content requirements and related costs, and c) consolidating operations in line with our new business model.

With respect to the reorganization of distribution of physical products, we have outsourced our DVD distribution in France to a third party and re-organized our French subsidiary. As a result we will make savings of EUR 0.5 million per year in overheads and we expect sales volumes to increase significantly. We are continuing to review our model for distribution of physical products and additional changes are expected.

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With respect to revising content requirements and related costs we have analyzed sales statistics for newly produced content vs. compilations, reviewed demand for newly produced content from digital new media distribution vs. traditional physical delivery and analyzed sales statistics with respect to our content mix. The result of this review is a reduction in the average number of releases per month by 2.5, a change in the mix and an expected average saving in investment in video library of approximately EUR 0.5 million per quarter, starting in the second quarter of this year. We do not believe that the revised content strategy will have any impact on sales since our digital new media distribution is mainly dependent on our expansive library and not on new releases, unlike the traditional business. We have also renegotiated agreements with third parties relating to content acquisition and post-production cost.

We have also reviewed our magazine production and distribution and reduced the number of new publications from four to two, as from the third quarter this year. We have replaced the two cancelled publications with back catalogue magazines. We do not believe this will have any material impact on sales since we distribute all our magazines together with back catalogue DVDs and research has indicated that consumers are primarily interested in the DVDs.

With respect to consolidating operations, we are reviewing all our processes in order to take advantage of technological advances and potential outsourcing opportunities, and in order to eliminate duplicate functions. During the nine-month period ending September 30, 2008 we have reduced the Company’s headcount, including employees and temporary agency employees, by 18 to 105.

We expect to continue to focus on cost reductions and expect additional restructuring actions in the near term.

Restructuring

During the first quarter of 2008 restructuring plans were developed in response to the shift of the Company’s business model from traditional physical delivery of our content to digital new media distribution. The plans consist of three main features a) reorganizing distribution of physical products, b) reviewing and revising content requirements and related costs, and c) consolidating operations in line with our new business model.

With respect to the reorganization of distribution of physical products, we have outsourced our DVD distribution in France to a third party and closed down our subsidiary. As a result we will make savings of EUR 0.5 million per year in overheads and we expect sales volumes to increase significantly. We are continuing to review our model for distribution of physical products and additional changes are expected.

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With respect to revising content requirements and related costs we have analyzed sales statistics for newly produced content vs. compilations, reviewed demand for newly produced content from digital new media distribution vs. traditional physical delivery and analyzed sales statistics with respect to our content mix. The result of this review is a reduction in the average number of releases per month by 2.5, a change in the mix and an expected average saving in investment in video library of approximately EUR 0.5 million per quarter, starting in the second quarter of this year. We do not believe that the revised content strategy will have any impact on sales since our digital new media distribution is mainly dependent on our expansive library and not on new releases, unlike the traditional business. We have also renegotiated agreements with third parties relating to content acquisition and post-production cost.

We have also reviewed our magazine production and distribution and reduced the number of new publications from four to two, as from the third quarter this year. We have replaced the two cancelled publications with back catalogue magazines. We do not believe this will have any material impact on sales since we distribute all our magazines together with back catalogue DVDs and research has indicated that consumers are primarily interested in the DVDs.

With respect to consolidating operations, we are reviewing all our processes in order to take advantage of technological advances and potential outsourcing opportunities, and in order to eliminate duplicate functions. During the six-month period ending June 30, 2008 we have reduced the Company’s headcount, including employees and temporary agency employees, by 15 to 108.

We expect to continue to focus on cost reductions and expect additional restructuring actions in the near term.