Trading Statement

Zoo Digital Group PLC
18 February 2005


18 February 2005


                             ZOO DIGITAL GROUP PLC

                             ('ZOO' or 'the Group')

                               UPDATE ON TRADING

ZOO Digital Group plc ('ZOO' or 'the Group'), premier provider of tools for the 
production of interactive DVD-Video content, today announces a trading update 
and overview of current business activities.

HIGHLIGHTS

   • ZOOtech expected to achieve £500,000 of revenue by year end

   • ZOO Digital Publishing set to approximately double turnover to £11m by
     year end

   • Software testing on 'Regionalisation' successfully completed with major
     Hollywood Studio with expected revenues of $1 million

   • Further Interactive DVD Products agreed with Universal Pictures

   • Agreement reached with Noviy Disk for supply of ZOO's gaming products in
     Russia and ex-Soviet Union to a minimum value of $2million over the next 12
     months

   • Delayed income on ZOOtech and deferred income on the 'Crimelife'
     development project will lead to Final Results for period to 31 March
     2005 being below Board expectations

Ian Stewart, Chief Executive of ZOO Digital Group PLC commented:

'We are more confident about the prospects of this business than ever
before, however this year's revenues  will fall below the Board's
expectations.  Although short term revenues and profits have fallen behind
what we were expecting to achieve the medium to long term prospects for the
Group are better than we envisaged and much of the shortfall in revenues has
not been lost but simply deferred into the new financial year.

Both ZOOtech and Zoo Digital Publishing have progressed well over the last
12 months and we have made a number of breakthroughs in both technological
and market terms.  Our technology is now starting to be well used and we
are in advanced discussions with many leading corporates in many market
sectors.  The Board believes that the prospects for ZOO remain excellent.'



Enquiries

Ian Stewart James Chandler/Grace Marriner
CEO, ZOO Digital Group plc Beattie Financial
0114 241 3700 020 7398 3300

John Llewellyn-Lloyd
Noble & Company Limited
020 7763 2200

ZOOtech LTD

ZOOtech focuses on R&D and licensing of DVD-EXTRA, the Group's highly original
development software capable of creating complex interactive content for
standard DVD players. The strategy for ZOOtech is simple; to create the industry
standard tool for the production of interactive DVD content and drive revenues
through licensing worldwide in a combination of up front fees and royalties.
Current Trading

Since the launch of DVD-EXTRA STUDIO in Q2 2004 considerable progress has been
made with a number of third parties already developing commercial titles using
the product. Total sales for the 15 month Financial Period to 31 March 2005 for
ZOOtech Ltd are likely to be in the order of £500,000. Over 60% of this is from
royalty based revenues and the balance from software sales, one off project fees
and training income.

Entertainment titles produced pre-Christmas by third parties using DVD-EXTRA
STUDIO included:

* Three titles by Ouat Entertainment published in France by Universal Pictures
* A top selling interactive DVD 'Beat the Intro' published by VCI in the UK that
  was developed by Somethin' Else
* Bonus features on a number of DVD titles including 'Garfield The Movie' 
  published by Fox
* The successful production of two marketing DVDs by Freestyle New Media for 
  Land Rover
* Two children's educational products were released by Leapfrog in the US.

ZOOtech's work with a number of Hollywood Studios has progressed well. Detailed
and positive discussions continue with a particular interest expressed in the
significant time and cost savings that can be achieved using DVD-EXTRA STUDIO as
well as in the opportunity to produce more engaging interactive features.
Rigorous testing of our 'Regionalization' software in conjunction with one
studio has been successfully completed on criteria selected by the studios and
is in advanced stages of testing with a second studio, and ZOOtech is currently
working on the integration of the software into the wider DVD production
process.

We are in final contract negotiations with one particular studio from which we
would anticipate initial revenues of around $1 million. However, the timescale
between testing and revenue generation has been longer than we originally
anticipated and revenues from the Hollywood Studios are expected to commence in
the next financial year rather than the year to 31 March 2005. Consequently this
delay in revenues will impact profitability in the current financial year.

Entertainment Market Activity
The momentum and desire, across many markets, for interactive DVD has notably
increased. ZOO is in discussions with numerous organisations regarding
anticipated products for 2005 and 2006. In entertainment we are working closely
with several companies on products and roadmaps for iDVD games. These include
'Snap TV' with two major trivia games and the French game company Microids has
signed a license agreement to produce a major adventure game, expected to be
launched by the end of 2005.

Over the last six months ZOO has been working closely with a major toy company
in the US to evaluate various properties for interactive DVD using our software.
Following the three titles already produced, Ouat Entertainment is developing
between four and six products for 2005. After VCI's successful publication of
the 'Manchester United Official Interactive DVD', we are aware of plans by other
publishers to produce interactive DVDs based on four other major British
football clubs and at least two European clubs.

Education Market Activity
In education Generation 5, a leading French publisher of educational media, has
acquired a DVD-EXTRA STUDIO licence and is looking to publish a number of its
existing titles on interactive DVD during 2005. The four major US publishers of
educational content are evaluating a number of products for interactive DVD and
several other organisations have commenced evaluations of projects using our
technology. Detail Technologies are producing its police training software on
interactive DVD and also using ZOOtech's unique 'access control' feature to
prevent unauthorised use of the product.

Corporate Market Activity
In the corporate market Freestyle New Media Group, a leading new media marketing
 agency has selected DVD-EXTRA STUDIO as the cornerstone of a new service
promoting the use of interactive DVD as a marketing communications channel.
Following the success of two initial products for Land Rover, Freestyle has
indicated that two further DVD products will be produced and discussions have
also begun with other major motor manufacturers with regard to the production of
interactive marketing DVDs. One of our newest licensees, Georgopolis, is looking
to produce marketing products for two car manufacturers in the US and ZOO
expects to increasingly focus on the US corporate market during 2005.

Hollywood Studio Market Activity
As detailed above ZOO is continuing its work on the 'regionalisation' of menus.
One major studio has asked ZOOtech to assist in defining and deploying a new
production process based on our technologies, and one of our application
engineers has been seconded for a number of months. Consequently we fully expect
revenues from our regionalisation of menus to commence during the first quarter
of the next financial year and to be in the order of $1million for the full year
from this one studio.

We are in the final stages of testing and evaluation of regionalisation with
another major studio and expect to conclude this satisfactorily by end of March
2005. Once implemented, we will direct our resources to other major process
improvements such as the automated production of subtitles, which has been
requested by the studios. ZOO has also been commissioned by another major studio
to produce a unique feature for its film DVDs and we have produced concepts and
demos that have been very well received. This particular studio has further
commissioned ZOOtech on a funded basis to complete the next stage of development
involving a series of compatibility tests which will take up to three months.


Next Generation DVD
We have been a member of the DVD Forum, the group responsible for creating and
developing the DVD formats, since 2002 and have been participating with the
working group defining HD-DVD-Video, the next generation format for delivery of
high definition video using blue laser technology. In addition, in 2004 ZOOtech
joined the recently formed Blu-ray Disc Association (BDA), responsible for
developing a competing format (Blu-ray Disc), and we are active within this
group. Our participation as contributing members of the DVD Forum and the BDA
ensures that we are at the forefront of the development of next generation
formats.

We are working to establish ourselves as a leading provider of tools for these
new platforms by enhancing DVD-EXTRA STUDIO to deliver a single tool capable of
generating output for all video formats (standard definition DVD-Video,
HD-DVD-Video and BD-Video). We have been approached by major US based DVD
compression and authoring facilities with regard to development of next
generation tools and we are actively considering a number of collaborative
partners in order to part fund and also accelerate our development of this
capability for the professional authoring market. In short, the evolution of DVD
technology into a higher definition format presents ZOO with further commercial
opportunities and will have little or no negative impact on our progress moving
forward.

Patents
Our key patent application for the authoring of complex DVD products has now
been successfully granted in the UK and is pending in seven other territories.
We have continued to invest in our patent portfolio with 55 patents now pending
covering 22 patent families in the major territories and under the International
Patent Convention.

ZOO DIGITAL PUBLISHING LTD ('ZDP')
ZDP focuses on the publishing and distribution of interactive entertainment
products across multiple platforms such as interactive DVD, PS2, Xbox, GBA and
PC.

Current Trading
The plan to focus ZDP on two key areas of activity; DVD Production and Games 
Publishing, has delivered good results.  Despite the publicised difficulties 
that have frustrated the games and video sectors during Q4, both areas are 
progressing in line with overall plans and we anticipate continued growth.

The worldwide shortages of Playstation 2 and Xbox hardware throughout the 
Christmas period impacted some of our major customers including Game Group.  
However we have worked successfully with our major customers to re-schedule a 
number of our pre Christmas releases into our final quarter and maintain sales. 
The difficult trading conditions in the European games market compromised the 
performance of our Premier Manager product on PS2 and Guinness World Records 
Interactive-DVD under performed, although both products were profitable.  
However, we saw good performances of our other interactive DVD titles and 
general catalogue.  In particular, our Gameboy Advance range was very strong 
and a number of titles sold very well including Sim City, Need for Speed, 
Ms PacMan, Payback, Who Wants To Be A Millionaire 2 and Monopoly.

Christmas 2004 demonstrated the growing demand for Interactive-DVD content and 
whilst the UK continues to lead the world for 'special interest' content, 
Interactive-DVD has now been successfully launched in eight further territories.  
'Who Wants To Be A Millionaire' reached No. 16 in the UK DVD chart and the title
has now shipped approximately one million units across Europe.

Konami have extended the publishing of the Crimelife title we are developing 
into the North American market with the consequence of sacrificing expected 
licensing revenues this year in order to facilitate the potential for a far more 
lucrative royalty stream next year.  We continue to expect ZDP to be in a 
profitable position over the 15-month period to 31March 2005 with turnover in 
line, but net profit below the Board's expectations.

DVD Production
Following the success of the 'Who Wants To Be A Millionaire?' Interactive-DVD,
Universal Pictures has committed to extend its leadership in this new
entertainment category with a range of new titles developed by ZDP for 2005.
Consequently, we expect an e international rollout of our newest version of
'Millionaire' in 2005. With the support of Celador International and Universal
Pictures, this will be the first interactive 'Millionaire' product to offer
greater functionality than the TV show. We are in advanced discussions to
acquire further licenses of similar stature for publication in 2005 and are
looking to extend our dominant position in interactive DVD through increasing
our presence in many key territories, adding new publishers to our roster and
announcing a significant number of major new titles.

Games Publishing
Our portfolio of licenses in Games Publishing continues to strengthen, including
our first titles for the new Nintendo DS.  Products for release in February 
2005 and March 2005 include Psi-Ops on PC, Guilty Gear on PS2/Xbox and Sudeki on 
PC.  We are also very pleased to confirm the release of the much-awaited Alien 
Hominid on PS2 and Xbox in May 2005.

These titles demonstrate our ongoing strategy to improve the quality of titles 
and in turn have helped strengthen our distribution channels in a number of 
territories.  We have concluded an output agreement with Noviy Disk for Russia 
and ex-Soviet territories for the supply of our products to a minimum value of
$2million over the next 12 months and  have also reached agreement with Consult
DVD for the publishing and distribution of our range in the Benelux region.  In 
addition, our whole catalogue is now on sale in Germany through Midway Games and 
we also expect to see a significant increase in the amount of products to be 
placed in the Australian market during 2005 through our relationship with Pier 
57.

The development project with Konami for  'Crimelife: Gang Wars', the eagerly 
anticipated title continues to build momentum and is in the final stages of 
completion with all milestones having been met to date. It is expected to be 
published by Konami in the Autumn of 2005 on PS2/Xbox and PC, allowing us to 
participate in a royalty revenue stream in the year to 31 March 2006.

SUMMARY

Both business units have progressed enormously over the past 12 months and,
whilst the delays in revenues from the Hollywood segment have impacted profits
for the financial period to 31 March 2005, it is now a major breakthrough for us
to be working closely with one of the world's major studios ensuring the
inclusion of DVD-EXTRA in their future plans. Our technology for the
regionalisation of menus is being warmly received and is likely to generate good
revenues in the year to 31 March 2006. A number of interactive DVD products are
already being produced by third parties for publishing during 2005 and we expect
to see our royalty revenue stream growing at an increasing pace.

ZOO Digital Publishing Ltd will have at least doubled its turnover from the
previous year and has moved into profit, forming a solid core of revenues from
licensing and publishing games together with establishing itself as the leading
player in the fast growing area of Interactive DVD. Universal's recent
commitment to working with ZOO on extending its range of Interactive DVD
products for 2005 and beyond underlines the huge potential of this market place.




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