PNI Digital Media - Solutions for the Digital Lifestyle

PhotoChannel Corporate Update

PNI Continues Strong Business Progress

VANCOUVER, BC - October 4, 2005 - PhotoChannel Networks Inc. (TSX-V: PNI and OTCBB: PHCHF) ("PhotoChannel") the operator of PNI Digital Media, provides the following corporate update:

PNI continued to see strong adoption of its model, as evidenced by the increase in photo processing through its platform. For the first two months of the Company’s 4th quarter (July-Sept), revenue transacted by retail and wireless carrier customers continued to grow. During these two months, the dollar volume of photofinishing processed increased by 12%, July 2005 compared to June 2005, and by a further 35%, August 2005 compared to July 2005. The results of the Company’s fiscal year-end, ended September 30, 2005, will be announced as soon as they are available.

“We are very pleased with the continued drive toward higher revenues,” said Peter Fitzgerald, Chairman and CEO of PNI. “We are looking forward to the holiday season, which is traditionally the strongest photofinishing quarter of the year. Consumers are now printing their digital images in significant volume – in fact, it’s so strong that our retail clients are now asking us to layer on other digital products and services, such as music compilations on CD and video games. We expect our strong growth to continue as we push PNI Digital Media in Canada, the US and abroad.”

Recent Highlights

Wal-Mart Canada renewed its contract with the Company for two more years with automatic one-year renewal provisions.
Added SAM’S Club Canada as a customer.
Announced its next-generation technology, “PNI Digital Media”. This platform enables all forms of digital media to be electronically distributed and transported, direct to the retail store for production and pickup by the customer. For more, see www.pnidigitalmedia.com.
Signed an agreement with Summus Inc. for the integration of Summus’ mobile photo services infrastructure with the PNI Digital Media Platform. Summus has relationships with wireless carriers that account for 97% of all U.S. wireless subscribers.
Announced the integration of InComm’s Fastcard technology into the PNI Digital Media Platform to allow their point of sale activation (POSA) technology to be used in order to allow retailers to sell prepaid products for photos, music or games. Incomm serves over 70,000 locations in North America.
Thomas Nielsen was named as Director of the Company. Mr. Nielsen currently is Director of Engineering for Adobe's Creative Professional Business Unit.
Bell Mobility signed an agreement to connect Bell Mobility camera phone customers to the PNI’s retail network for photo printing services. PNI provides a similar service to TELUS and Fido customers.
Announced an oversubscribed private placement, and has now closed at $1,995,000. A total of 24,937,500 units were issued. All securities issued are the subject of a four month hold period. Insiders: Peter Fitzgerald, Chairman and CEO – 2,885,000; Peter Scarth, Director – 2,500,000; and Kyle Hall, EVP – 1,233,000.
Cancelled all common share stock options (“Options”) issued on November 24, 2003, at an exercise price of $0.31 per Option, and re-granted one half of one option for each Option held (“New Options”) to directors, officers and staff at an exercise price of $0.15 per New Option. This is subject to shareholder approval, which will be sought at the next annual general meeting. If approved, this will result in the cancellation of 2,375,000 Options and the re-grant of 1,187,500 New Options to the Company’s directors and officers.

About PhotoChannel

Founded in 1995, PhotoChannel operates PNI Digital Media to provide services for major retailers, wireless carriers, and content providers. The PNI Digital Media Platform connects consumer-ordered content, such as photos, music and games, with retailers that have on-demand manufacturing capabilities for the production of merchandise in real time. Currently, there are over 8,000 retail locations serviced by PNI Digital Media. Music, Photos, Games, Video, Mobile Content - PNI Digital Media creates transaction opportunities. For more information visit www.pnidigitalmedia.com.

Investor Information:

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The TSX Venture Exchange has neither approved nor disapproved the information contained in this release. The Company relies upon litigation protection for "forward-looking" statements.

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