PRIMEDIA’s 3rd Quarter Results

October 30, 2003

Channel One’s parent company, PRIMEDIA, is in terrible shape.

The company announced their third quarter results today and it was dismal. Last year’s third quarter showed a loss of one cent per share. This year, they lost 17 cents per share. This greatly exceeded what the experts had predicted.

PRIMEDIA is one lousy company. It has never made money since it was created in 1989. It purchased Channel One News in 1994 from Whittle Communications. PRIMEDIA, then known as K-III Communications, had no business buying Channel One. It didn’t fit in at all with the magazines that comprised most of the company.

Channel One has made money for PRIMEDIA but the days of easy profits are gone. Today, Channel One’s audience is a fraction of what it was in the 90’s. Schools have turned the show off and ignored Channel One’s weak demands for schools to honor their contract. Typical of schools that have ignored the Channel One contract is Pizitz Middle School in Birmingham. By allowing this school and others to “opt-out” of the contract terms, Channel One has given implicit permission to other schools to breach their contract. Of course, all of this results in fewer advertisers and those who do advertise refuse to pay Channel One top dollar. The advertisers know the students aren’t watching like they did. Channel One News is scrambling to find a company to purchase them or to enter into a partnership.

Channel One News will have to make drastic cuts in the next months. There is little chance for substantial increases in ad revenue. PRIMEDIA’s chairman, Dean Nelson, mentioned the trouble with Channel One’s advertisers on the conference call this morning. Evidently, advertisers are postponing ad campaigns until later in the school year.

Obligation’s Jim Metrock said, “I believe PRIMEDIA will sell Channel One by the end of their fiscal year- within three months. The parent company is reestablishing itself as a niche magazine company. Channel One’s last supporter, Charles McCurdy, was dismissed by the company this month. PRIMEDIA will sell Channel One at a fire sale price even if they have to finance the sale themselves. To make the company more attractive, they will slash costs and that means big changes in Channel One’s personnel. I would expect to see people like Morgan Wandell and Jim Ritts not waiting around for the new owners to fire them. Guys, get those resumes out there. PRIMEDIA is $2.2 billion in debt and their sales are DECREASING. Their losses are INCREASING. You don’t have to be a MBA to understand this company is toast. Stick a fork in them, they’re done.”

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