Ad Age

March 15, 2005

Excerpts from Advertising Age magazine March 14, 2005

Channel One hits bump, losing ads and top exec

In-school TV network often targeted by critics hurt as Kellogg, Kraft shy away due to kid obesity debate

By Claire Atkinson

Its equipment is badly in need of an upgrade, advertisers are fleeing, critics are declaring they want to put it out of business, and the top executive, one of the founders, is leaving.

Channel One, once proclaimed by its founder Chris Whittle as “a good business” that wouldn’t work “unless it makes sense to the sponsors,” no longer seems to work for some of its key advertisers.

Primedia’s latest financial results show the extent of the network’s problems attracting advertisers. In a year that saw overall U.S. ad spending up by 10%, according to TNS Media Intelligence, Primedia’s Education segment, dominated by Channel One, saw ad revenue fall 12.3% for the year to $39.1 million. During the fourth quarter 2004, a major holiday selling period, ad revenue was down 12.1% to $13.1 million.

New York-based Ms. Harris plans to be “highly visible” to advertisers over the next few weeks as she makes the rounds with outgoing chief Mr. Ritts. She has her work cut out for her. The network is hardly high profile at the media agencies. Aaron Cohen, senior VP-director of national broadcast at Horizon Media, New York, said: “I haven’t seen a sales effort by Channel One in the longest time. I can’t remember the last time we were approached by Channel One.”

But its very presence in classrooms has drawn the ire of critics, including Commercial Alert, a Portland Ore.-based consumer advocacy group, which has pushed the charge against Channel One to the top of its agenda. “The coalition which opposes the presence of Channel One is bigger and stronger than ever before. We expect to run them out of every school in the country,” said Executive Director Gary Ruskin.

Jim Metrock, president of Obligation, a Birmingham, Ala.-based child advocacy organization, charges on his Web site that any school district that has a contract with Channel One is “not serious about education * and they are inviting the wrath of parents and other citizens who don’t want school time replaced with commercials for junk food and sleazy movies.”

Channel One’s ad declines date back years. In 2002 ad revenue at Channel One was $50.2 million, that dropped by 11% to $44.6 million in 2003. Primedia once packaged its teen titles together with Channel One, but Seventeen and its related titles were sold to Hearst for $184.2 million in May 2003. Ms. Harris was not yet sure whether there were other cross-company packaging opportunities.

A second headache for Ms. Harris will be overseeing the company’s digital upgrade. Some observers close to the company report Primedia has put off upgrading the network as long as possible. A handful of schools are testing a new digital format, but an insider said the board has not yet given the green light to doing a full upgrade, and won’t address it for at least another 6 months.

“It would be very difficult for Primedia to justify the capital investment if the ad revenue is down,” noted one executive close to the company…


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