January 26, 2009

Timing, we are told, is everything, especially in comedy. Timing is important in business too.

For Channel One News and their owner Alloy Media and Marketing, timing is not working in their favor.

On April 23, 2007, Alloy assumed the assets and liabilities of the all but bankrupt Channel One Network. C1N’s previous owner, Primedia, Inc., basically paid Alloy to take this stinkbomb of a company off their hands. [Alloy in their SEC filings said the assets and liabilities of Channel One equaled each other. In other words Channel One was worth zero. The next year Alloy reported that they had made a mistake, the liabilities of Channel One were actually worth $5 million less than they thought. Alloy’s and Primedia’s accountants could not have been that incompetent. What probably happened was Alloy wanted Primedia to pay them for taking over the responsibility of owning the broken down piece of junk Channel One News had become, and Primedia agreed but they didn’t want it known at the time that instead of receiving money for a sale of one of its companies they were going to have to pay a "purchaser" to "buy" Channel One. Primedia’s shareholders wouldn’t have liked that at all.]

Alloy’s CEO Matt Diamond was upbeat in all his public comments about being the new owner of Channel One. They were going to spend millions on doing a digital upgrade of Channel One. That never happened. All Alloy did was upgrade the receiving units of Channel One’s equipment. This was a big help for advertisers (it helps track the number of viewers), but schools waiting for the rest of the digital upgrade – meaning digital TV screens and clearer pictures – can stop waiting… it is never going to happen. Alloy can’t afford a true digital upgrade of Channel One’s ancient TV screens.

When Alloy acquired Channel One they knew the company was a money loser. Since then Alloy has tried a lot of things to cut expenses. NBC, looking for a cheap way to advertise their programs to kids, agreed to produce all of Channel One’s shows. Channel One could not afford to continue to pay people like Jim Morris their longtime executive producer. Channel One News in effect died when Alloy took it over. Now, Channel One News is a watered down, kiddie version of NBC news scraps. Channel One once had eight reporters who traveled the world. Now they have three that don’t rack up too many frequent flyer miles.

When Alloy took control of the company they should have hired a whole new, dynamic executive team to bring new life to the stale company, but instead (again to save money) they hired Channel One-has beens, like Kent Haehl and Paul Folkemer, and they promoted Kathy Goodman who has been with the company since the Whittle days. All of these key people brought nothing fresh to Channel One.

Schools are tired of Channel One. They are tired of TVs that don’t work, tired of stale day-old newscasts, tired of advertising that has no place in serious schools, and tired of a group of old men and old women trying to exploit a captive audience of school kids.

It would have been difficult for Alloy to make Channel One work even in good times, but these aren’t good times.

The timing couldn’t be worse for Alloy Media and Marketing and Channel One News. The economic turndown is adversely affecting advertising spending, especially when it comes to advertising vehicles like Channel One that are very controversial.

This recession may last through 2009 and possibly longer. A company that is financially struggling to begin with and that depends almost exclusively on advertising sales like Channel One will find it very difficult to survive in this environment.

How much longer will NBC prop up Channel One by providing its programming? There were hints in the last Alloy conference call that NBC may be thinking about backing out of their production agreement. If NBC walks away, who will provide the camera people, producers, news content, etc that Channel One needs to pump out a daily TV show?

Alloy wasn’t setting the woods on fire financially speaking before they acquired Channel One. Since the acquisition, Alloy’s stock price has headed further SOUTH at an alarming rate. On April 20, 2007, the last trading day before they announced their acquisition of Channel One, Alloy’s stock was selling for $12.62. Today after almost two years of being weighed down with Channel One, the stock closed at $4.52. If it hadn’t been for a 1 for 4 reverse stock split in 2006, Alloy’s stock would be just above one dollar a share.

There are not many people left at Channel One News. It has to be a sad place to work. The glory years are now more than a decade in the past. The Channel One brand is dead. It was killed by poor management, by educators fed up with wasted school time, by students who tired of its often juvenile content, and, we would like to think, by activists like us.

Ironic that the market is telling this kiddie marketing company that it should go out of business.