-27%

Today PRIMEDIA announced their 1st quarter 2006 results. The revenue losses for Channel One are staggering.

The past few years PRIMEDIA has separated out Channel One’s ad revenue. Up until that happened, the public had no idea how well Channel One was performing. We have posted below the quarterly results and company comments on Channel One. The fourth quarter of 2003 was the time C1N’s revenue was discernable.

The last three quarters have been very bad for Channel One: Ad revenue down -27.5%, -18.3%, and -38.2%.

How long can Channel One go on? Obligation’s Jim Metrock: “As long as PRIMEDIA their parent company wants them to. PRIMEDIA has plenty of money and a big line of credit. They evidently perceive Channel One Network as a company that can be and will be turned around by the efforts of CEO Judy Harris. PRIMEDIA is certainly a patient and understanding parent company.”

A look back….

From the quarterly statements of PRIMEDIA. Comments are exact quotes from the reports.

1st Quarter 2006 – (Ad revenue down 27.5%) Channel One’s decline in advertising revenue is mainly attributable to the ongoing impact of large reductions in advertising from a few advertisers in late 2005. The Company has plans in place to replace those revenues through the end of 2006. Channel One also continues to make progress with its plan to broaden its revenue base beyond traditional advertising and to enact strategic cost-cutting initiatives. The Company is making upgrades to its web platform and plans to make its foray into broadband media with the launch of a broadband channel in fall 2006. Driven by its new head of sales, who joined in September, 2005, Channel One expects to realize the benefits from upgrades in sales capabilities in the second half of 2006.
Channel One recently announced that effective July 1, it will move its programming hub from Los Angeles to Washington, D.C., closer to the center of public affairs issues and breaking news. While Channel One maintains full control over content, it will outsource physical production components, reducing its operating costs.

4th Quarter 2005 – (Ad revenue down 18.3%) Channel One took significant steps in 2005. With the appointment of Judy Harris to CEO and President in April, the division has begun to broaden its revenue base and is developing partnership and sponsorship opportunities with corporations and foundations. A new head of sales, Ellen Flahive, joined in the third quarter. In repositioning its business, Channel One’s primary objective is to broaden its revenue base beyond traditional advertising to include corporate sponsorships of public affair topics that are relevant to teens. In 2005, Channel One gained major new sponsors including Verizon and Subway. The 2006 results will benefit from significant cost cuts in late 2005 and 2006.

3rd Quarter 2005 – (Ad revenue down 38.2%) PRIMEDIA’s performance in the third quarter was primarily impacted by revenue declines in the Enthusiast Media Segment’s automotive categories, as well as a reduction in U.S. Government advertising scheduled to air on Channel One.

Channel One’s results reflect certain U.S. Government agencies not renewing or reducing their advertising campaigns. Channel One’s advertising revenue has traditionally been low in the third quarter since the network is not on the air during the summer. Government agency advertising spending was down 76% in the third quarter and 31% year to date. All other advertising revenue has increased 4% year to date. Judy Harris joined Channel One as CEO and President in April,  2005. Her primary objective is to broaden Channel One’s revenue base beyond traditional advertising to include corporate and foundation sponsorships of public affairs topics that are relevant to teens.

2nd Quarter 2005 – (Ad revenue up 2.2%) Both revenue and Segment EBITDA grew in the second quarter of 2005 for the second consecutive quarter after several years of decline. Growth at Channel One News, which reaches nearly eight million teens, was primarily driven by new advertisers and increases from existing advertisers in the wireless, health and beauty, and video game categories. The Segment’s Advertising revenue is entirely from Channel One.

1st Quarter 2005 – (Ad revenue up 2%) Both revenue and Segment EBITDA grew in the first quarter of 2005 for the first time in several years. Growth at Channel One News, which reaches nearly 8 million teens, was primarily driven by new advertisers and network television programming promotion as well as increases from existing advertisers in the wireless, video game and military recruitment categories.

During the quarter, PRIMEDIA announced the appointment of Judy L. Harris as President and CEO of Channel One. The Company is optimistic that Ms. Harris’ track record of success at PBS, Discovery, and Hallmark will help the segment deliver on its target of showing year-over-year revenue growth. On April 12, 2005, Channel One won a Peabody Award for news coverage, its second. The George Foster Peabody Awards recognize distinguished achievement and meritorious public service, and are widely considered the most prestigious awards in electronic media.

4th Quarter 2004 – (Ad revenue down 12.1%) The Education Segment continued to experience advertising revenue declines in 2004, due largely to the performance of Channel One. The concern by certain advertisers about the obesity issue in schools caused them to stop or reduce advertising into schools. The decline was somewhat mitigated by a number of new advertisers that Channel One was able to attract.

3rd Quarter 2004 – (Ad revenue up 4.6%) Advertising revenues, which are all from Channel One, were $6.8 million, up $0.3 million or 4.6% in the third quarter 2004. Advertising gains from movies, consumer products and television networks were offset predominantly by reduced spending from certain Internet providers. The third quarter is seasonally low as schools are closed for summer vacation during much of the quarter. Other revenue was $6.4 million, flat compared to the third quarter 2003. Contributing to the gain was Channel One production revenue, which was offset by declines at IMN. Films Media Group revenues increased 1.8%.

2nd Quarter 2004 – (Ad revenue down 20.7%) Advertising revenues, which are all from Channel One, were $9.2 million, down $2.4 million or 20.7% in the second quarter 2004. Advertising gains from movies, television networks, military recruitment and other clients were offset by reduced spending from certain food and beverage accounts.

1st Quartet 2004 – (Ad revenue down 13.8%) Advertising revenues, which are all from Channel One, were $10.0 million, down $1.6 million or 13.8% in the first quarter 2004. Gains from additional health and beauty brands, movies, and telecommunications firms were offset by reduced spending from food and beverage accounts.

4th Quarter 2003 – (Ad revenue down 5.1%) Advertising revenues, which are all from Channel One, were $15.0 million, down $0.8 million or 5.1% in the fourth quarter 2003.

3rd Quarter 2003 – PRIMEDIAPRIMEDIA Television continues to be challenged, with sales down approximately $2 million or 14% in the third quarter 2003. This was due primarily to lower advertising on Channel One and education budget constraints affecting Films for the Humanities. Costs are being tightly managed in these businesses.

2nd Quarter 2003 – PRIMEDIA Television was soft in the second quarter 2003 due primarily to reduced advertising spending on Channel One from two large accounts, which more than offset sales from new advertisers. Sales for PRIMEDIA Television in the second quarter 2003 were down approximately $2 million.

1st Quarter 2003 – Seventeen magazine and PRIMEDIA Television were soft in the first quarter 2003.

4th Quarter 2002 – A significant growth initiative involves primarily the use of the existing Channel One Network for a next generation of product offerings to the nation’s schools, such as the streaming of educational video and software through the Channel One system.

Channel One Network tripled its number of new advertisers in 2002 compared to prior year, with average deal size doubling. New advertisers in 4Q02 included Cover Girl, Sony, Warner Brothers and Wrigley.

3rd Quarter 2002 – Channel One’s advertising cash revenue grew 42% in third quarter 2002 compared to prior year.
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So far in 2002, Channel One has 25% of its advertising from new customers and average new account deal size has more than doubled over prior year. The fourth quarter is expected to exhibit continued strength in the Consumer Guides, enthusiast properties and Channel One, and benefit from previous cost actions.

2nd Quarter 2002 – • Over 80% of Channel One’s advertising target for this year is already booked.  So far in 2002, Channel One has an increase of 143% in new accounts with average deal size doubled.

Weak brand advertising continued to affect some of the consumer Broad Reach magazines and Channel One.

1st Quarter 2002 – Consolidated EBITDA from continuing businesses declined in first quarter 2002 primarily because of the continuing impact of the advertising recession on the PRIMEDIA Business Magazines & Media Group and weak brand advertising which affected Broad Reach consumer magazines and Channel One.

in $millions

source: PRIMEDIA quarterly earnings reports

Tags: channel one news, financial results, Judy Harris, losing advertisers, sales decline