Channel One: New Owner, Old Issues

Alloy Makes Changes to In-school News Net, but Critics Aren't Satisfied

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Channel One's got a new CEO, a new head of sales (from World Wresting Entertainment, no less), and a content deal with NBC that deals with the messy and costly detail of news production. Amid the many inevitable changes since Alloy Media & Marketing bought the in-school network from Primedia for $10 million about five months ago, a few things have stayed the same.

It still forces teachers to perform the chore of feeding tapes into outdated VCRs to record the show via a satellite dump, at least until a planned $12 million digital upgrade is completed in April 2008. And, yes, Channel One is still a target for those groups that believe schools should be commercial-free, even though its audience has shrunk and it no longer accepts ads for non-nutritional food such as candy, soda and snacks.
Alloy Media & Marketing CEO Matt Diamond
Alloy Media & Marketing CEO Matt Diamond

The network that once boasted of reaching 10 million teens in 320,000 classrooms and at its high point in 2002 brought in $50.2 million in ad revenues is not offering the kind of audience it used to: only 6 million teens, according to a PowerPoint presentation provided by Channel One, and only 270,000 classrooms. Despite the shrinking audience, executives claim it offers the equivalent of a 17.3 Nielsen Media Research rating. With junk-food, fast-food and soda advertisers out for good, Channel One is stuck courting a smaller pool of advertisers.

Optimism up top
In a recent call with analysts, CEO Matt Diamond said he was "bullish" as the network went into the second half of 2007 and 2008. "Based on what we've booked for next year already in new advertisers, incremental spots we were able to close for the end of 2007 and expected renewals, 2008 is pacing 30% to 50% ahead of 2007." Alloy is mum on ad revenue to investors. Unlike when the network was owned by Primedia, Alloy does not break out ad revenue in SEC filings.

Marketers identified by Channel One as appearing on its program include New Line Cinema, Warner Home Video, Sony Pictures, U.S. Marine Corps., U.S. Navy, U.S. Army, the Knight Foundation, Warner Brothers Studios, and video-game marketers Nexon and Activision.

Except for a smattering of Neutrogena commercials with perky teenage girls for a line of acne medications, the only ads on view the day Ad Age checked out channelonenetwork.com were for websites such as Find Tuition and Careers and Colleges, both owned and operated by Alloy. The two-minute commercial segment was heavy with PSA's, from wildfire-prevention ads to appeals from President Clinton ("When I was in school, I was overweight. I ate foods that were high in fat and didn't exercise...") rather than ads from corporate America's biggest brands. The CW network was promoting a single show.

"Branded" news
Despite Channel One's long-standing policy of limiting advertising to two minutes out of 12 minutes of programming, "branded" news segments are popping up. The Army sponsors a question of the week. Gatorade sponsors a player of the week.

"We don't consider a sponsorship ad, brought to you by, to be an expansion of advertising at all," said CEO Kent Haehl, who joined Channel One in late October, after working as exec VP of In-Store Broadcasting Network.

Mr. Diamond said the digital rollout will give Channel One more data to share with advertisers, including an answer to the longstanding criticism that the TVs are never turned on: It will finally report whether the sets were actually on or not. "We didn't have that kind of data before," he said.

To woo more advertisers, Channel One has beefed up its sales staff to six and plans to add a head of sales, Andrew Knopf, from World Wrestling Entertainment, according to Mr. Haehl.

Racy relations
One of the biggest challenges facing Channel One could stem from its position within Alloy. Indeed, Channel One could emerge as even more controversial due to its connection to Alloy, particularly given the company's association with the books that inspired the sex-infused "Gossip Girl," now airing on the CW, and social-networking sites such as Sugar Loot, where scantily clad teens often post photos to be voted as "hottest girl" or "hottest guy."

"Alloy has been operating under the radar since being founded in 1996. ... Alloy recklessly publishes trash novels like 'Gossip Girl' for teens and preteens," said Jim Metrock of Obligation Inc. on his website. "These novels promote underage drinking, celebrate illegal drug use and normalizes casual sex. ... This is Alloy's sick world for kids."
Channel One CEO Kent Haehl
Channel One CEO Kent Haehl

A retired businessman who worked in the steel-wire business in Alabama, Mr. Metrock has spent the past 12 years self-funding a campaign against Channel One. "It's robbing from our children's education," he said, adding he estimates an hour of lost instructional time a week.

Mr. Haehl, via e-mail, said of Mr. Metrock, "We choose not to respond to inaccurate, dated commentary on Channel One News."

Ready for a fight
While Campaign for a Commercial-Free Childhood never campaigned against Channel One when it was owned by Primedia, it recently has been spurred to action after researching Alloy's other youth-based programs and marketing work.

"Alloy is not a company that has any business being in schools, and we plan on making the point shortly," said Josh Golin, associate director at the anti-commercialization group. Mr. Haehl, in response, points to the network's many awards, including a 2005 Peabody Award. "There are people who tend to look at Channel One and see only the advertising. But we give a product back every single day. We give a news product," Mr. Haehl said. "It has to be supported by advertising. And that's an important distinction that some refuse to see."

Clearly, the historic controversy surrounding Channel One isn't going away anytime soon, even though, for media buyers, accountability remains a concern.

Stuck in their seats
Brad Adgate, research director at New York-based media firm Horizon Media, called for more measurement of Channel One advertising. Even so, he said the network does offer what's increasingly a rare find. "It goes after an audience that is not easy to reach. Teens multi-media task; they consume eight hours of media a day in six hours. Maybe that's part of the appeal for advertisers is you have a little more of a captive audience. If you get them brand loyal early, you will have them for the next 60 to 70 years."

Rick Haskins, CW's exec VP-marketing and brand strategy, is one of those advertisers. He began advertising the CW reality show "Life is Wild," about an American family that moves to Africa, on Channel One.

"Channel One had gotten into a rut and somewhat of a formula," he said. "Alloy ... already is shaking it up. They are really making the programming more meaningful for the kids, and that will make it more meaningful for the advertisers."
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