Kicked Out of Class: Primedia Sheds In-School Net Channel One

Alloy Media and Marketing to Acquire Assets

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NEW YORK (AdAge.com) -- Primedia has finally found a buyer for its beleaguered in-school TV network Channel One. New York-based Alloy Media and Marketing has agreed to acquire the assets in exchange for taking on its debts and required capital expenditure. Alloy CEO Matt Diamond puts that figure at around $10 million.
Alloy CEO Matt Diamond
Alloy CEO Matt Diamond

Primedia was previously rebuffed in its efforts to offload the channel by a multitude of major entertainment conglomerates and was close to closing the service had a buyer not come forward. In December, Primedia shifted Channel One into its "discontinued operations," describing it as an accounting move. Even so, Primedia continued to support the service, which helped launch the careers of CNN's Anderson Cooper and National Geographic's Lisa Ling.

Taking channel digital
Mr. Diamond said he decided to buy the service because of the quality programming, though he said he was well aware of the lack of spending on infrastructure. His plan is to take Channel One digital and spend an estimated $8 million to $10 million on upgrading the ancient VCRs and TV sets used to deliver the service in schools.

Mr. Diamond praised current coverage of the environment and green issues.

The company is also planning to increase the amount of feedback from teens, both about the service and any number of other subjects. And Alloy sees that feedback as valuable research it might ultimately provide to colleges and schools.

Alloy, which also produces magazines distributed in schools, describes itself as an advocate of the youth market.

"Ultimately this network has an opportunity to let the youth message be heard. To take those relationships and have the feedback via the TV is unique," said Mr. Diamond, a former General Electric Co. executive. Channel One delivers programming along with two minutes of advertising to school classrooms and common areas, such as cafeterias. Since 1990, the network has outfitted schools with free TV and VCR equipment as part of an agreement to air newscasts with the ads during school hours. Channel One News reaches more than 7 million secondary-school children in 11,000 schools and has in the past won a Peabody for its coverage of issues for young people.

Huge declines in ad revenue
In recent years, Channel One suffered from huge declines in ad revenue, especially as it faced an onslaught of criticism from consumer groups such as Commercial Alert which does not believe that kids should be exposed to advertising within the confines of the school system.

For the first nine months of 2006, ad revenue in Primedia's education segment -- which housed Channel One -- fell 27.8%, to $17.1 million from $23.7 million, while third-quarter ad revenue fell to $3.7 million from $4.2 million, off almost 12%. When Primedia announced its full-year results on Feb. 27, it did not report numbers for the educational unit because it was being discontinued.

The U.S. Government, Pepsi Cola Co. and Cingular were once among Channel One's advertisers. But advertisers have recently backed away from overtly targeting young adults, especially for products that are viewed as unhealthful.

Mr. Diamond said Channel One would not solicit such advertisers. In reference to the lobby groups he said: "You have to work with those people. No program should go out into a school if the educators don't want it, and that's the way [Channel One] operates today. Teachers can press a pause or unplug the TV."

'Do the right thing'
"All you can do is do the right thing. We don't want those advertisers back," he said, referring to advertisers promoting junk food. Mr. Diamond suggested that Channel One had had a hard time selling ads in the past because of fears over its closure. He said those fears would now dissipate.

Channel One CEO Judy Harris remains head of the channel, and Mr. Diamond said he was not looking to cut staff but rather boost it. Primedia is expected to announce the sale when it reports its first-quarter numbers on May 3.

Alloy, which operates a number of business units, acts as both ad agency and content producer for marketers looking to reach the under-18 crowd. The company already operates an in-school ad network with national coverage in over 10,000 middle and high schools, reaching 8 million students.

The in-school ad network consists largely of electronic billboards to announce school news and more traditional message boards that hang in areas around school gyms. Alloy also offers services such as direct mail, display and content production.
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