Media & Marketing

Why Did Al Jazeera Pay $500 Million for Al Gore’s Current TV?


Carl Reiner and Joy Behar on the Joy Behar Set for Current TV at The London Hotel on Jan. 2, 2013 in West Hollywood, Calif.

Photograph by FilmMagic

Carl Reiner and Joy Behar on the Joy Behar Set for Current TV at The London Hotel on Jan. 2, 2013 in West Hollywood, Calif.

It’s hard to think of a television network that has struggled more than Current TV to find a successful programming strategy. And yet on Wednesday, the poorly rated cable network sold to Al Jazeera for somewhere in the ballpark of a whopping $500 million, allowing Al Gore and his co-founders to walk away with an estimated $440 million in profit.

How is that possible?

First, it’s a strong testament to the rich and forgiving environment that is the cable TV business of the early 2000s. At a time when even the biggest, most popular media brands continue to struggle to make money online, seemingly everybody in the cable TV firmament (thanks to the dual revenue stream of advertising plus carriage fees) has been raking in profits—even, apparently, when almost nobody is watching.

From its 2004 inception, Current TV floundered editorially. In the early days, the network bet on a programming strategy that relied heavily on user-generated content. It invited independent producers to submit videos, which were called “pods,” to Current’s website. Viewers could vote on their favorites, and the network bought the most popular ones and put them on the air.

The resulting pod-a-palooza resulted in a lineup of disjointed stories on far-flung topics in a range of styles. “The cable network itself airs a rotating slate of three- to seven-minute pods on subjects as varied as anorexia, global warming, the MisShapes, stay-at-home dads in Park Slope, growing anti-American sentiment in Egypt, Hurricane Katrina relief efforts and a 21-year-old’s cross-country road trip with his girlfriend,” Rebecca Angelo reported in the New York Observer in 2006. “It feels as if it were programmed by a 25-year-old graduate student with eclectic tastes and a Ritalin prescription.”

The appeal proved limited, and Current was eventually forced to cast about for a new strategy. Along the way, it occasionally produced some quality shows (the documentary news-magazine series Vanguard and high school football reality series 4th and Forever come to mind), yet struggled to establish a consistent identity as a brand.

Finally, in 2011, the network made a major gamble, paying top dollar to hire Keith Olbermann to anchor a slate of liberal news talk shows designed to compete with MSNBC (CMCSA). Olbermann, however, soon battled with Current’s management and departed in a storm of bad publicity for the network. Throughout it all, viewership remained puny. In the fourth quarter of 2012, Current TV’s average prime-time audience was a mere 42,000 viewers.

But as it turns out, the cable TV environment is so forgiving that even bad programming can still be good business. According to SNL Kagan, the network last year generated operating cash flow of $16.3 million on revenue of $108 million. Even though few people were watching, Current was still carried in some 60 million homes. The potential of reaching into so many living rooms remains highly appealing to a range of suitors. Thus, the network’s lofty sale price this week to Al Jazeera.

“Congratulations, cable guys!” writes Peter Kafka. “You’re in a business that’s so valuable that even a failed network with partial distribution and no audience is worth some $500 million.”

In the end, Al Gore didn’t have to create a beloved attraction along the Information Superhighway to make a nice windfall in the media business. All he had to do was create a cable network that viewers ignored.

Gillette_190
Gillette is a staff writer for Bloomberg Businessweek in New York.

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