New troubles at Al Gore's Current TV

6:30 AM PST 06/24/2010 by Andrew Wallenstein, AP

He couldn't sell the channel; now he has to fix it

Al Gore, the world's pre-eminent environmentalist, has embarked on his toughest recycling challenge: his own cable channel.

For much of the past year, Current TV has been quietly undergoing an overhaul that will change just about everything but the struggling channel's name. Current declined comment for this story.

It's a revitalization project Gore & Co. embarked on after exhausting a more lucrative possibility: selling the channel. Current's founding partner, Joel Hyatt, spent much of 2009 shopping the network with a price tag that wildly overestimated the company's worth, confirmed sources at several conglomerates. Current even had extensive sale talks as far back as 2007 with Google, where Gore serves as a senior advisor.

Now the focus has shifted to fixing Current, perhaps with an eye toward a sale down the road. Last July, Hyatt was replaced as CEO by Mark Rosenthal, the former MTV Networks COO who is rebuilding the channel in the traditional mold Gore avowed to avoid, only to suffer the consequences.

Rosenthal has brought in a crew of colleagues from his MTVN days including an unlikely ringer: Brian Graden, the programming genius who masterminded hit series from "South Park" to "The Osbournes," before leaving last year. He's on retainer as a consultant.

Forget bite-sized clips created by anonymous viewers; the new Current will consist of full-length series from the usual suspects in unscripted production who are getting the word that Current is open for business.

For all its troubles, Current heads toward its fifth anniversary in August a profitable venture receiving robust license fees and a worldwide distribution footprint of 70 million. But the network could lose millions of those homes if it fails to secure a new carriage agreement at the end of the year with Time Warner Cable, a key outlet because of its exposure to Madison Avenue.

Either way, advertisers will be hearing more from Current because it will finally make its Nielsen ratings available in the fourth quarter, a risky but necessary move that could expose how few subscribers are actually watching.

"They've got to become rated soon or advertisers will not go with them," said Derek Baine, a cable industry analyst. "It's a big red flag."

For all the brilliance he has displayed grasping the meteorological dynamics governing the globe, Gore has miscalculated those of a slightly less complex world: the TV business. The radical ambitions he brought to the environment didn't pan out the same way in cable; the television will not be revolutionized.

But while the publicity attending his recent split from his wife of 40 years might suggest Gore has enough distractions in his life, he's said to be as committed as ever to Current. In recent months, he's traveled to Italy and South Africa to preside over the launches of international versions of Current.

Gore is working the backrooms back home as well, from affiliate handshaking at the Cable Show in Los Angeles in May to dining with 20 media buyers in New York in April. That same day he touted Current in a speech at a media-industry conference in New York.

When Gore gathered a team of investors to buy the network formerly known as NewsWorld International from Vivendi Universal Entertainment in 2004, rumor had it the former vice president sought to transform it into a liberal-minded corrective to Fox News Channel.

But when he unveiled Current a year later, it took what its founders called a "small-d" democratic approach: empowering viewers to create the content. A companion website would train viewers to upload their own video programming--even some of the commercials. Current also catered to the young and tech-savvy by making the programming "pods" no greater than 8 minutes in length.

But it was almost immediately apparent internally that Current's programming strategy was not sustainable; the video was low in volume and, often enough, quality. Compensating for that shortcoming only created a new problem: Current dramatically expanded its in-house corps of producers to the point where the staff ballooned to 200--unusual for a small network.

As far back as 2007, it was clear to Current management that for all its faith in the programming concept it had an untenable business model. With significant stakes in the company and anxious investors looking for an exit strategy, Hyatt and Gore began looking for buyers that had pockets deep enough to support it.

Gore's ties to Google made it a natural choice. Those ties gave Google an early presence on Current TV, which ran interstitials featuring Top 10 searches from the site. But an acquisition was an entirely different matter, one that ran contrary to the company's avowed disinterest in being in the content business.

Nevertheless, sources say talks between the two companies went beyond preliminary negotiations, for a price in the neighborhood of $400-500 million. Ultimately, Gore's proximity to Google wasn't enough to get the deal done.



"While Google is constantly talking to various companies about a variety of things, we don't comment on rumor speculation," a spokesman said.

Since then, Current has been offered up to every conglomerate operating a stable of cable channels. Its appeal is easily underestimated: Even the dimmest assessments of Current's brand and programming are outweighed by the fact that the network is in enough homes that growing it to full distribution is a very lucrative possibility only one of the big boys can achieve. That's because the Viacoms and Discoverys of the world are able to leverage their biggest channels to build up smaller spinoffs.

Current could very well have thrived in such an arrangement but the problem was Current continuing to be offered for over $500 million. That may seem a small sum compared to the billions that earlier acquisitions from BET to TNN have fetched. But that number is far above what potential buyers were willing to pay and the marketplace lately hasn't been conducive to acquisitions even at a fair price.

Market conditions also killed another route to growth Current tried in more publicized fashion: IPO. The company filed to the tune of $100 million in class A common stock in January 2008, unfortunately timed to the crumbling of the U.S. economy. By the following April, the IPO was canceled, leaving Current underneath serious debt. In November 2008, 60 layoffs gave the company a little breathing room.

With no choice but to fix the network they were saddled with, Hyatt stepped aside as CEO to make room for Rosenthal, who has sat on Current's board since its inception. Since joining nearly a year ago, Current has maintained near-radio silence as he leads retrenchment efforts.

The network did pop back on the radar, albeit as a footnote, to a major story in August: Two female journalists employed by Current were detained in North Korea and nearly imprisoned for a 12-year term before Bill Clinton was brought in to negotiate their release.

Rosenthal signaled his game plan last July, when 80 more staffers were laid off. Current also announced at the time that it would ditch its signature short-form programming. The move was indicative of a 180-degree turn from Gore's original vision: Current would conform to the traditional network model in every way, shape and form. Changes should be evident on air first quarter of 2011.

Several senior MTVN colleagues were brought in as consultants to engineer the turnaround including Hank Close, formerly president of ad sales. Several more key full-time hires have been made as well.

But original programming is at the heart of any successful cable network, and for that he's turned to Graden, who's known for his knack for hits. Graden and Current make for an unusual combination. A network that has devoted significant time to serious topics ranging from AIDS in Africa to New Age spirituality is in the hands of Graden, who didn't exactly win Peabodys for shows often criticized for corrupting America's youth.

Graden did not respond to an email seeking comment.

The MTV infusion at Current is ironic considering the channel is essentially facing the same fundamental problem MTV confronted so successfully in the 1990s: a TV schedule comprised of multi-minute clips is far less advertising-friendly than the half-hours that ensure viewer tune-in isn't so erratic.

The early word is Current will be nowhere near its former staff size. Rather, it will be restructured less like one massive news bureau and more like a traditional cable channel, with formal departments for development and acquisition.

The channel will likely stock up on documentaries, a safer play than going with all originals. Still, originals will be crucial part of the mix.

While Graden is only helping Current on a consulting basis, the network has already hired another MTV veteran, Ocean MacAdams, as a second-in-command to a new programming chief that has yet to be hired.

Also going forward the channel will likely blur the boundaries between news and reality formats. In addition, part of the mandate at Current going forward is lightening up beyond its more serious-minded fare--and aging up as well, about a decade older than the early-twenties male that was its former target.

All that Current has made public about its development slate is that the network had struck a deal with Will Wright, creator of the videogame colossus "The Sims," to create his first TV venture: "Crowdsourced TV," which aims to create shows based on the ideas of the viewing audience.

"I think that they really need to have some series that get some traction with viewers," said Baine.


   
How exactly all this will allow Current to distinguish itself from the umpteen unscripted-heavy channels in cable from TLC to Tru TV isn't clear, but the network will likely retain some veneer of its original emphasis on interactivity, if for no other reason than to avoid scrutiny from cable operators who can be sticklers for holding networks to the programming description with which they started.

The cable operators are a chief concern at Current because its valuation is tied up almost entirely in its distribution. Which makes renewing its expiring deal with Time Warner Cable a top priority; the MSO can be notoriously hard-nosed at the negotiation table. At the very least, Current doesn't have to worry much about losing Comcast, which is believed to own as much as 10% of Current, according to SEC filings the cable giant recently submitted due to the NBC Universal acquisition. It's the price many startups have to pay to get on Comcast.

Changes have already taken hold at Current's website, which has largely reverted to the typical TV marketing platform after ambitious, multiple attempts to reposition Current.com as a force in its own right.

In retrospect, what's distinctive about Current's troubles was Gore's vision had so much potential. It's uncanny how close he was to capitalizing on several key trends that transformed the media world, only to watch others do so.

For instance, Current's reliance on user-generated video was the right idea, but the wrong medium. Little did Current know that at virtually the same time--and in the same Bay Area region where it was headquartered--an unknown website called YouTube would adopt a similar programming strategy.

With 2 billion streams per day currently under its domain, the winning approach isn't difficult to determine. Having just celebrated YouTube's own fifth birthday, founder Chad Hurley still talks of his creation in eerily similar terms to the populist phenomenon Gore was hoping to spark.

Furthermore, insiders say the Current rank and file agitated to take advantage of Gore's political outlook as a programming mission. But they were repelled by management's insistence the network stay even-handed in fear of alienating the cable operators that granted it carriage.

Lo and behold, another cable network once known for its struggles, MSNBC, righted itself precisely by leaning left in its primetime programming

Another trend Current failed to exploit was Gore himself. Even as Gore rocketed to international acclaim for "An Inconvenient Truth," Current barely leveraged its in-house rock star; Gore didn't appear on the channel's air until its third year, and fleetingly thereafter. And yet Gore's reputation was such that he could have been the basis for the entire channel, not unlike what Discovery Networks is doing with its much anticipated OWN venture with Oprah Winfrey.

Depending on which insider you ask, Gore was either: leery about letting his cable channel bask in his halo in fear of seeming self-serving; too distracted by the production and subsequent success of "Truth" to even have the time to get involved, or Current TV management intentionally kept Gore at arm's length in fear of turning the channel into Gore TV. The truth is quite possibly a combination of all three.

That said, Current is hardly Gore's only foray into big business. In addition to his Google advisorship, he's a board member at Apple and partner at two investment firms, Kleiner Perkins Caufield & Byers, and another he founded, Generation Investment Management. His war on global warming continues, too.
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