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Published in Print: July 27, 2005, as Channel One Struggling in Shifting Market

Channel One Struggling in Shifting Market

CEO of TV newscast confronts loss of ads and aging technology.

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In a Culpeper Middle School classroom one rainy morning this past spring, the morning news aired on a wall-mounted television set: a deadly helicopter crash in Iraq, prescription drug abuse by teenagers, and an effort to recycle crude oil led by high school students.

The program was Channel One News, a daily current-events broadcast for students whose news coverage has garnered national awards. But the few students who trickled into the room midway through the 12-minute show largely ignored the TV set and talked to each other instead.

That kind of indifference is just one of many problems facing the Channel One Network, a subsidiary of New York City-based media giant Primedia Inc.

Long criticized for including two minutes of commercials in its broadcasts to classrooms, the for-profit network has lost a steady stream of advertisers and revenue in recent years. It needs to upgrade its aging technology infrastructure—a project potentially costing millions of dollars. And while the show is aired in almost 12,000 public and private middle and high schools nationwide—reaching 7.7 million students—the overall number of schools that subscribe to Channel One hasn’t increased in a decade.

Fifteen years after Channel One made its debut, some educators continue to see the newscast as a valuable addition to the school day. But in an era of intensified pressures for academic accountability, others don’t regard the free TV sets and other equipment that their schools get for subscribing as worth the 12 minutes of class time that the program consumes.

Upgrades Under Way

The network is now revamping itself to become more relevant to schools and advertisers, says Judy L. Harris, who took over as the network’s chief executive officer and president in April.

Ms. Harris is setting up an advisory council of educators to help create new school-ready products for Channel One. The network also recently rolled out a resource guide on its Web site aimed at helping students interact with government agencies and elected officials. And the new CEO is making the rounds to major food companies pitching participation in an on-air initiative that promotes healthy eating.

“My goal is to take it into the next generation of what Channel One can be,” said Ms. Harris, who previously worked for the Alexandria, Va.-based Public Broadcasting Service and Discovery Communications Inc., the Silver Spring, Md.-based cable-programming giant. “We want to make it the pre-eminent news and public-affairs resource and content for teens.”

Channel One at a Glance

Product: Daily current-events program shown in schools.

Audience: Some 7.7 million students in grades 6-12.

Format: 12 minutes, including two minutes of commercials.

Subscribers: Nearly 12,000 public and private schools.

If student reaction at Culpeper Middle School is any indication, she just might have her work cut out for her. Eighth grader Pariesce Baumgardner said she would give the show a “6” on a scale of 1 to 10, but acknowledged, “I really don’t pay that much attention.”

Channel One started in six schools in 1990 and grew quickly. Within several years, the fledgling news source created by Christopher Whittle, now the founder and president of the education management company Edison Schools Inc., had nearly 12,000 schools as subscribers.

Mr. Whittle sold Channel One in 1994 to K-III Communications Corp., which was renamed Primedia in 1997.

Schools subscribe to Channel One in part because they get television sets, VCRs, and satellite-receiving systems for free. But now much of that technology is old, and while some schools are getting new TVs, upgrading the technology infrastructure is one in a long list of priorities that Ms. Harris has to tackle.

“We don’t need the free televisions,” said Paul Regnier, a spokesman for the 166,000-student Fairfax County, Va., school district.

The network approached the district in the 1990s, and then-Superintendent Robert R. Spillane decided not to subscribe after talking to his social studies teachers. Mr. Spillane, now the Western and Eastern Europe regional educational officer of the U.S. Department of State’s office of overseas schools, says it wasn’t the commercials they were against.

“Their opinion was very strongly that it was not a quality asset to the curriculum,” he said. “And the interruption of Channel One at a very specific time [in the day] was just not an educational enhancement.”

That’s not how educators at Culpeper Middle School see things, though.

“The quality of Channel One is excellent, as it touches on the most important news of the day,” said Margery G. Southard, a principal-in-training who formerly taught English at the school. “That’s important, as kids don’t watch TV news or read the newspapers.”

Growth Stalls

Channel One executives stress that the number of schools subscribing to the newscast has remained steady, despite turnover among those schools. While 200 to 300 schools do not renew their subscriptions each year, about the same number of new schools sign up, the company says.

Still, Channel One is clearly struggling to keep its advertising base. Revenue losses at the network, which constitutes most of Primedia’s education division, were the leading driver of its parent company’s overall decline in 2004 earnings, according to company financial reports.

From 2002 to 2004, revenues dropped 30 percent, from $99.1 million to $66.4 million, for Primedia’s education division, the company says. A spokeswoman for Primedia said the company does not disclose Channel One’s total revenues separately.

The division’s net revenue in the fourth quarter of 2004, the time of the year in which Channel One typically earns the most, was also down 19.8 percent, compared with the same period in 2003, according to company financial reports. A company spokeswoman said advertising revenues for Channel One dropped from $44.7 million in 2003 to $39.1 million in 2004. She added that advertising was not the company’s only revenue source.

Food advertisers, such as Northfield, Ill.-based Kraft Foods Inc. and the Kellogg Co., of Battle Creek, Mich., have pulled out of Channel One in recent years. Those major companies sell cookies, cakes, and breakfast cereals, among other food items.

“Certain advertisers stopped or reduced advertising in schools due to concerns about the obesity issue in schools,” the 2004 Primedia annual report said.

Another advertising challenge facing Channel One is that it has to be pickier than other cable networks because of its K-12 audience, the company says.

“We’ve been very careful on who we accept advertising from because we have the educational community, which sets a higher standard,” Ms. Harris said in an interview this past spring.

Companies also now have more choices on where to advertise, she noted. The Internet attracts advertising, and the number of cable networks has also exploded over the past decade.

“We’re bound by a market that has changed,” Ms. Harris said.

Despite those challenges, results for the first quarter of 2005 look more promising. Advertising revenues for Channel One are up almost 2 percent, driven by ads by military recruiters, wireless telecommunications services, and video-game producers, as well as by spots promoting network television shows.

Ms. Harris says she is busy lining up more sponsors, such as Verizon Inc., which began advertising in April. She also plans to increase “health conscious” advertising, and is now talking to food companies and foundations.

A Balancing Act

Amid this push to shore up advertising, criticism of Channel One has not faded.

“Advertising in schools is a bad thing,” said Gary Boyes, a parent who sued the Salem-Keizer school district in Oregon over Channel One. “There’s no room in school for it.”

His lawsuit, filed in 2003 in state circuit court, maintained that the 38,000-student school system was violating the Oregon Constitution by forcing his son and daughter to watch commercials in school.

Mr. Boyes lost the case, and in early April, a state appellate court upheld the lower court’s ruling. The lawsuit is now slated to go to the state supreme court.

Officials in the district, which subscribed to Channel One in 1990, say the newscast has proved worthwhile.

“School officials must examine the balance between what Channel One brings to their students in terms of academic content, and the school in terms of equipment, compared to the two minutes of advertising that comes with the contract,” Mary Paulson, a spokeswoman for the district, said by e-mail.

Ms. Paulson also said that students can opt out of watching Channel One, and that schools that do air the newscast extend the school day by 12 minutes, so that students are not shortchanged on instructional time.

Still, anti-commercialism activists have kept up their long-standing criticism. Among them is Jim Metrock, the president of Obligation Inc., a local watchdog group in Birmingham, Ala. His Web site contends in a piece titled “Rearranging the Deck Chairs … The End of Channel One News” that the newscast is on its last legs.

Ms. Harris suggests that such groups oppose Channel One because “that’s how these groups get their funding.”

“There will always be a faction that will leverage you for their individual platform,” she said.

Vol. 24, Issue 43, Pages 3,14

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