Current.TV turns a 'small profit', offers US filmmakers $100k prize

Current.tv, a pioneer of user-generated web content, unique in having an accompanying cable channel in the US has apparently turned a 'small profit' according to Derek Baine, a senior analyst with Monterey-based Kagan Research. The Al Gore backed network does not boast anywhere near the viewing figures of YouTube, but has an accompanying cable channel piped to 30 million US homes. Users of the site can vote on content to 'greenlight' for air, with the best being broadcast and paid for. The service has a much more socially engaged editorial focus than most video streaming sites; a competition this month, for example, offers US filmmakers the chance to win a $100,000 prize for short films about tolerance (deadline October 2nd). Submissions are normally open for filmmakers anyway in the world, however.

The San Francisco Chronicle article, which first reported on the profit, is copied below:

Television insiders and pundits mocked Al Gore and Joel Hyatt a year ago when the pair introduced Current TV, their San Francisco-based cable and satellite channel. Even after critics saw that the ex-vice president and Democratic Party fundraiser weren't crafting a left-wing network, few in the change-averse world of television could understand why anyone would tune into Current's programming motif: three- to seven-minute videos created by emerging filmmakers, citizen journalists and the most rank of amateurs -- the viewers themselves.

Soon after Current's premiere, the Wall Street Journal described it this way: "Newsless, often clueless and usually dull, the new channel is a limp noodle." Plus, Current was carried in only 17 million households, making it the equivalent of a one-stoplight town in the television universe. Big advertisers don't start calling until a network can be seen in 40 million households.

But the media landscape has shifted in the past year, as video-sharing sites like YouTube.com revealed an audience for viewer-created entertainment. Current has since led the industry in the commercialization of that concept, as its viewers are creating ads for its leading advertisers. Half of Toyota and Sony's commercials on Current are made by the people watching them, giving advertisers a window into the mind-set of the coveted younger demographic.

Now carried in 30 million homes, Current will announce a plan next month for online expansion and is planning an international version next year. Madeleine Smithberg, co-creator of Comedy Central's "The Daily Show With Jon Stewart," will start a daily offering this fall that's still under wraps.

The best news of all for Hyatt, who is Current's CEO, is that the operation is making a small profit, according to Derek Baine, a senior analyst with Monterey-based Kagan Research.

And some of the TV industry observers who once mocked Current have begun to change their minds as several networks, such as CNN and the CW -- which is a combination of the former WB and UPN television networks -- are now embracing user-generated content.

But while Current may have been ahead of the curve on this trend, the next challenge it confronts is tougher: Many in the channel's targeted 18-34 demographic may not be able to afford the premium-tier service of some digital cable systems, where Current is carried. Others may prefer lapping up videos online in YouTube's free-form format rather than on Current's more organized site. Critics continue to ask: Is Current focused on the wrong medium?

Current "caught the (viewer-created content) trend early, but it is kind of surfing by them," said John Higgins, business editor at Broadcasting & Cable magazine, a trade publication for the television industry. "These guys (at Current) had all the right ideas and all the same machinery in place that YouTube did, but they didn't quite do it. Lighting struck 10 feet to the left of them.

"Do you ever hear people say, 'Did you see that video on Current?' No. They say, 'Did you see that video on YouTube?' " Higgins said.

Hyatt said Current is trying to position itself as the thinking person's YouTube -- "a premium offering" where the best of user-generated content will gravitate to TV.

Part of Current's strategy is rooted in the belief that while YouTube may be serving up 100 million videos a day to 6 million unique visitors, the 18-to-34 set still watches and appreciates a lot of television. But while that age group watches an average of three hours and 55 minutes a day, it is far less than older folks. The over-50 crowd sees nearly six hours daily, according to Nielsen Media Research.

Yet, in another sign that media consumption habits are unpredictable, the audience for short videos may not be as young as perceived. The highest percentage of YouTube's audience is between 35 and 49 years old, according to June measurements by Nielsen/NetRatings.

"Content creators -- people who want to share their stories with their generational cohorts -- believe that television is at a whole different level than the Web," Hyatt said recently while sitting in Current's offices across the street from AT&T Park. "So, yes, anybody can submit a piece of video to, fill in the blank -- YouTube, iFilm, Google Video, Yahoo video -- and it's all put up there. And it's a big mass of stuff.

"And for viewer creators, yes, you get your stuff on the Web, but the best of it can get on television," Hyatt said.

Plus, said Current programming chief David Neuman, cable TV offers a proven business model that a dot-com company doesn't.

Higgins agreed: "That's where they have to make their mark. To be the organizers, the editors of user-generated video."

The majority of Current's videos, called "pods," are submitted by correspondents with whom the channel's editors have a continuing relationship. About 30 percent of Current's pods come in over the transom as "viewer-created content."

The way viewer-created video winds up on the air is akin to "American Idol." Creators submit pieces to Current's Web site, www.current.tv, where viewers comment on them and vote on whether to "green-light" them to the airwaves. Current producers skim the cream of these for airplay.

Current's lineup is an eclectic mix of point-of-view journalism and trend and cultural pieces. It has aired heartbreaking stories from AIDS-ridden corners of Africa and wacky pods on bikini-wearing meter maids. It's shown correspondents filming from the site of recent rocket attacks in Israel and aired an insightful conversation with two Hezbollah members that was filmed days before the current Middle East war broke out.

Programming chief Neuman, an NBC veteran who supervised mid-1980s comedies such as "Cheers," became more confident than ever that Current was on the right track last fall when he saw a video filmed by a New Orleans resident shortly after Hurricane Katrina struck the city -- and before network reporters could get on the ground. The resident shot the video while he volunteered on a 3 a.m. rescue operation aboard a flat-bottomed boat.

"He was authentically from that place," Neuman said. "He was telling the story in his voice, from his point of view. It was just a more compelling and authentic experience than you could get from conventional news. And he had scooped the competition. They were out by a satellite truck somewhere trying to figure out how to drive through 3 feet of water."

Neuman said Current has no hard rules on story length, but it has no plans to begin airing long-form documentaries. While its market research says Current's audience will watch six to eight pods in a row, Neuman said, "They don't want to sit there and be annihilated with miserable war news for 45 minutes.

"When you want the audience to participate meaningfully in digital generation, it's easier in the short form," he said.

Current may be ahead for now in the area of short-form television entertainment, but others in the industry are gaining on it.

In the past few weeks, the CW announced it would allow viewers to create 15-second promotional spots for its programs, as Current already does. In September, MTV will start MTV Flux in the United Kingdom, a channel that will allow viewers to share video they shot; if the concept works, an MTV executive said all MTV channels could be "fluxed." CNN just started soliciting viewer video and photos for its CNN Exchange Web site, and NBC has created a channel on YouTube.com to promote its programs.

Hyatt smiled and shook his head at the changes, noting that the imitation is flattering. "We are gratified, to be sure, but we're motivated by the validation."

But Current is still too small to be Nielsen-rated, "so nobody knows if people are watching or not," said Baine, of Kagan Research, who is tracking Current. "That's a tough thing for advertisers. You're showing them a lot of hypotheticals."

Baine estimated that the company is turning a slight profit of $3 million this year based on estimated revenue of $47 million. He forecasts that Current's advertising revenue will increase next year to $19 million from $10 million this year. "For a network in its first year to not be losing money is pretty good," Baine said.

Major advertisers such as Toyota are happy with Current's first year -- and especially its V-CAMS, or viewer-created ads, which began in May. Toyota is so pleased with the new approach that it is considering using a viewer-created ad if it buys advertising time during the 2007 Super Bowl.

Current "is a great place to experiment with new ideas like this," said Kim McCullough, corporate manager for marketing communications for Toyota Motor Sales, USA. As for whether television is the best medium for user-generated content, McCullough said, "I don't think there is one best way. It's too early to say right now. We want to be involved in all these different platforms as this shakes out."

Next, Current is experimenting with a video-on-demand offering in Los Angeles, where viewers can watch the pods they choose. It is attempting to lure more high-end filmmakers with its "Seeds of Tolerance" contest, which awards $100,000 to the best piece on tolerance and diversity. And two months ago, it began soliciting short pods shot on cell phones. Newman said the quality isn't good yet, but he isn't concerned.

"It's perfectly consumable TV; it's just not really compelling," Neuman said. "Where it will become more compelling is when it's taking you places where you wouldn't be taken otherwise."

Source: San Francisco Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/08/14/MNGCIKHTRQ1.DTL