A new study by SNL Kagan shows that while on the surface it appears that Al Jazeera may have paid a reasonable price for Current TV, there is s strong possibility that the purchase may cost the Qatar-owned propaganda network far more than $500 million.
SNL Kagan analyst Derek Baine noted that prior to the purchase, Current was available in 60 million households. But as soon as the transaction was announced, the second largest cable operator, Time Warner Cable Inc., exercised the change of ownership clause and plan to drop the struggling network from its system as soon as possible.
According to Baine, the loss of Time Warner Cable’s nine million subscribers will move the network to a break-even level at best. He believes that Al Jazeera will be forced to drop its licensing fees altogether in order to convince operators to carry the newly rebranded network. This would be a severe blow to the financial structure, as it now relies on subscriber fees for 80% of its revenues.
But even dropping the fees altogether may not be enough to keep Current TV’s network of cable operators together. There are reports that Al Jazeera may have to actually pay operators to carry the network, which would cost them even more money. The concept of paying for carriage is nothing new—Fox News did this when they launched and they now command a cable news market-leading 82 cents per subscriber. But Al Jazeera America, or whatever they plan to call the channel, is no Fox News and it faces significant hurdles from operators concerned about Al Jazeera’s true motives.
Since Al Jazeera is owned by the oil rich Qatari government, they have plenty of money to burn. Yet they may have badly miscalculated how much their attempt to buy viewership was really going to cost them, and from a business standpoint, this could go down as one of the worst deals in television history.
AIM’s Cliff Kincaid was on “The Kudlow Report” on CNBC last Friday discussing other implications of the deal: