Parsing through Current Media‘s filing for a $100 million public offering, I kept stumbling over the financials section. The youth-oriented news company had a net loss of $9.8 million in 2007, based on revenue of $63.8 million. It lost $7.6 million in 2006 and $14.3 million […]

Parsing through Current Media‘s filing for a $100 million public offering, I kept stumbling over the financials section. The youth-oriented news company had a net loss of $9.8 million in 2007, based on revenue of $63.8 million. It lost $7.6 million in 2006 and $14.3 million in 2005. Altogether, Current had $36.5 million in debts as of the end of last year.

Yet until now, while the company — which is perhaps best known for being co-founded by Al Gore — wasn’t obligated by the government to tell the world, Current kept telling me it was profitable. Just last week an external PR person pitched me in an email: “Unlike so many Web 2.0 companies, they’re profitable.” And back in October, when Current was making its big online push, Joanna Drake Earl, the company’s president of new media, said in an in-person interview, “We continue to be profitable. It comes back to discipline. We didn’t want to spend marketing dollars.” I reported the situation as such in my write-up on Oct. 15.

I wasn’t the only one who took Current’s claims of profitability at face value. “Joel Hyatt is comfortably ensconced in his loft-style San Francisco office at Current TV, Al Gore’s now-profitable cable network,” wrote Fast Company last summer. “Hyatt says that Current TV is profitable and has been for nearly a year,” reported BusinessWeek in September. “Mr. Hyatt said Current TV, which is backed by two private equity firms and a group of business partners, including Ronald W. Burkle, the supermarket magnate, turned profitable in the fourth quarter of 2006, but would not give specifics,” said the New York Times in October.

Current declined to comment for this story, citing federal securities law that requires a company to undergo a “quiet period” after filing with the intent to go public. Update, Tuesday 2:50 PST: Current spokesperson Whit Clay, who previously declined to comment, just offered the following statement:

Like most media companies that are publicly traded, Current has used EBITDA as a measure of cash earnings. Our previous comments about ‘being profitable’ were on an EBITDA basis which excludes non-cash expenses such as interest, taxes, depreciation, amortization, stock compensation, and extraordinary items…Financial statements in an S-1 are on a GAAP basis in keeping with SEC regulatory requirements which means they include all costs — cash or otherwise.

In its S-1 filing, the five-and-a-half-year-old company states quite clearly, “We have a history of losses since launching Current TV….We expect to continue to incur net losses in the future…we cannot assure you that we will be able to achieve or maintain profitability in the future.”

One section that seems like it might explain the discrepancy concerns Current’s purchase of cable channel Newsworld International from Vivendi Universal for $70.9 million in May 2004. Initially, says Current, the company planned to relaunch NWI from in-house, but a year later it decided to go another direction. It is amortizing the cost of useful parts of the acquisition over seven years; here’s the detail from that section:

“We accounted for the acquisition of NWI as a purchase of a business. We valued the acquired intangible assets, consisting of affiliate distribution arrangements, at $13.7 million and are amortizing them over their estimated useful lives of seven years. We recorded the excess of the purchase price over the value of the acquired intangible assets, or $57.2 million, as goodwill. On August 1, 2005, we terminated the NWI programming and a majority of the acquired outsourcing agreements and launched Current TV in the United States. Because the nature and content of our television programming changed so significantly with the launch of Current TV and we effectively began to operate a new business, we believe that our results of operations before August 1, 2005 are not comparable to our results of operations after August 1, 2005.”

But still, Current, according to its own math, lost $7.6 million in 2006 and $9.8 million in 2007. That’s more than $13.7 million, however long you amortize it. And I just don’t see how you could call the company “profitable.”

  1. How come no one is talking about who the hell actually watches Current? Their egalitarian-ish podcasty formula for viewer-created shows is boring, repetitive and pretty uninspired. How in the world could they ever make a profit?

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  3. My question is: Where’s all this money being spent in the first place? I thought their emphasis was on User-Generated Content and, thus, cheap labor.

    Great post, Liz. Keep an eye on this story for us…

  4. Antoine, Al’s friends and their perqs don’t come cheap!

  5. Good reporting and investigation. Does this change your perception of the company at all? Or did you suspect from the beginning that you weren’t getting the full story?

  6. Not only has Current TV been nothing better than boring and sophomoric from the gitgo – I still hate to be reminded about the slaughter of one of the better world news operations ever offered on television in North America.

    NWI was enjoyable and growing in importance compared with the sleazy corruption of CNN by Times-Warner. Any serious news junkie still misses it.

    I wouldn’t miss Current for a second.

  7. Kevin Kelleher Tuesday, January 29, 2008

    There are many yardsticks you can choose to measure a company’s financial performance. A lot of investors avoid EBITDA because it can be misleading, as can “cash earnings” – which means you want to pretend that all the money you’re paying management in stock won’t have any impact on its profitability. The SEC insists on GAAP earnings for a reason.

    In Current’s case, the EBITDA measure strikes me as misleading because of the $6 million in depreciation and amortization last year. Add to that the $2.4 million last year in stock-based compensation to affiliates and employees and you have $8.4 million in expenses that aren’t accounted for by EBITDA cash earnings. That’s a lot.

    Technically, current was profitable by one definition, but it may not be what many potential investors consider as truly profitable.

  8. If Current TV stopped trying to use the “walled garden” approach, they would become profitable. My guess is that once the company goes public, it will be forced by the nature of publically traded company responsibilities/rhetoric to pursue IPTV deals. Working with a companies like Vuze and Veoh, whose users are primarily in Europe and North America [ad agency sweet spot], would increase the audience exponentially and carry the brand into new heights.

    On a side note, the way Current treats some indie producers now is ridiculous already, I doubt that it will get much better when the company goes public. The one thing that I can;t stand about Current is that if you watch it for an hour, it will begin to loop the same shows over and over for the next few days.

  9. sorry for the grammar and syntax errors above….

  10. The idea of Current TV is MONEY. Given the range of revenues, costs, profits, and cash flow that are floating around the ‘content’ business today I wouldn’t say that losing 13MM$ over two years is ‘profitable’ but if they’re generating 63MM$ in revenue back in 2006 this company has great potential to MAKE money in the future. The idea of a multi-platform programming distributor that’s in 51MM homes & has a growing cable VOD footprint and a robust bband distribution strategy & is based in very large part on user created programming and advertising is a big idea. They’ll figure out the programming mix…i mean hell, Liz Liz Winstead is there right. She was one of the creators of the Daily Show with Jon Stewart. They’ll get off the super-serious ‘issues’ bent soon…trust me. I’d buy this stock at IPO.


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