Humiliating Deal Lands Channel One In Alloyland

Jim Metrock

Obligation, Inc.

April 23, 2007

Alloy, Inc. will be the new owner of Channel One. The long financial nightmare for Primedia will soon end. The long financial nightmare for Alloy has already begun.

Alloy has advertised on Channel One News so their executives know, or should know, the controversy that will come along with ownership of Channel One. It is hard to imagine what they thought was attractive about this deal.

Some things we found out from today's press releases and Advertising Age article:

1. Channel One's assets and liabilities were about equal. In other words Channel One has close to ZERO net worth. That is incredible. The fall for this company has been even worse than we suspected. Our hard work and that of other activists has paid off beyond our wildest expectations. We were aided by years of incompetent management at Channel One.

2. Every major company that looked at Channel One's assets and liabilities turned down the chance to buy the company. Channel One has been up for sale for YEARS. Only Alloy thought that they have the cash, talent and time to turn this company around.

3. Alloy is not committed to saving Channel One at all costs. Alloy's CEO Matt Diamond told Advertising Age that he wants to take Channel One digital and spend an estimated $8 million to $10 million on upgrading Channel One's aging equipment. This of course is a joke. If Channel One has 10,000 schools, Mr. Diamond is thinking $1,000 will transform an entire SCHOOL from analog to digital. Schools must have at least 200 students before Channel One will enter into a contract. That means there are about 8 TV sets in the smallest schools and up to 75 in the largest. Replacing just five TVs with monitors for a digital signal would eat up the paltry amount Alloy is willing to spend on Channel One's upgrade. The numbers don't add up.

4. Although Mr. Diamond says he doesn't anticipate cutting staff - that is what he will do. He has to. He is planning on bringing Channel One to a break even point within a year and a half. That is close to impossible, but it will definitely be impossible if Channel One's high-priced executives, who helped kill the company in the first place, linger with their snouts in the ever-shrinking payroll trough.

I have asked for a meeting with the CEO of Alloy Education. I have also left a voicemail for the chief financial officer of Alloy, Gary Yusko. I told him in the message that there is ample evidence that Channel One's audience is overstated. I mentioned the problems with Convergent Media System and the forged compliance reports that we were told of. Alloy's shareholders need someone checking our our claims. So far I haven't heard back.

No one called me or any other person involved in opposing Channel One's presence in classrooms. Because of that, I have to question the depth of the due diligence invesigation that Alloy conducted before agreeing to assume Channel One's liabilities. Did Primedia's attorneys tell Alloy all they knew about the opposition to Channel One? Did Primedia mention the evidence we gave them about faking compliance reports which could easily lead to overstating viewership and therefore lead to possibly presenting advertisers, including the U.S. Government, with false invoices? Obligation sent what we knew to the head of Primedia's legal department. If Primedia sat on this information and did not pass it on to Alloy, it might come back to haunt Primedia.