By Peter Lauria
(Reuters) - Al Gore's Current TV has bigger problems to deal with than a potential lawsuit from fired news anchor Keith Olbermann - namely not getting kicked off Time Warner Cable for low ratings.
According to three sources with knowledge of the situation, Time Warner Cable Inc's carriage agreement with Current TV stipulates that, if the left-leaning political news network fails to meet a minimum threshold for overall viewers in a given quarter, financial penalties such as Current TV being required to increase marketing and promotion spending on the cable operator's systems are triggered.
If Current TV misses the audience benchmark in two consecutive quarters, another clause is triggered that would allow Time Warner Cable to drop the channel. The condition was built into the most recent distribution pact between the two parties, which was signed in 2010.
"Time Warner Cable has been flirting with the idea of pulling Current off its systems for some time now," said one of the sources, who all spoke on condition of anonymity.
All of the sources interviewed for this story declined to provide the precise threshold for overall viewers.
Olbermann, the feisty host of the politically tinged talk show "Countdown," was fired from Current TV last week and replaced with former New York Governor Eliot Spitzer.
Current TV, founded seven years ago by Gore, the former U.S. Vice President, and business partner Joel Hyatt, accused Olbermann of breaching his contracts and trying to sabotage the progressive public affairs network. Olbermann denied Current's allegations and vowed to take legal action.
If it was not for Olbermann's show, which averaged a total of 177,000 viewers per night, Current TV likely would have missed Time Warner Cable's viewership benchmark, said one of the sources.
The appointment of Spitzer, another outspoken news commentator, led to speculation among Time Warner Cable executives that Current is courting controversy to attract viewers.
Based on the 47,000 total viewers who tuned into the initial broadcasts of Spitzer's "Viewpoint," the source said that "just enough people are tuning in to keep Current over the quota."
A representative for Current TV said: "We are fully in compliance with our Time Warner Cable contract and all indications show that even with Keith leaving we will continue to be in compliance."
A representative for Time Warner Cable declined comment.
The late March debut of Current's new morning programming block consisting of talks shows "Full Court Press" and "Talking Liberally" hosted by left-leaning commentators Bill Press and Stephanie Miller, respectively, has given the network a ratings boost. "Full Court Press" has increased ratings by more than 200 percent in the 6 a.m. to 9 a.m.(1000-1300 GMT) timeslot, while "Talking Liberally" has provided a 150 percent ratings gain during the 9 a.m. to 12 p.m. block.
Still, prime time is where the cable news networks that Current seeks to compete with generate their largest audiences, which means a lot is riding on Spitzer.
"If Olbermann couldn't get to where he was at MSNBC on Current, I don't see how Spitzer can get to where he was at CNN there," said Brad Adgate, senior vice president for research at Horizon Media. "That's a tall order to ask of someone who is not a journalist and is on a network with a fraction of the viewers and distribution he was on before."
Spitzer's former show on CNN, "In the Arena," averaged 474,000 viewers who watched either live or on DVR playback within a week, according to Nielsen data. Olbermann regularly averaged around one million total viewers when he was on MSNBC.
Current TV's overall viewership failed to meet Nielsen's minimum reporting standard, which means that the network's average audience was not large enough to be rated, since the new TV season began last September 19.
CURRENT'S CORD CUT BEFORE
Current TV has struggled to develop an identity since its founding in 2005. It first aired user-generated videos in 8-minute pods, then moved to long-form narrative video journalism and reality shows such as "Fourth and Forever" that attempted to address the issues of the day. "Fourth and Forever," for instance, looked at poverty in southern California through the lens of the Long Beach Polytechnic High School football team.
Last May, News Corp's Sky Italia stopped carrying Current TV, a move that prompted Gore to accuse Rupert Murdoch of dropping the channel simply because it was featuring Olbermann who "has often been critical of News Corp."
For its part, News Corp said dropping Current TV from Sky Italia was "purely commercial" and that the network asked for "double the carriage fee when prime-time viewing had fallen by 40 percent" over the previous year.
Current TV is distributed in about 60 million homes in the United States, about 12 million of which are from Time Warner Cable Inc, which is the fourth-largest pay-television provider in the nation. Current is also distributed by Comcast Corp and DirecTV, with 22.4 million and 19.8 million subscribers, respectively. Both Comcast and DirecTV hold equity stakes of more than 5 percent in Current, according to public filings. Gore and Hyatt together control a majority of the channel.
A representative for Comcast declined comment. A DirecTV representative did not respond to requests for comment.
If Time Warner Cable were to drop Current TV, that would hurt its bottom line and future prospects since the network would lose almost one-fifth of its total reach.
"The biggest challenge for Current is to make sure it doesn't get dropped, because it gets all of its value from distribution," said the second source.
Despite its low ratings, the network averages a relatively high 12 cents per subscriber per month from cable operators, according to estimates by SNL Kagan. By comparison, MSNBC only gets about 16 cents per subscriber per month, or 4 cents more than Current TV, despite drawing nearly 800,000 viewers per night in prime time.
Olbermann was recruited to Current about a year ago with the aim of remaking the network around his liberal political views.
The network's 2010 carriage agreement with Time Warner Cable was negotiated prior to Olbermann's arrival under the aegis of former CEO Mark Rosenthal and coincided with its agreeing to make its ratings data available to Nielsen.
Although it was Time Warner Cable's second agreement with Current TV, the first source said the only reason the company signed the new deal was because "executives as the highest level of Current personally called and pleaded their case to executives at Time Warner Cable."
The source declined to comment on whether that meant a personal call from Gore to Time Warner Cable CEO Glenn Britt.
(Reporting By Peter Lauria in New York; editing by Tiffany Wu and Andre Grenon)