Profitable Paltalk Gives VCs Their Money Back

Webcam chat subscription service Paltalk has bought out its investor Softbank Capital Partners, which had purchased 20 percent of the company for $6 million in 2004. The buyout was enabled by Paltalk’s ongoing profitability, founder and CEO Jason Katz told NewTeeVee Tuesday. Katz even paid Softbank a premium on their shares, given them “a very solid profit,” he said.

PaltalkStartup acquisitions and IPOs are rare these days, but buying out your VCs? It doesn’t happen very often. The one example that springs to mind is podcasting startup Odeo, where CEO Evan Williams gave his investors their money back to have the freedom to change strategy and corporate structure into what would eventually become Twitter. In Katz’ case, he said it wasn’t that Paltalk was having problems or that it didn’t like Softbank, but that his profits were starting to put a fair amount of money in the bank and the structuring of Softbank’s shares disabled from paying out a dividend to Paltalk shareholders.

Paltalk, founded in 1998, had taken the Softbank money in 2004 after about $4 million in two previous rounds of funding from other investors (whose shares it is not buying back). It’s been profitable since 2004, said Katz, but that kind of timescale doesn’t really fit into the VC model. So Katz approached Softbank last December about buying the VC out, and the deal took until just now to finalize.

What’s next? Katz said he hopes to operate Paltalk as if it were a public company, with dividends and earnings. He hopes to eventually be bought by a larger company looking to facilitate social interaction with video.

Katz said he made Paltalk a subscription service in 2001 during the last downturn, when advertising dollars dried up. That strategy has paid off, in that since then the company has made 80 to 85 percent of its revenue from subscriptions, though down times and good times. The service has 4 million active monthly users, with an undisclosed amount of them paying.

While Paltalk could be at the center of the burgeoning social TV phenomenon with its video chat rooms, so far it’s not. The company had tried a strategy of creating its own original live programming, sets from comedy clubs and the like, but last year decided to pull back from weekly posting obligations and high production costs, said Katz. Now it only puts on live shows every other month or so.

We would think that one of the big factors that’s hindered Paltalk has been its requiring users to download software. However Katz said the company has spent the last year and a half building a Flash client that interacts with the rest of its live video infrastructure. Users are now able to host video chats with up to 10 people in the Flash version from a web browser on any platform.

The next big plan, said Katz, is to let users sign up for vanity URLs on the domain SuperIM.me, where they can host live video chats on their own without being beholden to any particular platform. That product is set to launch in the next quarter.



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NYTCo Execs Tell Staff Company Can Manage $1 Billion Debt

The pending sale of WQXR-FM for $45 million will help the New York Times Co. (NYSE: NYT) chip away at its $1 billion debt, Arthur Sulzberger and Janet Robinson told their staff in a memo posted by The Awl. Tired of having outsiders do it for them, the second memo in as many months from the chairman and CEO runs through the company’s debt situation: “We have been pro-active and disciplined in addressing our long-term debt obligations. … we strongly believe we have the financial strength and flexibility to manage through this difficult time.”

Some of the “highlights” from the internal PR effort:

—Only $45 million of the company’s approximately $1 billion in debt matures before 2011 and “we expect to repay that in November with cash flow from operations and our revolving credit agreement.” The majority of the debt is due in 2015.

—The company closed down one of its two $400 million revolving lines of credit when it expired in May, using a $250 million loan from shareholder Carlos Slim’s Banco Inbursa and Inmobiliaria Carso. Some of the loan went to repurchase “roughly half” of the $100 million in bonds due in November. “We are paying an interest rate of 14% on the Inbursa debt. Yes, it’s a high rate, but given the state of our economy, our industry and the credit markets at the time we did the transaction, we believe it’s both fair and financially sound. … He has not asked for nor been offered a Board seat and does not have a history of activism in the companies in which he invests.”

—The $225 million from the sale/leaseback deal for a large chunk of the company’s HQ space and other funds went to pay off $250 million in bonds due in March 2010.

—The proceeds of divestitures including WQXR sale for $45 million and the potential sale of the Boston Red Sox—the Boston Globe isn’t mentioned—will go to pay down debt.


Reporters Uncensored: Behind the Scenes of the Global Web Series

By Maura Kelly

On July 15, Reporters Uncensored (RUTV) will launch its first season of thought-provoking, international news and analysis of leading social entrepreneurs LIVE on the Web. RUTV is anchored by journalist and senior advisor to Reporters without Borders, Tala Dowlatshahi and features a team of independent local reporters from around the world. This week, executive producer, Maura Kelly writes about behind the scenes and what you can expect in the upcoming weeks.

Technically speaking it’s all about the connections

It’s Monday afternoon and I’m in the office waiting on the launch of our new Web site complete with an embedded Livestream broadcast player. Live, 24/7, linear and VOD all in a single player and with streaming video software, soon RUTV will be live on the Internet for anyone anywhere to view and comment on. The day has been full of tweaking scripts, screening clips from our team, all the while, I’m wondering if the TV Skype interview we set-up with our Sudanese reporter is going to make it into the show. He is planning on using the nearest post office computer since his is not powerful enough; it’s antiquated actually and can’t handle Skype. Our first show looks at Dafur and the International Criminal Court’s (ICC) arrest warrant for President Al-Bashir for his alleged crimes against humanity. Our man in Sudan is key. But we do have a back-up because new technology is NEW and bugs are ever-present. That’s what happens when you decide to use the latest digital tools and software to connect reporters in different regions of the world to give voice to those not in the prime time news game.

The Overview

Overall, Tala and I am excited about the launch, and the team of local journalists worldwide who have signed on. Right now, RUTV is the only program on the Web devoted to exploring international issues through the lens of local reporters on the ground. A secondary focus of the show will be to highlight social entrepreneurs who are creating positive social change around these issues.

The RUTV team come from far and wide: from the teacher/writer in Kenya to the youth correspondent in Peru — a seasoned filmmaker in Tehran, an investigative reporter and human rights activist in Nigeria to the environmentalist in Poland We are especially pleased to have local African reporters who will talk about African issues and discuss the ICC and Dafur on show one. It is the combination of multiple perspectives and our RUTV staff — international in flavor and multi-disciplined that will give the series a big voice.

Deciding on the topics and what to include

There are unfortunately too many international issues that the mainstream news outlets do not cover. Not sexy enough, the audience is not interested, doesn’t get the rating. RUTV is unfiltered, uncensored and looks for important issues that get lost.

On Wednesday, the series opens with a brief look at Iran from the POV of host Tala Dowlatshahi, an Iranian-American and creator of the show. The main topic this week takes advantage of the annual International Day of Justice on July 17th to look at the ICC’s indictment of President Al-Bashir of Sudan. Many African leaders and academics are critical of the ICC and we’ll discuss its role in today’s world. JUSTICE or RACIST? Local African reporters will talk about how average people in their country really feel.

We will also discuss Mahood Mamdani’s latest book “Saviors and Survivors” which looks at the ICC as a racist institution set up by colonial powers to exploit African countries. Skeptics of his book say Mamdani is neglecting to fully take into account that the ICC is not a watch dog group and that the court was created largely based on the political will of the states whose signatories include many African country members. We tried to interview Mr. Mamdani for the show but our schedules collided but we had to include his book and its content.

At RUTV we like to test the waters and see how others feel and think about the issues. We’ll hear from Tove Gerdhardsen in Copenhagen about what Europeans think of the warrant.

It turns out that Mahood Mamdani is also very critical of the Save Dafur Campaign stating, “Save Darfur has turned into a lavishly funded and massive ad campaign spreading and sustaining a lethal illusion, consistently exaggerating the level of mortality and racializing the reasons for it.” We will have a rep for the Save Dafur campaign respond and also hear about their latest efforts.

Now the serious works begins

In the past year, a whole new world has opened up in the global news business: citizen journalism, camera-phones, twitter and tweets and now broadcasting live on the Web from multiple sources — without fiber or satellite feeds. RUTV is testing it all and working out the technical bugs thanks to our partner Livestream.com (and we’re using the term “launch” loosely). We’ll be Live and On Demand starting July 15 at 6pm on Reporters Uncensored.

Thanking you in advance for watching from anywhere and anytime.

Maura Kelly is an Emmy-award winning producer and former executive producer at PBS


It’s time to retire newspaper circulation data in favor of Web analytics – But which ones?

By Nikki Usher: This is part one in a two-part series on Web analytics and the future of news

Newspaper circulation numbers are taken as report cards for survival. When worse than expected for too long, these numbers forewarn of future layoffs and corporate restructuring – and at the very worst, the death of a newspaper.

But we’re putting our emphasis, energy, and nostalgia in the wrong place. The future is in Web analytics, but this extends beyond just knowing about page views, unique users, and visits.

“If newspapers have any chance of making it in an online and social media world with an ad based model, we’ve got to see much more living and dying by analytics,” said Dana Chinn, a lecturer at the USC Annenberg School of Communication.

Nonetheless, a print mentality dominates our current understanding of the media landscape.

Consider, as an example of the formidable significance circulation numbers have in our industry, a June 15, 2009 AP story about the troubles facing the Boston Globe:

Will Rhino’s New ‘Digital 45’ Find An Audience?

Rhino has a new gimmick to get middle-aged music fans to buy some more oldies: a download format on iTunes called the Digital 45. Ostensibly tied to what the company tells BillboardBiz is the 60th anniversary of the 45 RPM record, the company has started selling 60 individual “hit songs” that also feature second track (of course, there are no “A-sides” online). The downloads will include a PDF with the singles’ original sleeve artwork. Apple (NSDQ: AAPL) is giving Rhino a special section on the iTunes store’s front page.

The Digital 45 packages range from $1.49 to $1.99. But as with the vinyl 45s—which are still a staple of indie record labels—it’s questionable whether users will want to pay a little more simply for an extra song and old album art. After all, users still have the option of paying $1.29 for Prince’s 1986 hit Kiss by itself—will they really pay another 70 cents for the previously unreleased “Love or Money”? (The latter is also available for 99 cents alone.) Rhino is owned by Warner Music Group (NYSE: WMG), which doesn’t break out results for the unit. Download sales has been one of the few bright spots for Warner Music over the last year. In the second quarter, digital income was up 7.1 percent to $166 million.

David Dorn, Rhino’s SVP for e-commerce and international catalog strategy, tells BillboardBiz that creating an event—like the 45’s 60th birthday, as if anyone was celebrating it—is a good way to get oldies some attention. “If you put a whole lot of them in the store in one shot, then they all sit there. They’ll have their promotion period, and some of them will get featured, but then they just sit in the store. To me it’s more interesting to market them each month and create a program around them and have something new to talk about every month.”


Mark Pasetsky: GQ’s Cover Blunder: Where’s Channing Tatum Shirtless?

GQ released its hot cover featuring Channing Tatum and it’s spreading like wildfire all over the Internet.

What’s also getting a ton of buzz?

The even hotter shirtless pics of Channing inside GQ. CLICK HERE to see the pics!

So – why didn’t GQ put the picture of Channing shirtless on the cover?

The magazine looks like it’s assuming the general newsstand buyer will remember seeing the shirtless pictures of Channing online and connect them to the cover.

In today’s hyper-competitive newsstand business, that’s a big mistake!

While it wouldn’t fit GQ’s traditional format, the magazine should have at least inset the picture – ultimately reminding the consumer that the pics are inside.

CLICK HERE to see the cover at CoverAwards!

Sound off below!


A Plan To Upend The Domain-Name System Runs Into Opposition

ICANN, the non-profit group that regulates domain names, wants to vastly expand the number of “top level domain names” beyond the 21 that currently exist, such as .com, .net, and .mobi. But the proposal, which is expected to go into effect next year, is running into lots of opposition. ICANN says that by adding top-level domains it will “promote competition in the domain-name marketplace” and prompt “innovation.” At the first public meeting held on the initiative, however, the response was largely negative, at least according to a report on InternetNews.com. Several lawyers said the plan could put a big burden on groups such as sports leagues that might feel the need to purchase all the domains related to their trademarks in all of the new top-level domains. A lawyer for Turner Broadcasting also said it could create new opportunities for sites to try to steal other sites’ identities, leading to the possibility of fake news stories that seemed real.

The vocal opposition follows written criticism ICANN has received from several groups including the U.S. Department of Justice and the National Telecommunications Information Agency, which have said that the new domains will likely create confusion among consumers and also force trademark owners to defensively purchase domain names. The DOJ and the NTIA both want the initiative delayed until ICANN completes a study to determine some of its economic implications, according to a report on the ICANN website. ICANN doesn’t seem inclined to bend. It says it has already spent $13 million on designing the program and lists a number of initiatives it is undertaking to respond to the feedback.

Under a draft plan, anybody will be able to apply for a top level domain name, although they will have to fork over a $185,000 application fee to ICANN first. ICANN will then evaluate applicants based on whether they are financially and technically able to run a registry. Once an application is accepted based on those criteria, ICANN will invite third parties to post any objections they may have, before ultimately deciding whether or not to give the entity the go ahead.