Yahoo Loses $42 Million on ‘Community,’ 2 Other Original Series

Community Season 6 Yahoo Returns

Internet media company announces new search pact with Google, as Q3 earnings miss Wall Street expectations

Reviving “Community” has been a costly adventure for Yahoo — and might spell the end of its foray into big-budget original series.

CFO Ken Goldman revealed during Yahoo’s third-quarter earnings call Tuesday that the company took a $42 million charge on “Community” and two other original series as it couldn’t effectively monetize the programming.

Yahoo recorded a $42 million impairment charge in Q3 on the value of its video assets, and Goldman specifically singled out “Community,” as well as original shows “Sin City Saints” and “Other Space,” when asked what went wrong. Writing off the cost of the shows — $41.699 million to be precise, according to Yahoo’s financial statements — removes them from the balance sheet so they won’t be amortized over time.

“We thought long and hard about it, and what we concluded is (for) certain of our original video (series), we couldn’t see a way to make money over time,” he said.

Continued Goldman, “We’re not saying we’re not going to do these at all in the future. But what we are saying is, in three cases at least, it didn’t work the way we had hoped it to work, and we’ve decided to move on.”

Yahoo debuted season six of Dan Harmon’s “Community” exclusively on its video platform Yahoo Screen in March following NBC’s cancellation of the show after five seasons. Yahoo landed Honda as a launch sponsor for “Community,” which is produced by Sony Pictures Television. But apparently it couldn’t gather enough of an audience, or long-term commitments from advertisers, to make the investment into original content at that scale pay back.

Yahoo previously teased that it may be renewing “Community” for a seventh season, or even take part in a movie deal with the Greendale Community College gang. That may appear less likely with Tuesday’s disclosure, but insiders tell Variety that a “Community” movie is still in play — with or without Yahoo.

The exec who had led Yahoo’s charge into originals with TV-size production budgets was chief marketing officer Kathy Savitt, who in September joined independent studio STX Entertainment as president of its digital unit.

The revelation came as Yahoo turned in another quarter of financial results that failed to meet Wall Street expectations, leading CEO Marissa Mayer to promise that the company will focus on fewer products in 2016 to try to right the ship.

Yahoo posted third quarter 2015 revenue of $1.23 billion and adjusted earnings per share of 15 cents; analysts had expected $1.26 billion in sales and EPS of 17 cents. And the company reduced guidance for the fourth quarter: It expects revenue to be between $1.16 billion and $1.2 billion, compared with average analyst expectations of $1.33 billion.

“As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability,” Mayer said in announcing the results.

Yahoo also announced a new pact with Google for search results and ads. That agreement will “complement” the search services provided by Microsoft and Yahoo’s own search technologies and ad products, according to the company.

Yahoo has been hit with a wave of recent high-level exec departures. In addition to Savitt’s exit, this week Jack Dorsey’s Square announced the hiring Jackie Reses, formerly Yahoo’s chief development officer, to run its business-financing group, while product SVP Mike Kerns joined Chernin Group in July as president of digital.

In addition trying to improve the metrics of its core businesses, Mayer called out as a top priority Yahoo’s planned spinoff of Aabaco Holdings, representing the remaining 15% stake it owns in Chinese e-commerce giant Alibaba Group. That transaction is still pending regulatory approval, and Yahoo said it was moving forward with the plan despite the IRS denying a request to rule the spinoff tax-free. Yahoo had expected that to close in Q4, but Mayer said on the earnings call that the spinoff may not be completed until January.

Mayer noted that Yahoo’s total Q3 revenue grew 7% year-over-year, while the strategic “Mavens” businesses — comprising mobile, video, native ads and Tumblr ads — rose 43% from a year earlier, to $422 million. But audience acquisition costs in the latest period soared to $223 million (up from $54 million), and Yahoo remains heavily reliant on desktop PC users.

Yahoo’s stock fell as much as 2.8% in after-hours trading Tuesday, after closing regular trading down 2% to $32.83 per share.

Janko Roettgers contributed to this report.

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  1. dado says:

    human greed knows no limits… all those huge corporations CEO’s have a mental disability (stupidity) and they are greedy as f$ck … everyone is trying to spread and constantly grown just so they can get bigger and bigger and get more and more money… amazing … and I don’t really see end to it either… yahoo small business just switched to Aabaco which sucks a$$ … I tried to set up a new web site, and it is pain in the a$$ … I cancelled after a few hours trying to figure out how to get around the retarded site builder, and after I cancelled, they said I will not get my money back, and my contract will run for a year, but they went ahead and took down my site??? WTF??? warning to everyone out there, stay away from Aabaco

  2. Rena Moretti says:

    Who could have predicted..?

    Oh wait, anyone with a brain and the ability to check the ratings.

    Community was a big flop when it was on its network and of course lost a bunch of money for Yahoo.

    It’s quite depressing to see how Yahoo, Amazon and Netflix are copying the worst habits of the failing networks by going back and ordering more seasons of flops.

  3. joe says:

    Yahoo Screen ruined it!!! Hands down worst media player ever.

  4. Dunstan says:

    Community was boring and unfunny when it was NBC; Yahoo’s decision to pick it up was a clusterfuck. Anyone who wants to watch TV on the net can find any show they want by doing a simple search.

  5. eqquesz says:

    I think this is the definitive ‘Heads will Roll’ moment for Marrisa Mayers from the board.

  6. fh says:

    Community was geo-blocked, It was denied the opportunity of having bigger audience.

  7. BlackBarz says:

    Reasons Yahoo didn’t make money with its new streaming service:

    1. Nothing worked at launch. (only ads worked)
    2. Next to zero advertising after launch.
    3. GUI is STILL horrible for the service.
    4. Its Yahoo you are dealing with.

    Yahoo will take whatever it had that was usable, and make it 20x more crap then make new crap that still sucks. <<<That comment isn't exactly science or filled with fact, but its the easiest way to explain it.

    Yahoo has only been digging its own grave for a while now. Just look at how they have been doing before "Yahoo screen". Yahoo taking a loss isn't exactly news…

    Basically no one in 'charge' of Yahoo understands the internet< again, the only way I can explain it.

    They got 'Community' to push their 'streaming service', and I won't be surprised if Yahoo uses it as the scapegoat to explain 'why it didn't work'. Honestly if it wasn't for Community I doubt their service would have gotten any major public interest at all, that 40million~ loss could have been worse.

    (If anyone at yahoo is reading this comment:

    Take EVERYTHING and throw it back to… idk 2005-ish and start over. It currently all sucks.)

  8. Anonymous says:

    OTHER SPACE was broken development and a RED DWARF copycat. It looked like IFC crap.

  9. Uncle Bling says:

    They have to do the movie now. Six Seasons and a Movie.

    • Rena Moretti says:

      Sadly, in Hollywood, doing a movie of a show that never got an audience for six seasons is “logical”.

      Absolutely astounding how they’re flushing money down the drain.

  10. Brad says:

    Big Community fan, and I was curious to watch the other shows, but I was so turned off by the Yahoo! Screen application on Roku. It was so difficult to navigate and slow that it was more of an annoyance to try to watch their programs.

  11. tiny says:

    Yahoo had a crappy player. Yahoo Screen app on Chromecast wasn’t programmed right and screencast the show without ads.

  12. Damon T says:

    Unfortunately Community crashed and burned when NBC first fired Harmon, and never recovered. Whatever compromises Harmon and NBC agreed to to bring him back, the damage was already done, and the writing never recovered, as well as the exodus of several key players did not help. This is a prime example of a brilliant show that should have been allowed to go out (sort of ) on top, instead of fizzling out with a whimper.

  13. OrdinaryJoe says:

    Nobody watched Community when it was on NBC. Why did some bozo at Yahoo think this time would be different?? Digital companies need to let dead series stay dead…..there’s a reason they died!

    • RobotShlomo says:

      Putting it up against The Big Bang Theory was ratings suicide, but NBC was still convinced it owned Thursday night like it did in the 80’s and 90’s. They could have moved it to Wednesday or even Tuesday night, and it might have worked then.

      • Rena Moretti says:

        Interesting, but I don’t subscribe to that way of thinking. You have to put something against hits, and frankly today’s hits aren’t what hits used to be.

        There’s still something like 290 million potential viewers available once you subtract the BBT audience.

        Community died because of its quality (or lack thereof) but you’re right it wouldn’t have hurt to try it somewhere else.

    • Nn says:

      No one? Oookay then dumb dumb.

  14. Seriously Now says:

    It’s darkness at noon.

  15. No one can be shocked by this development. Yahoo has no clear entertainment hub for easy viewing, its player was garbage, the advertising was nothing. Of course you will lose money. It would have been better to try buy out Hulu.

  16. Dude says:

    Does this explain Dasn Harmon melting down on Twitter LIVE at this very moment? Yahoo has a crappy player and likely crappy infrastructure. I tried and failed to play both Community and Other Space on my laptop, phone, and via Chromecast.

    • Rena Moretti says:

      The fact Community was a flop on NBC had of course NOTHING to do with the lack of success.

      It’s amazing how this show keeps being defended even though it was given every chance to shine but never did.

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