Just four months after the splashy launch of Toronto 1 in October, Calgary-based owner Craig Media finds itself in the deep end of the pool and looking for a buyer.

The ambitious broadcaster, according to sources, has failed to meet its revenue targets and as a result is being pressured to sell by its U.S. investor Providence Equity Partners.

RBC Dominion Securities has been retained by Craig to attract buyers for all or parts of the broadcaster.

Toronto media experts suggest Craig, Canada’s largest privately held broadcaster, will be lucky to reach $15 million in ad revenue from Toronto 1 in the first year. Providence bought into a business plan that suggested Toronto 1 would generate revenues of about $33 million in the first year.

Craig’s asking price is $400 million, which is roundly dismissed by industry analysts as twice that of the broadcaster’s market value. Based on earnings alone, the current price is more like $130 million to $150 million.

On top of that, Craig’s A-Channel properties in Alberta have seen a revenue drop in the past year, exacerbated by the termination of a deal to buy CHUM programming that depressed ad revenue, and by a labor strike at A-Channel Edmonton. Industry watchers also suggest A-Channel in Manitoba is underperforming and the digital networks such as MTV Canada and TV Land are struggling to contribute value for the shareholders.

Despite several calls to Craig Media, no comment was available at press time.

Analysts say Craig’s situation became critical when TD Capital, an investor in the company’s Alberta operations, called its loan early last year. Because CEO Drew Craig wanted to remain independent in Canada, he was forced into the international equity markets to replace the capital.

On March 21, Providence invested $110 million to buy out TD Capital’s undisclosed investment, gaining about 19% equity in Craig. The investment helped Craig restructure debt, provided working capital for overall business growth and helped launch Toronto 1. At the same time, RBC Capital Markets and BMO Nesbitt Burns secured a $35-million line of credit.

The startling reversal at Craig puts the spotlight on the CRTC, which rankled the industry by granting the Toronto 1 licence to Craig over other larger, more capitalized companies. According to one exec at a competing company, the Craig situation calls into question the commission’s decisions to hand broadcast licences to smaller players. Others suggest Craig, which may anger the regulator by trying to flip the Toronto 1 licence for a substantial premium, may have fared better with a more modest launch of Toronto 1.

Timing of the announcement is also a source of speculation. Some industry players are just now returning to profitability after a number of down years, and the industry is expected to be doing even better six months from now. Meanwhile, the CRTC is expected to hold off on its decision whether to award CHUM new licences for conventional stations in Edmonton and Calgary.

According to a story in The Globe and Mail, Quebecor Media in Montreal is a prime candidate, with the capital wherewithal and need for media properties to fuel its anticipated initial public offering this year. CHUM is also a leading contender – especially for the Alberta licences, which would negate the need for new licences in the region. Alliance Atlantis Communications, repositioning itself as a broadcaster, will be keenly interested, though analysts doubt AAC’s ability to finance the deal. And Torstar, the most prominent loser in the Toronto 1 decision, may be interested in getting Toronto 1 after the fact.

No broadcaster would confirm its interest in the Craig sale at press time.

‘We’re obviously watching this file very closely,’ says Jay Switzer, president and CEO of CHUM. ‘We’ve been friends with Craig [Media] and Drew for a long time, supporting their operations in Alberta. We’re interested in what’s right for Craig and the overall broadcasting system.’

The potential loss of Craig Media means an end to Western Canada’s role in broadcasting, say observers, and suggests the era of the family-run business in a capital-intensive industry is done. Drew, Boyd and Miles Craig own 80% of Craig.

Along with Toronto 1, 56-year-old Craig Media operates MTV Canada, MTV2 and TV Land, along with A-Channel Calgary, A-Channel Edmonton, A-Channel Manitoba and CKX-TV Brandon. Craig has also announced plans to launch another diginet, Stampede, later this year.