Why Yahoo wrote down $42 million for ‘Community’

October 20, 2015, 10:56 PM UTC
Yahoo CEO Marissa Mayer speaks during her keynote address at the annual Consumer Electronics Show (CES) in Las Vegas
Yahoo CEO Marissa Mayer speaks during her keynote address at the annual Consumer Electronics Show (CES) in Las Vegas, Nevada January 7, 2014. REUTERS/Robert Galbraith (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS) - RTX175NV
Photograph by Robert Galbraith — Reuters

In April, at a star-studded “newfront” presentation at New York’s Lincoln Center, Yahoo showed off Community, a splashy television show it had acquired. Although a cult favorite, NBC had cancelled the comedy sitcom.

Star Joel McHale served as the evening’s host, wearing costumes in the audience and joking around with Yahoo CEO Marissa Mayer on stage. Yahoo touted the creative advertising in Community, which included an entire episode about a Honda CR-V.

Six months later, Yahoo is less excited about its investment in Community. During its third quarter earnings call Tuesday, Yahoo’s chief financial officer, Ken Goldman, said the company had taken $42 million in write-downs in its video division. In the question and answer portion of the earnings call, Goldman attributed the trouble to three original video series that Yahoo had backed including Community and a sports comedy called Sin City Saints.

Goldman said the write-down was necessary because Yahoo’s management “couldn’t see a way to make money over time.”

Yahoo’s decision to pick up Community followed Netflix’s lead. The video streaming company financed a final season of Arrested Development, another cult favorite show that failed to attract a large viewership on network TV. But Netflix, which has a subscription model, is under no pressure to make money from its video acquisitions through advertising the way Yahoo is.

“I’m not saying we won’t do these in the future,” Goldman said, referring to the original video series. “In three cases, it didn’t work the way we hoped it would work.”

McHale said in an interview in August that the show would not return for a seventh season, even though Yahoo had wanted to make one. He said some of the show’s actors, including Allison Brie and Gillian Jacobs, had become too expensive for a “normal television salary.”

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