By Sue Zeidler and Liana B. Baker
LOS ANGELES/NEW YORK (Reuters) - Al Jazeera said on Wednesday it will buy Current TV, the struggling cable channel founded by Al Gore and partners, in a move that will boost the Qatar-based broadcaster's footprint in the United States.
Terms were undisclosed, but analysts estimated the deal could be worth as much as $500 million.
Al Jazeera said it would start a new U.S.-based news channel with the acquisition, which will make it available in more than 40 million U.S. households, up from 4.7 million prior to the deal.
The deal brings Al Jazeera, which operates under the patronage of the emir of Qatar and his family, into closer competition with American news channels like CNN, MSNBC and Fox.
But the award-winning channel that is seen in more than 260 million homes in 130 countries faces hurdles with U.S. distributors and viewers, television industry analysts said.
Current, a liberal channel which has battled low viewership, had been distributed in about 60 million of the 100 million homes in the United States with cable or satellite service.
One of its distributors, Time Warner Cable, which accounted for about 12 million of those homes, announced late Wednesday it was terminating its carriage deal.
"Our agreement with Current has been terminated and we will no longer be carrying the service. We are removing the service as quickly as possible," Time Warner Cable said in a statement.
Reuters reported in April Time Warner Cable was considering dropping Current if it did not reach certain ratings thresholds.
A spokesperson would not elaborate. Current is also distributed by Comcast Corp and DirecTV, with 22.4 million and 19.8 million subscribers, respectively.
Comcast or DirecTV were either unavailable or declined comment. Dish Network Corp also declined comment.
Both Comcast and DirecTV also hold equity stakes of more than 5 percent in Current, according to public filings.
Current said Gore, its chairman, and co-founder Joel Hyatt, the chief executive officer, will remain on the advisory board.
PARANOIA ABOUT AL JAZEERA
Analysts said Al Jazeera would have to overcome a significant image problem in the United States, where many viewers remember its stridently anti-war reporting of the conflicts in Iraq and Afghanistan.
"Al Jazeera has deeper pockets. The downside is the politics. People in America associate Al Jazeera with the Muslim world or the Arab world or the Islam world and they have problems with that," said Jimmy Schaeffler, pay TV consultant at The Carmel Group.
"They have psychological, political and emotional concerns and that will work against them."
"There's a fair amount of paranoia when it comes to Al Jazeera," said Robert Thompson, professor of TV and popular culture at Syracuse University.
Al Jazeera has only been shown in a handful of cities. It said its new U.S.-based news channel would be separate from Al Jazeera English, and would provide both domestic and international news for American audiences.
The new channel would air in 2013 and would be headquartered in New York City. In addition to existing bureaus in New York, Washington, D.C., Los Angeles, Miami and Chicago, Al Jazeera would open more bureaus and would double its U.S.-based staff to more than 300 employees.
Current was co-founded in 2005 but never caught on. It shifted to a more liberal format from 2011, but ratings continued to disappoint, said Brad Adgate, senior vice president of research at Horizon Media, who pegged its average daily audience under 50,000 viewers and the value of a deal at $400 million to $500 million.
In late October, Current confirmed it was considering selling itself and had hired JP Morgan and the Raine Group to assess options.
Thompson said the deal came at a challenging time for the cable industry.
"Launching a cable network in the U.S. in the second decade of the 21st century is not an easy thing to do. Even Oprah Winfrey has struggled in significant ways," he said.
Disputes between pay TV distributors and cable networks have risen lately. Time Warner Cable also dropped arts-focused cable channel Ovation over its low ratings and the high costs of carrying the network.
(Reporting By Susan Zeidler; Editing by Gary Hill and Stephen Coates)