One of the first moves the newly formed Warner Bros. Discovery made when it acquired CNN was to shut down CNN+, an early streaming service touted as a bridge to the network’s future.
When Chris Licht became chairman of CNN the following month, he told employees at his first town hall meeting not to worry about ratings, a mainstay of TV news used as benchmarks for revenue and relevance. .
Now, three months into Licht’s tenure, the network is wondering how it can continue to grow in the face of the end of moonshot streaming services and the structural decline of its traditional TV business. I realized that I was facing a big problem of being able to do it.
CNN’s profitability is on pace to decline to $956.8 million this year, according to forecasts from S&P Global Market Intelligence. It’s the first time since 2016 that the network’s earnings have fallen below his $1 billion mark, according to three people familiar with the network’s operations.
Two people familiar with CNN’s operations said the network’s initial 2022 revenue target is $1.1 billion, but Licht expects a loss of more than $100 million. But another person familiar with the matter said the network’s original budget didn’t take into account the losses associated with the network’s launch, so according to company executive accounting, Licht would make about $950 million a year. It said it plans to hit its dollar revenue target. CNN+ streaming service.
But the numbers are marginal, and CNN’s internal search for new income continues. To solve financial problems, Licht turned to his longtime friend Chris Marlin, who was recently an executive at Florida homebuilder Lennar. Merlin said some CNN employees call him “Fishman” after his last name, but he told Cable News he had no experience running the network and was at law firm Foley & Lardner. and worked for Holland & Knight.
Since joining CNN, Merlin has come up with a number of revenue-generating ideas, including signing advertising deals with major technology companies like Microsoft. Merlin also mentioned selling sponsorships to corporate underwriters, expanding his CNN brand in China, and expanding his e-commerce initiative, CNN Underscored.
CNN’s parent company is also cracking down on expenses. In July, CNN employees received a revised travel and expense policy. This, among other things, limits his spending on work celebrations for senior vice presidents and below to $50 per person (the policy says “there is no cap for WBD CEOs”). ). Licht has also found ways to make coverage more economical, including the US-based special event’s recent decision not to send his team to Queen Elizabeth II’s platinum her jubilee.
Licht, who took over CNN in May after a merger that made Warner Bros. Discovery the parent company, is trying to market his staff with a vision of a network that isn’t tied to traditional TV ratings. According to transcripts of his remarks obtained by The New York Times, Licht said during the first week’s meeting with employees that CNN would sell to advertisers the network’s “pure brand” rather than just viewership numbers. said to generate revenue.
According to the recording, Licht said, “I don’t want producers making decisions based on what they think they’ll appreciate.”
A CNN spokesperson said Licht is also focused on growing the network’s traditional TV audience, and his recommendations to producers are “editorial guidance” rather than “business strategy.” I explained that there is. The spokesperson said Licht has yet to step into the network’s programming, adding that Licht expects the network’s profits to increase in 2023.
Ratings across cable news have fallen from their Trump-era highs, but the drop on CNN is particularly pronounced. The network attracted an average of 639,000 people in prime time this quarter, down 27% from a year ago, according to Nielsen data. In prime time over the same period, he trails MSNBC, which declined by 23%, and Fox News, which increased viewership by about 1%.
CNN has spent millions of dollars covering the war in Ukraine, and the network still pays some costs associated with CNN+, according to two people familiar with its operations. Focused on the bottom.
The network seeks to cover the costs associated with CNN+ by selling some of the shows made for the streaming service to other providers, such as HBO Max, which also owns Warner Bros. Discovery.
Executives at CNN’s parent company are looking at their media empire (including channels like the Turner cable network and the Food Network) to find cost savings of around $3 billion.
But Licht told employees at a town hall meeting in May that he didn’t expect Warner Bros. Discovery to impose additional layoffs at CNN after CNN+ shut down.
According to the recording, Licht said, “Nobody ever said, ‘I have to go cut this.'” “I think they have a keen understanding that they don’t know our business.”
Wells Fargo senior analyst Steve Cajor said most of CNN’s revenue comes from long-term cable subscriptions and traditional TV advertising revenue. When these advertisers make spending decisions, they primarily care about total viewership, he said.
“If a strategy brings more reach, which means more ratings, it’s probably better business,” he said. If it turns out, it’s not a very good business strategy.”
