Profits plummet at CNN as ratings plummet
One of the first steps taken by the new Warner Bros. Discovery when it took over CNN was to shut down CNN+, the fledgling streaming service that was billed as the network’s bridge to the future.
The following month, when Chris Licht took over as president of CNN, he told employees at his first town hall meeting not to worry about ratings, a mainstay of television news used as a benchmark for revenue and performance. relevance.
Now, three months into Mr. Licht’s tenure, the network finds itself facing big questions about how it can continue to grow its business with its dead moonshot streaming service and the traditional television business in decline. structural.
Projections from S&P Global Market Intelligence indicate that CNN’s profitability is on track to decline to $956.8 million this year. It would be the first time since 2016 that the network has fallen below $1 billion in profits, according to three people familiar with its operations.
Two people familiar with CNN’s operations said the network’s original 2022 profitability target was $1.1 billion, which Licht is on course to miss by more than $100 million. But another person familiar with the matter said that based on company executives’ accounting, Mr. Licht is on track to hit a profit target of around $950 million for the year, as the network’s initial budget did not take into account the losses associated with the launch of the CNN+ Broadcast Service.
However, the numbers are tight, inside CNN the hunt is on for new revenue. To help solve the financial puzzle, Mr. Licht enlisted Chris Marlin, a longtime friend who was most recently an executive at Florida homebuilder Lennar. Mr. Marlin — who some CNN employees called “Fish Man,” a takeoff of his last name — had no experience operating a cable news network, having worked at the firms of lawyers Foley & Lardner and Holland & Knight.
Since joining CNN, Mr. Marlin has pioneered various revenue-generating ideas, including advertising deals with major tech companies such as Microsoft. Mr. Marlin also mentioned the sale of sponsorships to corporate subscribers, the expansion of the CNN brand in China and the expansion of CNN Underscored, an e-commerce initiative.
CNN’s parent company also clamped down on spending. In July, CNN employees received a revised travel and expense policy that, among other things, limits spending on labor celebrations for senior and under VPs to $50 per person (“no cap for the CEO of WBD,” the policy reads). And Mr Licht has found ways to make coverage more economical, including recently deciding not to send a US-based special events team to Queen Elizabeth II’s Platinum Jubilee.
Mr. Licht, who took over CNN in May after a corporate merger made Warner Bros. Discovery, its parent company, has attempted to sell its staff a view of the network that is unrelated to traditional TV ratings. In a meeting with employees the first week, Licht said CNN would generate revenue by presenting advertisers with the network’s ‘immaculate brand’, not just audience size, according to a recording of his remarks. obtained by the New York Times.
“I don’t want producers making decisions based on what they think they’re going to score,” Licht said, according to the recording.
A CNN spokesperson said Mr. Licht was also focused on growing the network’s traditional TV audience, describing his recommendations to producers as “editorial advice” rather than “market strategy.” The spokesperson said Mr. Licht has yet to put his stamp on the network’s programming, adding that Mr. Licht expects the network’s profits to increase in 2023.
Ratings are down from their Trump-era highs in cable news, but the declines at CNN are particularly steep. The network averaged 639,000 people during prime time this quarter, according to Nielsen data, down 27% from a year ago. It follows MSNBC, which was down 23% in prime time over the same period, and Fox News, where viewership was up about 1%.
CNN has spent millions covering the war in Ukraine, according to two people familiar with its operations, and the network still pays some costs associated with CNN+, such as the salaries of top reporters like Chris Wallace and Audie Cornish, who have also weighed in on the bottom line.
The network tries to cover the costs associated with CNN+ by selling some of the programming created for the streaming service to other providers, including HBO Max, Warner Bros. Discovery also owns.
Executives at CNN’s parent company are looking at the media empire – which includes cable networks Turner and channels like Food Network – to find about $3 billion in savings.
But Mr. Licht told employees at the town hall meeting in May that he did not expect Warner Bros. Discovery imposes additional layoffs on CNN after CNN+ shuts down.
“Nobody said to me, ‘You’re going to have to cut this,'” Mr Licht said, according to the recording. “I think there’s an acute understanding that they don’t know our business.”
The bulk of CNN’s revenue comes from long-term subscription deals with cable companies and traditional television advertising revenue, said Steve Cahall, principal analyst at Wells Fargo. When these advertisers make spending decisions, their main concern is the size of the total audience, Cahall said.
“If the strategy offers more reach — meaning more ratings — then it’s probably a better business,” he said. “If it offers less reach — if it turns out the middle is a tight place to be these days in America — then it’s a worse business strategy.”