CNN profits plummet as ratings plummet

One of the first steps the newly formed Warner Bros. When it took over CNN, Discovery was shutting down CNN+, the emerging streaming service touted as the network’s bridge to the future.

The following month, when Chris Licht took over as chairman of CNN, at his first town hall meeting, he told employees not to worry about ratings, a mainstay of TV news used as a measure of revenue and relevance.

Now, three months after Mr. Lightly, the network is facing big questions about how it can continue to grow its business now that its moonshot streaming service is dead and the traditional TV business is in a structural decline.

S&P Global Market Intelligence forecasts CNN’s profitability will fall to $956.8 million this year. That would be the first time since 2016 that the network has plunged below $1 billion in profits, according to three people familiar with its operations.

Two people familiar with CNN’s business said the network’s initial 2022 profitability target was $1.1 billion, which Mr. Slightly on track to miss by over $100 million. But another person familiar with the matter said Mr. Light is on track to meet a profitability target of about $950 million for the year, based on business executives’ accounting, as the network’s original budget doesn’t account for it. suffered losses related to the launch of the CNN+ streaming service.

Anyway, the numbers are cracked, CNN is on the hunt for new revenue. To solve the financial puzzle, Mr. Slightly contacted Chris Marlin, an old friend who was recently a principal at homebuilder Lennar in Florida. Mr. Marlin — whom some CNN employees called “Fish Man,” starting by his last name — had no experience operating a cable news network, having worked at the law firms of Foley & Lardner and Holland & Knight.

Mr. Marlin has put forward a variety of revenue-generating ideas since joining CNN, including signing advertising deals with major tech companies such as Microsoft. Mr. Marlin also mentioned the sale of sponsorships to insurers, the expansion of CNN’s brand in China and the expansion of CNN Underscored, an e-commerce initiative.

CNN’s parent has also taken a hard line against the spending. In July, CNN employees received a revised travel and expense policy that, among other things, limits work party expenses for senior vice presidents and below to $50 per person (“no limit for WBD CEO,” the policy reads). And Mr. Light has found ways to make its coverage more frugal, including a recent decision not to send a US-based special events team to Queen Elizabeth II’s platinum anniversary.

Mr. Licht, who acquired CNN in May after a Warner Bros. corporate merger. Discovery made the parent company has sought to sell its workforce with a vision for the network that is not tied to traditional TV ratings. During a meeting with employees in his first week, Mr. Light that CNN would monetize by pitching advertisers to the network’s “pristine brand,” and not just because of its audience size, according to a recording of his comments obtained by The New York Times.

“I don’t want producers to make decisions based on what they think it will judge,” Mr Licht said, according to the recording.

A CNN spokesperson said Mr. Licht was also focused on expanding the network’s traditional TV viewing audience, describing his recommendations to producers as “editorial guidance” rather than “business strategy.” The spokesperson said Mr. Licht has not yet left his mark on the network’s programming, adding that Mr. Licht expects the network’s profits to increase in 2023.

Ratings are below their Trump-era highs in cable news, but the declines at CNN have been particularly pronounced. The network attracted an average of 639,000 prime-time people this quarter, according to Nielsen data, down 27 percent from a year ago. It follows MSNBC, which is down 23 percent in prime time over the same period, and Fox News, where viewership is up about 1 percent.

CNN spent millions to cover 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 leading journalists such as Chris Wallace and Audie Cornish, who also weighted on the bottom line.

The network is trying to cover costs associated with CNN+ by selling some of the programming created for the streaming service to other providers, including HBO Max, of which Warner Bros. Discovery also owns it.

Executives at CNN’s parent company are examining the media empire — which includes Turner’s cable networks and channels like Food Network — to find about $3 billion in cost savings.

But Mr. Licht told employees at the town hall meeting in May that he didn’t expect Warner Bros. Discovery would impose additional layoffs at CNN after the CNN+ shutdown.

“No one said to me, ‘You have to go cut this,'” said Mr. Light, according to the recording. “I think there’s a keen understanding that they don’t know our business.”

Most of CNN’s revenue comes from long-term subscriptions with cable companies and from traditional TV advertising revenue, said Steve Cahall, senior analyst at Wells Fargo. When those advertisers make spending decisions, they’re primarily concerned with the overall size of the audience, said Mr. cahall.

“If the strategy gets more reach — that is, more reviews — then it’s probably a better company,” he said. “If it delivers less reach – if it turns out that the middle of America is a narrow place to be these days – then it’s a less good business strategy.”

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