Earnings plummet at CNN as ratings plummet

One of the first moves the newly formed Warner Bros. Discovery made when it took over CNN was to shut down CNN+, the fledgling streaming service that was touted 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 point of reference. reference for income and relevance.

Now, three months into Mr. Licht’s tenure, the network is facing big questions about how it can continue to expand its business with its Moonshot streaming service dead and traditional TV business in structural decline.

Projections from S&P Global Market Intelligence say CNN’s profitability is poised to decline to $956.8 million this year. That would mark the first time since 2016 that the network has fallen below $1 billion in profit, according to three people familiar with its operations.

Two people familiar with CNN operations said the network’s initial profitability target for 2022 was $1.1 billion, which Licht is on track to miss by more than $100 million. But another person familiar with the matter said that according to company executives’ accounting, Licht was on track to hit a profitability target of about $950 million for the year, as the network’s initial budget didn’t take into account. losses associated with the launch of the network. CNN+ streaming service.

However, the numbers are small, within CNN the search for new income is underway. To help solve the financial puzzle, Mr. Licht turned to Chris Marlin, an old friend who was most recently an executive with homebuilder Lennar in Florida. Mr. Marlin, who has been called “Fish Man” by some CNN employees, an imitation of his last name, had no experience operating a cable news network, having worked at the law firms Foley & Lardner and Holland & Knight.

Marlin has come up with a variety of revenue-generating ideas since joining CNN, including amazing advertising deals with major tech companies like Microsoft. Mr. Marlin also mentioned the sale of sponsorships to corporate subscribers, the extension of the CNN brand in China, and the expansion of CNN Underscored, an e-commerce initiative.

CNN’s parent company has also cracked down on spending. In July, CNN employees received a revised travel and expense policy that, among other things, restricts spending on work celebrations for senior vice presidents and below to $50 per person (“no limit for the CEO of WBD,” it says. politics). And Mr. Licht has found ways to make coverage more affordable, including a recent decision not to send a US-based special events team to Queen Elizabeth II’s Platinum Jubilee.

Licht, who took over CNN in May after a corporate merger made Warner Bros. Discovery its parent company, has tried to convince his staff of a vision for the network that isn’t tied to TV ratings. traditional television. During a meeting with employees in his first week, Licht said CNN would generate revenue by presenting advertisers with the network’s “pristine brand,” not just the sheer size of the audience, according to a recording of his remarks obtained by The New York Times. .

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

A CNN spokesperson said Licht was also focused on expanding the network’s traditional television audience, describing his recommendations to producers as “editorial guidance” rather than “business strategy.” The spokesman said that Mr. Licht had not yet put his stamp on the network’s programming and added that Mr. Licht projects that the network’s profits will increase in 2023.

Ratings are down from Trump-era highs on cable news, but the declines on CNN are particularly steep. The network has drawn an average of 639,000 people in prime time this quarter, according to Nielsen data, a 27 percent decrease from a year earlier. It trails MSNBC, which is down 23 percent in prime time over the same period, and Fox News, where viewership is up 1 percent.

CNN has spent millions covering the war in Ukraine, two people familiar with its operations said, and the network still pays some costs associated with CNN+, such as the salaries of high-profile journalists like Chris Wallace and Audie Cornish, who have also heavy on the baseline.

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

Executives from CNN’s corporate parent are examining the media empire, which includes Turner’s cable networks and channels like the Food Network, to find cost savings of about $3 billion.

But Mr. Licht told employees at the town hall meeting in May that he did not expect Warner Bros. Discovery to impose additional layoffs at CNN after CNN+ shut down.

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

Most of CNN’s revenue comes from long-term subscription deals with cable companies and traditional TV advertising revenue, said Steve Cahall, a senior analyst at Wells Fargo. When those advertisers make spending decisions, they care primarily about the total size of the audience, Cahall said.

“If the strategy offers more reach, meaning more ratings, then it’s probably a better deal,” he said. “If it offers less reach, if it turns out that the medium is a tight place to be in America these days, then it’s a less good business strategy.”

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