CNN Earnings Slip as Ratings Fall

One of the first moves a newly formed Warner Bros. discovery made when it acquired CNN was Close CNN+, the emerging streaming service touted as the network’s bridge to the future.

The following month, when Chris Licht took over as CNN chairman, he told employees at his first city council meeting not to worry about ratings, the mainstay of television news used as a revenue criterion and its importance.

Now, three months into Mr Licht’s tenure, the network finds itself facing big questions about how it will continue to expand its business after the streaming service has gone out of the moon and exposed the traditional TV business to structural collapse.

Forecasts 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’s profits have fallen below $1 billion, according to three people familiar with its operations.

Two people familiar with CNN’s 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 by holding the company’s executives to account, Mr. Licht was on track to meet a profitability goal of nearly $950 million for the year, since the network’s initial budget did not take into account losses associated with launching the CNN+ broadcast service.

However, numbers are smashed, inside CNN, the search for new revenue is underway. To help solve the financial puzzle, Mr. Licht chose Chris Marlin, an old friend who had recently been an executive at Florida home builder Lennar. Mr. Marilyn – who has some CNN employees to contact “Fish Man”, as his nickname – he had no experience running a cable news network, having worked for the law firms Foley & Lardner and Holland & Knight.

Mr. Marlin has come up with a variety of revenue-generating ideas since joining CNN, including advertising deals with major technology companies such as Microsoft. Mr. Marilyn also mentioned the sale of insurance company sponsorships, the expansion of the CNN brand in China and the expansion of CNN Underscored, an e-commerce initiative.

CNN’s father also cracked down on expenses. In July, CNN employees received a revised Travel and Expense Policy that, among other things, limits spending on business ceremonies for senior vice presidents and below to $50 per person (“there is no ceiling for a WBD CEO,” the policy states). Mr. Licht has found ways to make coverage more economical, including the recent decision not to send a US-based special events team to the platinum jubilee of Queen Elizabeth II.

Mr. Licht, who took over CNN in May after a company merger tried to make Warner Bros. Discovery, the parent company, sold its employees based on a vision of the network unrelated to traditional television ratings. During a meeting with staff in his first week, Mr. Licht said CNN would generate revenue by promoting advertisers on the network’s “original brand,” not just the massive audience size, according to a recording of his notes obtained by The New York Times.

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

A CNN spokesperson said Mr Licht has also focused on expanding traditional television viewing for the network, describing his recommendations to producers as “editorial guidance” rather than a “business strategy”. Mr Licht has yet to put his stamp on the network’s programming, the spokesperson said, adding that Mr. Licht expects the network’s profits to increase in 2023.

Ratings have fallen from their Trump-era highs across news channels, but the drop at CNN has been particularly pronounced. The network drew an average of 639,000 people at peak times this quarter, according to data from Nielsen, down 27 percent from a year ago. It comes after MSNBC, which is down 23 percent in prime time over the same period, and Fox News, where viewership is up about 1 percent.

CNN has spent millions covering the war in Ukraine, two people familiar with its operations said, and the network still pays some of the costs associated with CNN+, such as the salaries of prominent journalists like Chris Wallace and Odie Cornish, which also weighed in on the bottom line.

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

Executives at CNN’s parent company are scrutinizing the media empire — which includes Turner’s cable networks and channels like Food Network — into Find nearly 3 billion dollars in cost savings.

But Mr. Licht told employees at a city council meeting in May that he did not expect Warner Bros. Discovery laid off additional workers at CNN after CNN+ closed.

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

The bulk of CNN’s revenue comes from long-term subscription deals with cable companies and from traditional TV advertising revenue, said Steve Cahal, chief analyst at Wells Fargo. When these advertisers make spending decisions, they are primarily concerned with the size of the overall audience, said Mr. Cahal.

“If the strategy provides more reach — that is, more valuations — it is probably a better business,” he said. “If it provides less access – if the middle turns out to be a tight place to be these days in America – then it’s a lower quality business strategy.”