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April 21, 2022, 7:26 p.m.
Business Models

CNN, Plus or Minus: The news network’s new streaming platform is dead, and that’s okay

It wasn’t hard to see this day coming on the day CNN+ was announced. It didn’t take blowing hundreds of millions of dollars to figure it out.

On April 28, 2010, soon after wrapping up the show he ran for MSNBC, Morning Joe, Chris Licht’s brain exploded. Well, not the whole brain, but an important part of it. (Are there unimportant parts?) A cerebral aneurysm left him in the ICU for nine days.

A major health scare often makes people with high-pressure jobs see life differently — making them want to slow down, smell the flowers, and appreciate the things that don’t come with hard deadlines. The title of Licht’s book about his aneurysm — What I Learned When I Almost Died: How a Maniac TV Producer Put Down His BlackBerry and Started to Live His Life — might prepare you for that cliché. Not so much:

You sometimes hear that illness is a way of telling the victim to slow down. That’s not the message my illness sent me. Mine said, “Get moving.”

Or, as one anonymous CBS staffer told the L.A. Times: “Maybe he is more Zen when he goes home at night. But he’s a guy who knows what he wants, and he wants it done the way he wants it.”

Given all that, it shouldn’t be surprising that Licht — the incoming CEO of CNN — was brutally swift in murdering CNN+, the streaming service that was supposed to be the network’s passport from cable bundles to cord-cutters. As CNBC’s Alex Sherman reported, CNN+ will shut down on April 30, barely a month after its launch on March 29. (CNN, grimly, matched the story almost immediately.)

It’s an embarrassing flop — it couldn’t even attract 10,000 viewers a day — not to mention a case of spectacular mismanagement by CNN. But it’s almost certainly the correct move for CNN’s streaming future.

It’d be one thing if the decision to pull the plug was based solely on CNN+’s underperformance over its first few weeks.

It reportedly has 150,000 paying subscribers; at the $3/month bargain rate they’re nearly all paying, that’s less than $500,000 a month in subscriber revenue, or $6 million a year. Considering the network hired “hundreds of people” and spent “hundreds of millions of dollars” on CNN+ before launch, that ain’t gonna cut it.

But if you believe in a product, you’re probably willing to give it some time to grow — to tweak, to pivot, to learn what works and what doesn’t. (Licht has even done that before — he was called in to fix the struggling Late Night with Stephen Colbert when its first iteration left it far behind The Tonight Show in the ratings.)

No, the biggest error here was going ahead with the launch even though it was clear this sort of quick death was very possible, even likely. Almost nothing about CNN+’s performance after launch — or how its new corporate masters would view that performance — was hard to predict. CNN spent a lot of money and hired a lot of people while walking into a very visible buzzsaw.

Let’s look back at how this all rolled out. (All emphases are mine.)

December 4, 2020

The Information reports that, as had been discussed for years, AT&T’s WarnerMedia was close to okaying a new “subscription offering based on content from CNN” that “could launch next year.”

The CNN offering wouldn’t be a streamed version of the cable channel. The exact programming strategy for the new service hasn’t been finalized, although it’s not expected to offer news 24-hours a day like CNN does. Instead, executives are discussing a lineup that could include custom-made shows, such as documentary specials on different topics, specials that drill down on issues of the day featuring its talent as well as international programming that may have never aired on CNN, according to people familiar with the discussions. By taking this approach, CNN ensures the streaming service won’t cannibalize its core cable channel.

February 28, 2021

A Ben Smith New York Times column raises the visibility of a potential Discovery–CNN tie-up. Smith notes that Discovery has made substantial investments in news channels overseas. Why? CEO David Zaslav “said the investments in those channels were part of a strategy to sell streaming services as a bundle with news and sports.”

May 17, 2021

AT&T announces it’s selling off CNN and its other Warner assets to be combined with Discovery. All the talk around the deal is about scale — how their combined forces would rival (if not pass) Netflix in content ambition and spend and give it a foothold in the competitive streaming world.

The emphasis from the start is on merging streaming services, not spawning new ones, as a later SEC filing showed: “[The new company] expects to develop and implement a go-to-market strategy for its DTC products that coordinates and/or combines its offering of discovery+ and HBO Max.”

AT&T CEO John Stankey tells the Times that the deal makes sense as a unitary whole, not as an assemblage of parts:

“If you step back and think about what holds this transaction together, it’s not just one or two pieces,” he said in an interview. “It’s the whole thing together.”

Mr. Stankey added that “to kind of mix and match things and thinking about ripping stuff out and putting one asset somewhere else, your overall financial equation, a value proposition out to the market, kind of falls apart.”

The merger isn’t expected to face significant antitrust problems from regulators, but it nonetheless has to go through the process in the U.S., E.U., and elsewhere, meaning the merger likely won’t take effect until Q1 or Q2 of 2022.

July 19, 2021

CNN announces CNN+, describing it as “the most important launch for CNN since Ted Turner launched the network in June of 1980.” The very expensive proposition (450 new hires!) involves creating a parallel network of sorts, including 8 to 12 hours of live programming per day. “We are going to take a pretty big swing here, and the company’s behind it,” CNN+ boss Andrew Morse says.

CNN+ will be its own freestanding brand, even though nearly every other WarnerMedia property had already been lumped into the “Max” part of HBO Max. Not to mention that Warner had already shown itself to sacrifice its feature-film division at the altar of the one true god, HBO Max.

Who will CNN+ be for? Execs describe it as “an addictive experience that complements the core CNN linear networks and digital platforms to serve CNN super-fans, news junkies and fans of quality non-fiction programming.”

CNN+ is set to launch in Q1 of 2022 — riiiiiiiight around the time the Discovery merger is likely to conclude.

November 3, 2021

Headline: “Get Ready for HBO Max and Discovery+ to Become One Mega-Service.” Discovery exec JB Perrette says on an earnings call that “There will be meaningful cost savings from combining into one platform. I think there also will be meaningful consumer benefits from combining into one platform.”

Fall and winter, 2021-22

CNN announces a series of high-profile (and, presumably, expensive) hires for CNN+, including Kasie Hunt, Chris Wallace, Audie Cornish, Rex Chapman, Cari Champion, and Jemele Hill — along with streaming-only shows from the network’s biggest anchors and content deals with Hollywood stars.

February 23

CNN announces CNN+’s launch programming lineup, which includes 8 daily shows (most hosted by CNN’s existing TV talent), 11 weekly shows (most hosted by CNN’s existing TV talent), original documentary series, and the network’s back catalog.

Also, February 23

The date of the Discovery–WarnerMedia merger is finalized: April 8.

March 3

CNN announces pricing for CNN+ ($5.99/month, $59.99/year) as well as a special launch deal: “Early subscribers that sign up within the first four weeks directly will have access to the ‘Deal of a Lifetime,’ or 50% off the monthly plan — for life — as long as they remain subscribers.” In other words: Pleeeeeeease, CNN super-fans, sign up right away — we’ve gotta hit a big number out of the gate.

March 11

A launch date is announced: March 29, sneaking juuust under that Q1 2022 deadline.

March 14

Discovery CFO Gunnar Wiedenfels says that HBO Max and Discovery+ will indeed be merged into a single product, not just available as a bundle. “One of the most important items here is that we believe in a combined product as opposed to a bundle,” he says. “We believe that the breadth and depth of this content offering is going to be a phenomenal consumer value proposition.”

Says Engadget: “It’s not surprising to learn that Discovery and TimeWarner plan to unify their streaming platforms. When the merger was first announced last year, it was positioned as a move that would make the two companies better able to compete with Netflix, Disney+ and other rivals.”

March 29

Launch happens, without any significant glitches. The network announces it will sell clips of CNN+’s first few moments as NFTs, ensuring only the best karma for the whole endeavor.

April 8

The Discovery-WarnerMedia deal officially closes, on CNN+’s 11th day of existence. Warner Bros. Discovery, awkward mid-name period and all, is born.

April 13

That launch discount seems to have had the desired effect: CNN+ signed up more than 100,000 subscribers in the first week alone. Bloomberg says the number “suggests a favorable start for a news service in a business where only a handful of players top 1 million customers.”

April 19

Ruh-roh: WarnerMedia kills off all external marketing spending (that is, everything but in-house promotions on CNN or CNN-owned properties) for CNN+ and lays off CNN’s longtime CFO. “More than 100,000 subscribers” after 7 days is now “roughly 150,000 subscribers” after 22 days.

April 21

CNN+ is dead. It was one month old.

Looking back over that litany, it’s amazing how predictable this all seemed.

Set aside the product itself for a minute. It was obvious from the day the Discovery deal was announced — even before then! — that the goal here was to gain scale in streaming. “Competing with Netflix,” and all that. All the messaging around it was that you need to create a broad enough mix of content to create a compelling offering for customers. The Warner side of the deal seemed to understand that, having put everything from “Succession” to “Sesame Street” to “Aqua Teen Hunger Force” under a single umbrella. The Discovery side has made their position clear all along: News was part of a bundle, potentially a very valuable part, but not a separate SKU.

Given all that — not to mention that execs said they expected to find $3 billion in “efficiencies” to cut in the deal — why would CNN commit hundreds of millions of dollars to a standalone news-only streaming service it seemed clear the new bosses wouldn’t be interested in keeping around? If HBO Max — Warner’s everything-but-CNN streamer — wasn’t big enough to stand on its own post-merger, why would CNN+ be?

The most unexpected event over this timeframe was the sudden resignation of CNN CEO Jeff Zucker on February 2. But Zucker and Discovery’s Zaslav are famously golfing buddies; nothing about this strategy should have been secret. In any event, Zucker had originally been expected to leave the company at the end of 2021 anyway.

The point is, the mismatch between this streaming product and the merged company’s streaming strategy has been clear for almost a year. And yet CNN+ was announced, developed, marketed, and launched over that same period.

When Chris Licht met with CNN employees this afternoon, this was how he put it:

…Mr. Licht compared CNN’s efforts to launch CNN+ to a builder constructing a house without being allowed to speak to the intended owner, according to a recording reviewed by The New York Times.

“Then the new owner came in and said, ‘What a beautiful house! But I need an apartment,’” Mr. Licht said, according to the recording. “And that doesn’t take anything away from this beautiful house you built. I am proud of it, and I am proud of this team, and I am gutted by what this means for you.”

But the new owner bought the place almost a year ago! Sure, closing took a while to finalize — but c’mon! This is more like someone buying 5 vacant acres, with plans to build a ranch house, only to discover at closing that since his offer was accepted, someone somehow built a steel mill where the living room should be.

Ranch houses are fine, steel mills are fine — but it takes a hell of a miscommunication to mix them up.

There are limits on how much merger partners can talk about the companies’ current operations while deals are being approved. But come on — it’s not as if there was no way to communicate “We think CNN+ is a dumb idea” back when Zaslav and Stankey were busy having “a two-hour conversation about the future of media” or the “many other conversations [that] followed.”

JB Perrette, the Discovery exec who went on about the “meaningful cost savings” and “meaningful consumer benefits from combining into one platform,” was also at today’s meeting and said what CNN execs should have known a year ago:

Mr. Perrette also referred to Discovery’s “painful” history launching similar smaller streaming services — focused on cars, food and golf — and said that they were costly to market and had limited audiences.

“We have failed almost at every turn launching these products,” he said, according to the recording of the meeting.

Okay, let’s un-set-aside that product we set aside before. CNN+ is (was) not a very compelling one, from Day 1. Here are a few of the ways:

  • As a product, CNN+ was supposed to be the network’s answer to cord-cutting and the collapse of the cable bundle. But it was designed to be an “addictive experience” for “CNN’s super-fans.”

    CNN super-fans, almost by definition, still have cable. Who is the Wolf Blitzer stan or Tapper-head who doesn’t already watch them on linear cable? A real CNN super-fan probably has the channel on, live, all day — when do they need to second-screen it?

    Cord-cutters are disproportionately young: 66% of Americans 18 to 29 don’t have a cable or satellite subscription, versus only 19% of those 65-plus. Since 2015, that number has soared for 18-29s (from 35% to 66%) but barely budged for 65-plus (14% to 19%).

    CNN’s broadcast audience — which is to say its base of super-fans — is old. The median age of a CNN viewer in 2021 was 64. That number is lowered by the younger audience that watches during daytime; median ages for evening programs — the sort of appointment viewing that usually helps define a super-fan — is routinely over 70. And remember, we’re talking about the median — so half over 70, half below.

    How would you attract young cord-cutters by making a product designed to appeal to cable-loving retirees? I’m not suggesting CNN+ would’ve been a hit if it’d “fellow-kidsed” its strategy, but the limits of their approach were obvious.

  • HBO Max doesn’t “complement” HBO the cable network. It contains HBO the cable network. The value proposition is clear: Want to watch “Righteous Gemstones,” but have something else to do on Sunday nights? Now you can watch it any time you want — plus a bunch of other stuff, like Big Bird and that great Jean Smart series.

    CNN+ was designed to “complement” CNN the cable network — but almost nothing that actually airs on CNN was on CNN+. There’s a perfectly sound reason for this: CNN’s contracts with cable providers don’t allow it to offer its live-TV content elsewhere, because the CNN fans among their customers wouldn’t need to pay for cable anymore.

    Defenders of linear TV and the cable bundle crave nothing more than the watch-it-now urgency of live events; just look at the prices being paid for NFL games and other sporting events that demand to be watched live. CNN ain’t the NFL, to be clear, but a channel you can turn to whenever big news hits is a real value.

    So CNN didn’t have much choice about streaming its TV live feed. But that doesn’t make it any less punishing of a problem for a news network that built its reputation on live coverage.

    Think back to what Perrette said about “Discovery’s ‘painful’ history launching similar smaller streaming services — focused on cars, food and golf — and said that they were costly to market and had limited audiences.” To certain newsroom curmudgeons, that’ll sound like heresy. Cars, food, and golf are only part of the news; news is the whole thing! But the reality is that “cable news, only it’s on your phone and you pay for it” is absolutely a niche market, no matter how big the CNN name is.

CNN news as part of a streaming bundle makes a ton of sense. Two of the biggest problems with the streaming business model is that they are (a) easily substitutable and (b) hit-driven.

If someone stops HBO Max for a month and gets Hulu instead…they’ll survive. The churn rates for all these services illustrate that brand loyalty is still in flux — even for Netflix.

And what’s a huge cause of that churn? People who sign up for a single show…which they then binge in a weekend. If you absolutely love “Ted Lasso,” it won’t be hard to make you an Apple TV+ customer — until the season ends and nothing else catches your interest. Streamers would love to figure out a way to create sustainable content loyalty, as proven by the remains of a zillion talk shows. (Netflix has a daily trivia game now! It’s very meh.)

A news channel can fill in part of that void. You might not watch it every day, but you know it’ll be there when you need it. “HBO Max, now with CNN” is a legitimate differentiator.

News as part of a larger bundle also makes sense from a civic-information perspective. CNN super-fans do not need more CNN. (Just as Fox News super-fans do not need more Fox News, and MSNBC super-fans do not need more MSNBC.)

But cord-cutters who rely on Netflix or HBO Max for their entertainment currently get no news at all on their TV screens. The 11 o’clock news doesn’t come on after they finish “Breaking Bad.” There’s no alert in their Continue Watching list when the local weather takes a sudden turn for the worse. Their recommendation engines don’t nudge them toward what just happened in Ukraine. Those are people who would benefit from more news in their lives.

I doubt what CNN+ was cooking up — an unexciting pastiche of cable tropes — was going to be the thing that demanded their interest. But something needs to. And now hundreds of millions of dollars invested in the problem have gone up in smoke, and hundreds of people who bought into the effort will now probably be out of a job.

That’s what so frustrating about this announcement: There was no good reason for CNN management to march down this misguided a path in the first place. I think the call made today is probably the correct one. It just should have been made a year ago.

POSTED     April 21, 2022, 7:26 p.m.
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