As $48 Billion WarnerMedia Discovery Merger Looms, CNN+ Ramps Up
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The race to plant a flag in the streaming market went into overdrive during the pandemic, with homebound consumers in search of new content and delivery systems. But it took a proposed $48 billion merger to create a sense of urgency at CNN.
As rival news organizations, including NBC News and Fox News Media, were funneling resources into streaming, the media narrative at CNN swirled around tension between CNN Worldwide chief executive officer Jeff Zucker and WarnerMedia CEO Jason Kilar, who became Zucker’s boss when AT&T CEO John Stankey put him in the job in May 2020. The former went so far as to announce publicly that he intended to “move on” from CNN at the end of 2021, eliciting a chorus of lament from the network’s top stars.
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To many at the news operation, the long-gestating CNN direct-to-consumer service, officially announced as CNN+ last July, was more closely aligned with Kilar, the former Hulu CEO.
Not anymore.
When Stankey and Discovery, Inc. CEO David Zazlav (Zucker’s Hamptons neighbor and golfing buddy), sent tremors through Hollywood with the surprise announcement last May that AT&T would spin off its WarnerMedia unit in a $48 billion deal with Discovery, Zucker’s future at the company was immediately recast. When the deal is consummated — as soon as mid-2022 — Zazlav will be in charge of a behemoth content company boasting dozens of cable and digital networks, storied film and TV studios and a global sports business.
“They weren’t taking it too seriously early in the year,” says one CNN source of the company’s streaming play. “The merger announcement comes and CNN+ becomes a really big f–king deal.”
And a matter of survival.
The cable bundle is staggering toward implosion as viewers continue to cut the cord — and younger consumers continue to be completely allergic to the antiquated cable subscription. Market research firm Kagan predicts that cord-cutting will cost U.S. cable, satellite and telecom companies more than $33 billion in annual revenue through 2025 with revenue declining from $91.1 billion in 2021 to $64.7 billion by 2025. CNN’s U.S. subscriber base is expected to dip about 5 percent to 80.5 million this year compared to 84.9 million last year, according to Kagan.
As the industry awaits a reordering of its delivery systems, streaming is an essential hedge for a future when all content is streamed on demand. And Zazlav has characterizing CNN as a “core asset” of the future combined companies, calling Zucker a “hugely, hugely talented” executive.
“We are committed to CNN having the greatest editorial integrity and success globally,” Zaslav said during a press conference in the wake of the deal announcement. For its part, Discovery has a growing portfolio of international news assets, including GB News, launched last summer in the U.K. as an alternative to the BBC and Sky News. Among Zazlav’s ambitions, he has said, is to “be the world leader in news.”
Since news divisions cannot duplicate the programming they serve up on their linear channels, care of lucrative distribution agreements, CNN will experiment with some facsimile of its core product. On CNN+, there will be eight to 12 hours of live programming each day, some with an interactive component, offerings from the CNN archives, original series (Amy Entelis’ CNN Films has been on a buying spree of late), and new daily programs developed for the platform. Hence, CNN+ will launch shows hosted by former NBC News Washington correspondent Kasie Hunt, who joined CNN last August. The company has also hired NYU marketing professor and entrepreneur Scott Galloway, who hosts the podcast “The Prof G Show” and cohosts “Pivot” with Kara Swisher. (Galloway appeared in a bizarre Twitter video last July; bare-chested, wearing a hardhat and with a mattock slung over a naked shoulder, he copped to “erectile dysfunction” and a propensity for “one-night stands.” The video was ostensibly to promote what was supposed to be a show on Bloomberg. Plans for the show were nixed. Apparently, CNN executives are not as squeamish.)
And CNN confirmed a report that Zucker made an overture to the popular MSNBC host Rachel Maddow to join CNN+. (Maddow re-signed with MSNBC last August.) CNN’s streaming play will be rooted in news and documentary; there is no intention to stray into scripted content. Without mentioning CNN, Zazlav used his appearance at the Paley Center’s International Council Summit on Nov. 10 to draw an implicit distinction with rival Fox News, which launched its Fox Nation subscription service in 2018.
“I think Fox News is much more of an advocacy network,” he told interlocutor Ken Auletta during the online conference.
Zazlav also said he would move to Los Angeles — he is restoring Robert Evans’ famed Woodland mansion, which Zazlav bought for $16 million shortly after Evans’ death in 2019 — so that he can be “very hands-on” in running Warner Bros. Discovery. And he has said that he hopes to keep Zucker, a famed empire builder, at the company. There is speculation that Zazlav could tap Zucker to run the merged company’s global news and sports assets. But those who know Zucker wonder if that would be enough to satisfy his ambition. (If and when Zucker does get kicked upstairs, he has made it known that his pick to succeed him at CNN is his chief marketing officer Allison Gollust, say sources. The two have had a close association for decades, and first worked together at NBC.)
Meanwhile, Andrew Morse, CNN Worldwide chief digital officer, and his team are busy hiring hundreds of new employees for the direct-to-consumer platform. There will be a handful of additional CNN+ talent announcements before the end of the year, while the network’s New Year’s Eve coverage hosted by Anderson Cooper and Don Lemon will include big talent reveals, said a person familiar with the company’s rollout plans. A 30-second spot, which bowed in October, hearkens to the network’s launch in 1980 with archival footage from iconic events (Tiananmen Square massacre, Operation Desert Storm, Hurricane Katrina, the Miracle on the Hudson).
Of course, CNN+ is launching as many legacy streaming services are confronting the specter of post-pandemic churn. Disney added 2.1 million Disney+ subscribers for its recently ended fiscal fourth quarter, down from 12.6 million the previous quarter. WarnerMedia’s HBO and HBO Max ended the third quarter last September with 45.2 million U.S. subscribers, down 1.8 million after the company’s decision to remove the HBO subscription from competitor Amazon Prime.
But there are few news brands with the global reach of CNN. Which means, if the company can put out a reasonably good product and offer it at a non-objectionable price point, it could be a major player in the global streaming news space.
Some day.
“There is immense potential,” notes former CNN chief Jon Klein, who is the cofounder of subscription streaming platform Tapp Media. (Discovery is an investor in Tapp.)
“In a fragmented environment, strong brands rule,” adds Klein. “We first saw that at CNN with the advent of the internet. The online explosion in 1995 should have cut the legs out from under CNN because its brand proposition was about 24-hour news. What happened? CNN dominated online news and does to this day. Their strong brand has lured news consumers on every platform that came along. That became true of digital, it became true of social, and I have no doubt it will be true of streaming.”
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