The Global Media Weekly for executives and entrepreneurs

CNN faces up to digital

CNN, arguably the world’s most successful news service, is in a spin. At its most recent townhall, new chief executive Chris Licht had a lot of questions to answer. In fact, CNN staff had submitted more than 300 questions, many about the round of layoffs that had swept through the company less than a week before. 

Addressing the layoffs, Licht insisted that “the mission of this was not just to cut costs, but also to rethink how we do business.”

What Licht has said so far seems to lack much in the way of a concrete plan for what CNN’s business needs to look like if he is to achieve his goal of increasing profits, revenues and audiences. 

Licht says he plans to focus CNN’s transformation around three pillars: Newsgathering, Programming, Digital. The last of those is obviously the most existential (and any legacy media CEO who doesn’t cite it would be laughed out of the room). In fact, Licht has said digital is not just a pillar but a standalone goal running through his plans. But saying is not the same as doing – and making it happen. 

He also talks extensively about focusing on newsgathering, both as a way of strengthening CNN’s overall product and ensuring that it remains a huge force in digital. But changes so far have mostly constituted tweaks to programming, says one insider, and digital still seems to be too far down the picking order. 

It isn’t that Licht has necessarily changed the way CNN does things for the worse, says the insider, but that he hasn’t addressed the pre-existing problems under previous CEO Jeff Zucker. These include seeing digital output as a question of format, rather than a guiding light for how journalism is done end-to-end.

“CNN’s long-term approach to digital has been that it’s at the end of the sausage factory,” they said. “The idea that everyone was thinking CNN was perfect is a nonsense. Everyone wanted change, especially on the digital side.” 

“[Under Zucker] they made noises about digital, but TV was all they cared about. Since Licht’s been here, it feels like they’ve doubled down on that.” 

The new CEO has blamed the previous regime under Zucker for CNN’s financial troubles and the need for layoffs and restructuring. CNN’s profits are projected to dip below $1bn for the first time this year, its first as part of the newly-merged Warner Bros Discovery, formed in April.

“There were problems with the financial health of the company,” Licht told the townhall. “The revenue decline we’re all seeing this year started long before I got here.”

He said the company had been spending big in non-core areas, and hadn’t even budgeted for CNN+, the planned streaming service scrapped before launch by the new parent company. “I am very confident we will bring in more money this year than we did last year because of these changes.”

The question, of course, is where will that money come from, especially given that the company has abandoned the direct user revenue route CNN+ was supposed to deliver.

Licht told the townhall that the “experts” at Warner Brothers believe the company has many years of runway from its broadcast linear news channel. But runway is only useful if you have a flight path to follow, and exactly how CNN plans to turn its huge digital audience, and wealth of content, into greater online revenue remains pretty unclear. This disruption to CNN’s long-established and successful business model is something that will strike a chord with newspapers who experienced the same pain and confusion when digital media smashed their revenue a decade or more ago.

For CNN, one area that has done well is sponsored content, which has been something of a cash cow less exposed to the whims of programmatic display advertising. But, as with all sponsored content, there are questions about how far to push it, and concerns about some of the partners with which the channel has been prepared to work. A solid editorial wall should be able to withstand any interference in reporting, but the partners themselves can always pose a threat to CNN’s own brand. 

What else is there? Well one of the most logical reasons for scrapping CNN+ (other than its poor subscriber acquisitions) was that it was competing with Warner Bros Discovery’s other streaming services, many of which offer compelling content in non-news areas in which CNN is also strong, such as cooking.

“His point was: look we’re launching this thing that basically does lots of things Warner Bros Discovery does already, why would we set up internal competition? It just doesn’t make a lot of sense,” said the insider. “CNN content should just be on our broader network, we are part of a massive parent company.”

That, of course, may be key to keeping Licht’s bosses at Warner Bros Discovery happy. Already somewhat behind in the streaming wars, Warner can hope to use CNN content that wasn’t compelling enough as a draw on its own, as part of a much broader package. In that scenario, CNN’s reputation will provide a halo effect far beyond its direct contribution to revenue. 

One problem Licht will have to deal with, however, is very definitely of his own creation – a lack of trust. After he joined and scrapped CNN+, Licht told staff in May he didn’t expect further layoffs. He also asked employees not to leak the company’s goings on, saying they would hear news from him first. He then proceeded to give away details in media interviews. Ouch.

“We were told no cuts and then there were cuts,” says the insider. “We were told please don’t leak. You’ll hear from me first. Then he gave a load of interviews. That was the biggest breach of trust.” 

That lack of trust is not helping employees feel confident that Licht has a plan in place to deliver the change he says he wants. “There’s a broad sense that employees are being asked to trust in a plan that hasn’t been revealed to them – and may not even be complete yet,” said another insider. 

Regaining that trust – both with a change in approach and a clearer roadmap to get CNN to where he says he wants it to be – is going to be vital for Licht if he wants to make good on his promises not just to CNN, but also his bosses at Warner. We wonder whether any prolonged difficulty in 2023 might yet lead the parent company to consider cashing in its chips and selling-off CNN while the profits are still in sight of the £1bn that had kept the former Time Warner happy for decades. Just watch.