The streaming video business is going through a correction, and CNN + has become a major casualty.
Just nine days after the completion of the merger that created Warner Bros. Discovery, new management announced Thursday it is pulling the plug on CNN’s $ 5.99-a-month streaming service.
CNN staffers were informed that CNN +, which launched March 29, will be shut down April 30, according to a memo from incoming CNN President Chris Licht obtained by The Times.
“This decision is in line with WBD’s broader direct-to-consumer strategy,” Licht said. “In a complex streaming market, consumers want simplicity and an all-in service, which provides a better experience and more value than stand-alone offerings.”
The decision to cut bait on CNN + so quickly comes on the heels of the disastrous quarterly results for streaming behemoth Netflix. The company has lost billions in stock value after failing to meet expectations for subscriber growth.
The decline of Netfilx subscribers in the first quarter highlighted the limit on what consumers are willing to spend on streaming services, which have proliferated under the aegis of media and tech companies, including Warner Bros. Discovery, Comcast, Apple and Amazon.
Jon Klein, a former CNN president who has been involved in several tech startups, said the Netflix subscriber declines probably put an exclamation point on existing concerns Warner Bros. Discovery already had about the launch of a free-standing CNN service.
“Its business model was that of a startup that was built to lose tons of money at first and build long-term value,” Klein said. “Wall Street couldn’t care less about long-term value, so it was pretty easy to cut it loose. After one more quarter, it would be new management’s albatross. ”
Even in the weeks before launch, there was talk that executives from the lean, budget-conscious culture of Discovery were unhappy with the amount of resources invested in CNN +, said to be $ 120 million in 2021 and hundreds of millions set for this year.
Warner Bros. Discovery Chief Executive David Zaslav said privately that he was unhappy about how his predecessors moved forward with the CNN + launch less than a month before the company changed hands, according to people familiar with the matter.
But Discovery and WarnerMedia’s previous owner, AT&T, kept arms length from each other until the completion of the merger. WarnerMedia and CNN executives led by former CEO Jason Kilar pushed ahead with their plans to get the service up and running before new management came in – even after Jeff Zucker, the architect of the service, was ousted as CNN president.
Licht told staff the decision to close CNN + was not a judgment on the content of the service. He said some of the programming and on-air talent hired will be absorbed into the company’s other networks.
“The process for making those decisions is already underway, and we will communicate to those affected as quickly as possible,” Licht said.
CNN + launched with major fanfare and a promotional blitz, hiring a number of well-known names, including Chris Wallace from Fox News and Audie Cornish from NPR. Being high-priced talent, they will presumably be joining the TV side.
Wallace’s one-on-one interview program has included sit-downs with such high-profile figures as “The 1619 Project” author Nikole-Hannah Jones and White House Press Secretary Jen Psaki that were certainly worthy of airing on the cable network.
But with 400 employees hired for the endeavor, there are likely to be cuts.
The first casualty is Andrew Morse, the CNN executive who oversaw CNN +. In a staff memo obtained by The Times, he said he is leaving the company.
CNN staffers were shocked by the announcement of a total shutdown of CNN +. Many expected a freeze in hiring and spending as the new executive team decided on a new path forward.
They also expected some version of a CNN streaming product to be folded into HBO Max, as Warner Bros. Discovery brass envision is an offering that gives streaming consumers one-stop shopping for news, entertainment, sports and unscripted programming.
According to one executive not authorized to discuss the matter publicly, Warner Bros. Discovery leadership probably preferred to take the short-term hit of a shutdown, rather than continuing to invest in a service they did not believe in.
CNN + reportedly had gained 150,000 subscribers since its launch, a respectable number after a few weeks, and was on track to reach its business goals in its first year.
But when new management came in to analyze the data, it found that usage of the site was low and believed it would be difficult for CNN + to gain the scale it would need to succeed as a free-standing subscription service, according to a person familiar with the discussions who was not authorized to discuss them publicly.
Warner Bros. Discovery executives are also faced with the task of reducing the company’s debt by several billion dollars, and significant losses would be tough to stomach.
Even though CNN + was seen as a long-term play to bring the service to consumers who are bypassing pay-TV subscriptions, there were questions about its approach.
Although consumers associate CNN with breaking news, its bread and butter was not touted in the promotion and advertising for the streaming service. The company promoted programs and personalities, having anchor Anderson Cooper host a show on parenting and Jake Tapper fronting a program on books.
The promotion looked out of sync with what CNN was generating on TV, with its strong on-the-ground coverage of the Russian invasion of Ukraine.
“I want to see Jake Tapper in Kyiv, not walking out of Books & Books,” Klein said. “CNN + felt optional not urgent. They had some high-quality talent. But in streaming you better stick to your value proposition and deliver that relentlessly. ”
The programming approach was constrained by another factor. CNN had to ease cable and satellite operators into the idea that CNN + was not a competing product that would cannibalize the TV audience. Fees from pay-TV operators make up about 70% of CNN’s revenue.
But the thinking at CNN before the merger was that the streaming service and the cable channel would be one and the same in five years, when the number of pay-TV homes is expected to drop into the range of 50 million.
The quick end to CNN + also raises the question as to whether streaming consumers are willing to pay for news content. The news divisions at ABC, CBS and NBC now operate streaming services that are ad-supported.
Times staff writer Meg James contributed to this report