Business

Inside the Implosion of CNN +




David Zaslav had been the CEO of Warner Bros. Discovery for a few hours when he was told he had a problem.

On April 11, the day his newly merged company began trading on the Nasdaq, Zaslav greeted New York employees with pasta and ice cream parlors, and delivered an impromptu cry to his new accusers. He was on his way to Washington, the next stop on the coronation tour, when a call came in.

His team had just gotten their first look at data from CNN +, the much-promoted subscription streaming service started two weeks before, and the news was dismal. Fewer than 10,000 viewers watched at any one time, despite a multi-million dollar advertising campaign and big employees like Chris Wallace. They recommended a cold-eyed review.

Three days later, shortly after Mr. Zaslav appeared with Oprah Winfrey for a rah-rah company town hall, he gathered his representatives inside a low-rise stucco building in Burbank, California, on Warner Bros. studio plot, and said he agreed with their conclusion: put it down.

The almost immediate collapse of CNN + was one of the most spectacular media failures in many years, a $ 300 million experiment that ended abruptly with layoffs and disruptive careers. The company’s tug-of-war over its fate revealed deep philosophical dividing lines about the future of digital media, while executives struggle to navigate a rapidly changing marketplace where technology and consumer habits change from day to day.

And it reflected the difficult regulatory dance of two media giants that merged even when a high-profile project was nearing completion. Discovery had some concerns about CNN +, but was prevented from directly guiding one of its streaming competitors until the deal was terminated.

CNN must now emerge from one of the most chaotic periods in its history: the firing of its top-ranked anchor Chris Cuomo; the removal of his longtime president Jeff Zucker due to an undisclosed affair with a colleague; and the absorption of the parent company WarnerMedia by Mr. Zaslav’s Discovery.

The second injury has included the long friendship between Zaslav and Zucker, one-time allies in business and in life. Mr. Zucker, who once called the Discovery boss “the best friend anyone could wish for, and I’m lucky he’s mine,” has not spoken to Mr. Zaslav since leaving on February 2.

Inside CNN, employees remain stunned. “This is not simple news, and I do not want to minimize it,” Chris Licht, the network’s new chairman, told CNN + staff in a solemn announcement of the closure. “I’m proud of it,” he added. “I’m proud of this team, and I’m gutted at what this means for you.”

This account is based on interviews with a dozen people who are well acquainted with the rise of the power service and the sudden fall. They spoke on condition of anonymity to share the details of sensitive conversations.

CNN + was introduced to the world on March 28, a day before its debut, with a splash party on the 101st floor of 30 Hudson Yards, the futuristic Manhattan skyscraper that houses CNN. Network stars posed for photos of a giant fiberglass sculpture with the CNN + logo, New York City spreading under their feet.

But inside the network, the service lacked its most prominent master.

Mr. Zucker, the biggest proponent of CNN +, was out. Jason Kilar, CEO of WarnerMedia, was a streaming evangelist; he led a toast at the CNN + party, but it was among his last public appearances before leaving the company a week later. Left to defend the platform internally was its internal guru, Andrew Morse, CNN’s digital director, who previously ran Bloomberg Television.

It should not go this way.

CNN unveiled plans for CNN + in July 2021, billing it as the network’s most important venture since its founding in 1980. Mr. Zucker called it a bold and necessary entry into subscription-based digital news at a time when consumers were abandoning traditional cable television. Hundreds of new employees would be brought in to produce eight to 12 hours of live programming a day.

Crucially, AT&T – which at the time controlled WarnerMedia and CNN – was on board.

AT&T had already agreed to spin WarnerMedia into Discovery and leave the entertainment and news industry. But in June 2021, executives at telecom giant Mr. Zucker met in Dallas and approved a $ 1 billion four-year budget for CNN +.

Mr. Zucker went on a recruitment tour, attracting stars such as Eva Longoria, who signed up for a Mexico-based travel show, and Audie Cornish, the former NPR star. A start date for March 2022 was set.

Then Mr. Zucker abruptly pulled up, followed by his top deputy, Allison Gollust, a week later. In addition to not disclosing their relationship, the two were accused of violating the network’s news standards. (Both denied this.)

Mr. Morse, who oversaw all of CNN’s global digital operations, decided to act. In late February, and again in early March, he asked if his team could share their vision for CNN + with Discovery officials before the merger was completed. He reckoned that making an early case was the best way to convince Discovery that CNN + represented the future.

In both cases, the requests were not granted. In transactions between large companies, managers are wary of violating rules that exclude “arms jumping”: coordinate their business activities in the critical days before the agreements are concluded.

Then came an ominous sign. On March 14, two weeks before CNN + was due to launch, Gunnar Wiedenfels, Discovery’s CFO, appeared at a Deutsche Bank conference and announced that Discovery + and WarnerMedia’s HBO Max would be rolled up to a single giant “blowout” mega-platform.

Mr. Wiedenfels did not mention CNN +. After that conference, Mr. Morse again asked if his team could talk to Discovery; for the third time no such meeting took place.

His concerns were well-founded.

Discovery executives were skeptical of CNN +. Mr. Zaslav and his team had experienced bad luck with streaming services with one topic; their niche platforms dedicated to cars, food and golf were costly and ended in failure.

A cable TV pioneer known in the industry simply as “Zas”, Mr. Zaslav had developed the deal that brought together Discovery and Warner Bros., a late career that made him one of the most powerful figures in the media.

Discovery believed in the power of power services with large tents, especially given the crowded market. It was also about to commit $ 55 billion in debt as a result of the merger, and executives needed to find $ 3 billion in savings.

Despite the skepticism that radiates from Discovery, Mr. Kilar – who oversaw Mr. Zucker’s output and has a reputation as an iconoclast – did not consider shelving the start of CNN +. He assumed that Discovery had fully understood when it agreed to the merger that WarnerMedia was preparing an ambitious new digital CNN product.

Furthermore, Mr. Kilar did not think that CNN + was in conflict with Discovery’s “all in one” streaming philosophy. He had already planned to include some CNN + content with HBO Max, while still offering CNN + as a standalone service.

He went on. “It would be difficult to overestimate how important this moment is for CNN,” he wrote on Twitter on the day the service began.

Mr. Zaslav and his team were confused. Discovery was ready to take over the company within weeks. Why not just procrastinate?

Nevertheless, Mr. Zaslav’s assistants admitted one advantage: they would get a look at CNN +’s performance, much like a movie’s opening night box office. Maybe when they watched under the hood, CNN + would exceed their low expectations.

Immediately after the merger ended on April 8, Discovery officials began requesting data on CNN +’s progress. They did not like what they saw. In a disturbing sign, the downloads for the service were slowing down, despite the great marketing pressure.

On April 11, when the “WBD” symbol was published on Nasdaq, CNN + officials met the new management of Warner Bros. Discovery and took their case, an opportunity they had been asking for since February.

Mr. Morse said that CNN + had secured 150,000 paying subscribers during the first two weeks and was aiming to reach its first-year goals. He claimed that consumers were willing to pay for high-quality digital news (CNN + cost $ 6 a month), citing the success of The New York Times.

Zaslav’s representatives – who included Mr Licht, the new chairman of CNN, and JB Perrette, Discovery’s longtime streaming manager – were not convinced. They said they suspended external marketing for CNN + for two weeks pending a formal review.

The next day, slightly unflattering statistics were reported by CNBC and Axios. CNN executives were appalled. And they became suspicious of their new Discovery superiors, thinking they had leaked the data to create a pretext for shutting down the service.

Mr. Zaslav, after meetings with CNN employees in Washington and Atlanta, arrived at Warner Bros. Square in Burbank on April 14. He recruited Winfrey, who set up his OWN cable network with Mr. Zaslav and Discovery, to interview him on stage for an introductory town hall with staff.

Later that afternoon, Zaslav summoned his brain trust in a building where Jack Warner, a former Hollywood mogul, worked from the 1930s to the 1960s.

They agreed that CNN + ate up too many resources, and that the potential as a digital destination could not justify the small audience and the huge costs. Mr Perrette, who called in from London, said it was time to end operations. Mr. Zaslav agreed.

Over the next week, the Zaslav team completed the details. Mr. Licht, along with Adria Alpert Romm, Chief People Officer of Warner Bros. Discovery, argued that CNN + employees should receive three months’ salary and a chance to remain in the company; all layoffs will receive an additional six months’ severance pay.

In early April 21, Mr. Licht gave the news to top CNN officials that the service would end on April 30. Morse was also not told until that morning. Mr. Licht called Mr. Wallace, Mrs. Cornish and other top anchors to say that CNN would try to find a place for them. The shows arranged by Ms. Cornish and Ms. Longoria had not yet started.

Supporters of CNN + lamented that the streaming service was not given much chance, claiming that the decision was detrimental to the CNN brand, a mistake that would make the network unprepared for a future where few Americans still watch cable TV.

For the privates, it was a brutal blow. Compassionate about donuts, employees were told by Rebecca Kutler, CNN +’s head of programming, that they were not required to enter the office if they did not have a specific responsibility.

Kasie Hunt, who left an MSNBC job for CNN +, ended her last show Friday with a tribute to her staff. “They left stable jobs, some of them moved all over the country, they all took big risks,” she said. “If you hire journalists, they’re best in class.”





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