Time Warner (NYSE: TWX) clearly has a CNN problem. The all-news cable channel CNN just announced yet another plan to reinvent itself, canceling In the Arena, the 8 p.m. talk show hosted by disgraced former New York Governor Eliot Spitzer. The show, championed by former CNN U.S. head Jon Klein, was a ratings disappointment.
Klein was later dumped by CNN, so it was a shock that the program made it to the air. It was even more surprising that the show – originally named Parker Spitzer — continued when Spitzer’s former co-host Kathleen Parker was unceremoniously axed six months ago. Since it probably broke Spitzer’s contract, the network probably will owe Spitzer millions in compensation.
CNN, which Time Warner (NYSE: TWX) acquired in the 1996 acquisition of Turner Broadcasting, has been an irritant to shareholders for years as its ratings eroded due to changing media habits and increased competition from Fox. Not only did CNN lose the ratings war to News Corp’s Fox News Channel but it’s losing the money battle as well.
According to Project For Excellence in Journalism, CNN and its sister channel HLN earned $1.23 billion in revenue in 2010 on profit of $559.6 million, up 7 percent from 2009. During that same time, Fox News earned $816.3 million, an increase of 27% over the previous year, on revenue of $1.5 billion. To make matters worse, CNN is estimated to have a staff of about 4,000 to Fox News’ 1,272. Fox is owned by Rupert Murdoch media empire News Corp (NASDAQ:NWS).
The problems facing CNN have been endlessly documented. Though viewership increases for disasters (unrest in the Middle East, the Japan earthquake and nuclear crisis, and the Casey Anthony trial), people tune out when the crisis is over. Unfortunately, the ratings bump may not give as big of a bump to CNN’s bottom line as some might expect because TV networks sell much of their commercial time months in advance in so-called upfront sales.
While rumors swirled last year that CNN and CBS Corporation (NYSE:CBS) held talks about merging their news operations, the discussions apparently went nowhere. The two companies already have close ties including the CW Network and Warner Bros. television studios, which they both co-own. Merging news operations makes sense both financially and journalistically.
Time Warner needs to do the same dispassionate review of CNN that it did a few years ago of Time Warner Music. Former CEO Richard Parsons unloaded the businesses to a group lead by Edgar Bronfman Jr. for $2.6 billion. It was probably one of the smartest moves he ever made. Warner Music Group shareholders recently approved the sale of the company to Russian-born billionaire Len Blavatnik for $3.3 billion.
CNN’s current status in Time Warner makes no sense journalistically or financially. The time for action has long past.