Warner Bros. Discovery has suspended all external marketing spend for CNN+ and has laid off CNN’s longtime chief financial officer as it weighs what to do with the subscription streaming service moving forward, five sources tell Axios.
Why it matters: Inside CNN, executives think the launch has been successful. Discovery executives disagree.
- CNN+ has roughly 150,000 subscribers so far.
- Warner Bros. Discovery wants to eventually build one giant service around HBO Max.
- New leadership has replaced CNN CFO Brad Ferrer with Neil Chugani, Discovery’s current CFO for streaming and international, as part of a broader finance team restructuring.
- Other high-level positions at WarnerMedia across different business functions are likely to be eliminated to cut costs and streamline leadership in coming weeks.
What to watch: Sources say a plan is being considered to replace Chris Cuomo’s 9:00pm EST primetime slot with a live newscast, instead of personality-driven perspective programming.
Executives are frustrated that new leadership is moving quickly to dismantle what they see as an eventual lifeline for the cable network.
- CNN’s original plan was for CNN+ to become profitable in four years by investing $1 billion into the service.
- A profitable service would’ve diversified CNN’s revenue long-term around a digital asset outside of its website, increasing its valuation and potential, executives believe.
- CNN+ launched on Roku last week, which should’ve prompted a subscription boost. But with marketing around the service suspended, there are concerns that growth will be short-lived. A point of pride amongst CNN staffers is how smoothly the app’s rollout has been technologically.
- Executives believe that if the service wasn’t being knee-capped, its growth rate would’ve rivaled other print news outlets like The Wall Street Journal and The Washington Post — which have 2.9 million and 2.7 million digital subscribers, respectively.
Yes, but: That analogy, some argue, assumes customers would get the same product on CNN+ that they do with CNN’s linear channel, which isn’t the case.
- Internal data shows that the shows that do well are the ones that mimic live TV programs, like “5 Things with Kate Bolduan” and “Reliable Sources Daily” with Brian Stelter.
Inside Warner Bros. Discovery
Discovery executives are frustrated that the service launched. If CNN held off launching CNN+ until after the merger, it would have been easier to pivot the company’s efforts towards something better aligned with Discovery’s goals.
- Discovery’s experience launching niche subscriptions services, like GolfTV and its Food Network Kitchen App, has informed its strategy to focus on one scaled general entertainment offering around HBO Max, instead of more niche services that have to compete with big apps for subscriber cash.
- Warner Bros. Discovery executives see an opportunity to possibly include some CNN+ content on CNN’s app and make that video available for free and supported by ads, according to one source. Other CNN+ programming could live within HBO Max.
- It sees potential in leveraging the already massive reach of CNN.com and CNN’s main app to drive its digital growth long-term, as opposed to another subscription outside of linear TV.
- Discovery executives are focused mostly on returning CNN to its journalistic core, a point Warner Bros. Discovery CEO David Zaslav reiterated in a town hall last week. That includes less of a focus on primetime perspective programming, and more of a focus on hard, breaking news. CNN+ features an array of soft news content, which doesn’t align with Discovery’s broader vision for CNN.
By the numbers: Last year, CNN brought in roughly $1 billion in profit, with a large portion from long-term distribution contracts for its live TV network, according to two sources.
- Warner Bros. Discovery executives are willing to forgo some of CNN’s short-term profit growth from linear TV advertising to ensure the network focuses on hard news over ratings, according to one source.
- CNN+ executives were originally hoping to attract 2 million subscribers in the first year and 15-18 million over four years, as Axios has previously reported.
- Around $300 million has been spent and hundreds of jobs have been created to support the service.
The big picture: Blame bad timing, limited communications and misaligned incentives for how CNN and Discovery got strategically misaligned on such a massive product rollout.
- Fearing regulatory scrutiny, former WarnerMedia former parent AT&T and Discovery avoided direct communication about CNN’s strategy until the deal officially closed.
- While Discovery executives felt they made their priorities publicly clear, CNN executives didn’t feel corporate pressure from WarnerMedia to pause the rollout, according to four WarnerMedia sources.
- Former CNN head Jeff Zucker’s sudden exit in early February didn’t help solve for some of those communications issues.
- CNN’s new leader, Chris Licht, doesn’t officially begin until May 2nd, but has joined Zaslav on meetings.