April 26, 2022

CNN+ Was Doomed From the Start and Closure is the Right Move

I’m so excited to jump in and offer my totally useless take on Elon Musk buying Twitter because it seems like that’s all anyone can talk about. No, I’m joking. Elon bought what he wanted to buy. It is what it is. Instead, I want to focus on the abrupt closure of CNN+.

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Now let’s jump in…

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The AT&T spin-off/merger of Warner & Discovery (Disclosure: I own both) closed two weeks ago. Almost immediately, Warner Bros. Discovery CEO David Zaslav went to work to find the $3 billion in cost savings he had promised when the deal was first announced.

The first significant casualty? CNN+. I saw many people on Twitter acting positively giddy about the news, making jokes, of course, forgetting how many people might lose their jobs. That said, closing CNN+ was the right choice.

I predicted it would happen in July 2021. I wrote:

If it’s not clear, all options are pretty awful. This feels like the pivot to video. Every media company decided video was the name of the game and so that’s where they went. Now every media company is launching a streaming platform. Why? How will this benefit the audience?

The answer is it won’t.

Sadly, that question is never taken into consideration when these product decisions are made. CNN has decided it wants a streaming platform (like so many decided they needed to be in video) and is making the pivot. By mid-2023, we’ll be hearing about layoffs.

The launch of CNN+ was a solution—having a streaming app—looking for a problem. Did users want this? No one knew or cared; they just wanted to have a streaming app because that’s what all media companies wanted to have. It was the height of “DTC Media,” which meant everyone needed to bypass the middleman and go direct to the user.

The problem is that this is leading with a business model rather than leading with what the audience actually wants. Its audience is old as heck. My guess is CNN’s core demographic all still have their cable subscriptions, so why did it need a streaming product? To make matters worse, CNN+ wasn’t going to include the main CNN product (you know, live news) because its contracts with cable providers prevented it from going direct to consumers.

So, it was trying to create an app for superfans when superfans weren’t the ones who were canceling their cable subscription. Again, it was a solution looking for a problem. The real problem is no one in their 20s-40s is interested in watching cable news. According to The Washington Post:

In recent years, the median age of viewers who watch the big three cable news networks — CNN, Fox News Channel and MSNBC — has been in the 60s, an audience that television news industry analyst Andrew Tyndall calls positively “geriatric.” At MSNBC, the median age this year has been 68, four years older than CNN, according to the latest data from Nielsen. That’s up from a median age of 65 in 2017.

But let’s assume this type of product was exactly what a younger generation wanted. I might still suggest launching CNN+ was the wrong approach. The reality is that there are so many streaming platforms that people are beginning to get choosier. Look at what happened with Netflix. It had its first quarter where it lost subscribers. Netflix has never had as much competition as it does now, so is anyone surprised? If Netflix won’t give me what I want, there’s always HBO Max, Hulu, Disney+, and Prime.

This, by the way, is why Discovery wanted Warner Bros. so badly, and it’s why the end goal will be one mega app. At the Deutsche Bank 30th Annual Media, Internet & Telecom Conference, Discovery CFO Gunnar Wiedenfels said:

One of the most important items here is that we believe in a combined product as opposed to a bundle… We believe that the breadth and depth of this content offering is going to be a phenomenal consumer value proposition. The question is, in order to get to that point and do it in a way that’s actually a great user experience for our subscribers, that’s going to take some time. Again, that’s nothing that’s going to happen in weeks — hopefully not in years, but in several months — and we will start working on an interim solution in the meantime. So right out of the gate, we’re working on getting the bundling approach ready, maybe a single sign-on, maybe ingesting content into the other product, etc., so that we can start to get some benefits early on. But the main thrust is going to be harmonizing the technology platform. Building one very, very strong combined direct-to-consumer product and platform, that’s going to take a while.

Rather than forcing users to purchase Discovery Plus and HBO Max, why not give them a single experience to get everything? Of course, you might say, “but Disney offers multiple products with Disney+, Hulu, and ESPN+.” And you’d be right. But I think that will change once it buys out Comcast from its Hulu deal in a couple of years. In the competition for users’ dollars, bigger is better.

Instinctually, this makes sense. Why does The New York Times have so many more subscribers than local papers? A big part of it has to do with how much you get for the price. When dealing with more generalist content, scale really matters from a subscription perspective. And who better than Discovery to know this? According to NYT:

Mr. Perrette also referred to Discovery’s own “painful” history of starting niche streaming services — focused on cars, food and golf — and said they were costly to market and ended up with few subscribers.

“We have failed almost at every turn launching these products,” he said, according to the recording.

Discovery knew from experience that these niche streaming apps weren’t going to work. So, rather than even bother, it just ended the product. Candidly, this is the type of decisiveness that was needed. Of course, there will be a lot of ink spilled about how CEO Zaslav needed to show Wall Street he wasn’t playing around with his synergy promises. And some of that is true. But this is just good business. Resources are finite, and burning tens of millions of dollars for nothing is not intelligent.

And look, it’s not as if the content was created for nothing. As the integration of the apps takes place, Discovery might decide to spin up a CNN category within the HBO Max app. Why not? Bigger is better. Perhaps that’ll get some of its CNN superfans to become fans of HBO Max as well. That’s a win.

Local needs to be local

Richard Tofel has a good piece on local newspapers going all-in on local. In it, he writes:

One thing might be to try to get out of the business of distributing (and certainly of producing) national news themselves. That is to say, perhaps it has come time for legacy local news outlets to eliminate as much of the national content they provide as they can, and to press to cut the rest of it as quickly as feasible. The resources thus freed up—money and space– could then be re-deployed to produce more of the local content that, in many communities, only they can provide.

This is spot on. And research agrees. According to the Digital Pay-Meter Playbook by the Shorenstein Center on Media, Politics and Public Policy:

According the publishers surveyed, users who view local news appear to be 2-5 times more likely to subscribe than those who view national and wire-sourced stories. Of news organizations studied, publishers that produce more local (and non-wire-sourced) stories tended to generate greater subscription sales.

This feels right, yet people are surprised when I say it. Newspapers were, historically, the primary news product for geographies. In essence, a newspaper had a monopoly on a specific geography. This meant that it had to create local and national news (and, in some cases, international). But with the internet, that’s no longer necessary. I can get all the national and international news I need from The New York Times.

Therefore, if you want to stand out, you have to go back to basics and focus on your specific geography. The problem with this approach is it’s not a high-traffic play. And for so many newspapers, programmatic advertising really matters. In other words, scale matters. But that runs counter with how you get local subscribers, which is to create lower-traffic but highly relevant local content.

In the piece, Tofel lists a series of questions worth reading. But the crux of it is this: assess all the content you’re creating and determine how much it drives subscriptions. If it doesn’t, is it worth the cost? I think many local papers might find that it’s their local—not the generalist, national—news that drives success.

AMO Podcast: Alexis Grant from They Got Acquired

The latest episode of the AMO podcast is out, sponsored by Omeda! I speak with Alexis Grant, who recently launched They Got Acquired. This was a fun conversation for me. I haven’t been part of a launch in a long time, so to hear the decisions Alexis made early on and how sponsorships turned into a much more significant portion of the business than she planned was interesting. Plus, she talks about the actual business model that she plans to launch soon.

Be sure to give it a listen on your podcast player of choice:

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