Things may look bleak for CNN, with layoffs, pay cuts and a new digital programming model that may or may not work. However, On the Money has learned that private equity firms are crunching the numbers on a potential acquisition of the network with questionable ratings.
Sources both at CNN and in the private equity business tell me, don't hold your breath for something to happen soon. The network's parent company, Warner Bros. Discovery, has not yet joined CNN.
In fact, none of the companies have made any bids, my sources tell me, and PE officials I spoke with have no way of actually valuing the product due to a questionable business model. They say they don't actually know.
That being said, I know of at least one large PE firm (and probably more) that has pushed the numbers up. Analysts believe CNN will generate a significant amount of revenue, around $750 million this year. Sounds good until you realize that's down from over $1 billion in 2020. Cord-cutting is taking its toll as people stop watching cable news, which means lower cable costs. CNN has a high overhead because it is an international news operation.
When people cut the cord, they can no longer charge as much for advertising. According to WBD's balance sheet, advertising revenue fell to $1.5 billion in the third quarter of 2023, compared to $1.7 billion in the third quarter of 2023.
Another problem: PE executives also say the program remains too far to the left, saying the consumer market is shrinking and Kamala Harris would have been elected president otherwise. That is what I am thinking.
One executive at a major PE firm told On the Money: “Yes, there's a lot of sniffing around, but people think it's a waste of assets.”
That's too harsh. Full disclosure: I have friends there and respect the work of the people and producers at the top. I know WBD Director David Zaslav very well, and I can honestly say that he wants to make the operation a success by suppressing what some on the right claim is left-wing political bias. I believe in If I can stop the bleeding, I might leave it alone. Zsasz and his team believe that news can be profitable if you can find the right strategy.
Additionally, CNN CEO Mark Thompson is a serious media executive who helped build the New York Times' digital strategy. If Zsasz and Thompson can make CNN work, drawing the attention of people fleeing cable to an evolving digital offering, they will have created the news business model of the future. You may not have to go far to find a buyer.
