CNN crisis shows profitable cable news era coming to an end

At the cable news network’s debut in 1980, founder Ted Turner had his team film a military band rendition. nearer My God to Thee, The hymn, sung as the Titanic was swallowed by the Atlantic Ocean, was the last thing CNN broadcast in the event of the end of the world.

Some insiders seemed ready to dig the doomsday tapes out of the vault this week as Chris Licht’s run as the network’s CEO came to an abrupt end. Since the publication of a withering profile in The Atlantic, CNN has been portrayed as a network consumed by a morale crisis, with little known about its future.

CNN’s woes have been discussed with great intensity, reminiscent of Fox News’ recent dissection of star host Tucker Carlson’s firing. Did it go too far to the left during the presidency of Donald Trump? Was it too risky standing in the middle of the road since then?

These questions miss a larger business point. The cable news era ushered in by Turner is coming to an end. And while the cultural and political consequences of that fact garner public attention, it is also the story of the demise of one of media’s great business models.

The most troubling feature of Licht’s 13-month reign was his decision not to interview Trump in front of an audience of booing supporters. It was that CNN’s average prime-time audience fell to just 535,000 in the first quarter, down from 1.7mn in 2020. CNN lags behind longtime rivals Fox and MSNBC and sometimes even Newsmax, a partisan challenger with a fraction of its budget.

The shrinking audience is neither unique to CNN nor to America. Pay-TV audiences are getting younger and older. This has been true for a while, but it barely matters in business terms: through the magic of retransmission fees, in which distributors pay content owners to broadcast their channels, revenue and profits abound.

According to the New York Times, CNN’s annual revenue doubled to $2 billion in the decade leading up to the 2020 US election, and it generated roughly $1 billion in profits each year for the Trump presidency.

The tide has turned, with revenue coming in at just under $1.8 billion. With annual profits still being reported at $750 million last year, the business isn’t falling off a cliff, but as Wile E. Coyote of Warner Bros. can tell you, gravity eventually asserts itself.

News and sports channels were considered features that would persuade viewers to keep their cable subscriptions, giving their owners the power to negotiate with distributors. But more subscriptions are being canceled and media owners have failed to replicate that model online or on streaming platforms.

The old model has been so attractive that cable news operators have had little incentive to establish themselves as big brands in digital news, allowing everyone from legacy newspapers to other podcast hosts to take the lead. It may be too late to catch them now.

When the first 24-hour channels started, they filled an obvious gap in the news market. Whatever Licht’s successors do, they are unlikely to repeat that trick.

It’s not the end of the world in terms of journalism. But the end is in sight for a news media business model that won’t be replaced nearly as lucrative.