#Cable News Finally Seeks Exit From Pay TV Bundle

When Mark Thompson was hired as CEO of The New York Times in 2012, he knew that he was facing skepticism from within the storied news organization, wary of the TV executive coming in with a mandate to transform its business. 

“An outsider has many disadvantages, but one advantage is a ‘cold eye,’ ” Thompson recalled in a case study for the global consulting firm McKinsey & Co. in August 2020, shortly after his departure from the Times was announced. “In this case, I took the job because, besides all the problems and the difficulty of change in a legacy media organization, I thought there was also immense potential.” 

Now, Thompson will bring that “cold eye” to CNN, where he was named chairman and CEO on Aug. 30. As with the Times, Thompson will find a storied news brand grappling with a declining legacy business, and without an obvious off-ramp to a digital future. “I think Mark is the rare individual who has journalistic chops, as well as business chops,” says Jonathan Miller, CEO of Integrated Media, which specializes in digital media investments. “There are not many who are respected and effective at both the creative and business sides of the Hollywood ecosystem. I would mention Barry Diller, Bob Iger, Peter Chernin in that regard. And I think Mark is the equivalent in the news business. I think he’s of that caliber.” 

“What’s so important about that is CNN at this time has both journalistic questions and issues as well as business issues to deal with,” adds Miller, who was working as the head of News Corp.’s digital businesses when Thompson was running the BBC. 

Perhaps no challenge will be bigger than navigating the escape from the traditional pay-TV bundle, a system that drove CNN and its competitors to become profit centers for their respective companies, but which is now inexorably in decline. 

The dirty little secret about cable news is that Fox News, MSNBC, CNN and all the other players benefit greatly from each other’s existence. The competition is intense, in both ratings and mindshare, but the business that has powered these channels is the pay-TV carriage fee. Fox News benefits because avid MSNBC or CNN viewers, who either don’t care about Fox or actively loathe it, are nonetheless paying north of $2 per month to the channel. MSNBC and CNN benefit because Fox’s large audience subsidizes their channels. 

It’s a great business, and one completely at odds with the direct-to-consumer model, where fandom and relationships are key. It’s for that reason (as well as some corporate synergy concerns) that CNN, a year after the shuttered CNN+ effort, will revive its streaming plans via Max, Warner Bros. Discovery’s streaming platform. And it’s why NBCUniversal has sought to integrate MSNBC into Peacock, its own corporate streaming platform. Whether Thompson adjusts that strategy or pursues a new one remains to be seen, though WBD executives remain adamant that news will play a critical role in Max’s future. 

Fox News, meanwhile, has pursued a different approach, leaning into its own direct-to-consumer “super fan” offering Fox Nation. The company has not broken out how many subs the service has (it has also leaned more into entertainment content, like Cops, a Yellowstone national park docuseries hosted by Kevin Costner and a Roseanne Barr comedy special), but it is a different model than CNN or MSNBC’s strategy. 

CNN has leaned hard into Max, with its upcoming service to include live streams of key shows like The Lead, as well as exclusive programming hosted by top anchors. Peacock livestreams MSNBC’s Morning Joe, with the cable channel also producing exclusive shows for the service. Fox News replays its primetime shows on Fox Nation, and livestreams some events like the presidential primary debates. 

But the need for some sort of solution is critical. Wells Fargo analyst Steven Cahall, who downgraded Fox Corp. in a July 10 note, wrote, “Fox’s earnings are mostly Fox News earnings, and Fox News is facing viewership and share pressures. With ecosystem risks also elevated, we find our estimate outlook more negative and below the Street.” 

And that’s for the most successful channel in cable news; the others are all navigating similar challenges on less sure footing. 

Speaking with THR, a former colleague of Thompson’s at the Times praises him for what they called “bold” leadership decisions meant to transition the news outlet from its print roots to a digital future. CNN now finds itself in a similar boat, seeking to escape the legacy pay-TV business in search of calmer waters. The mood inside CNN after his hire was announced was a blend of anxiety about yet more change and optimism about having an experienced hand at the helm.

Thompson, for his part, told staffers in a note Aug. 30 that he intended to apply that Times playbook at CNN. “As everyone knows, TV journalism is approaching peak disruption. We face pressure from every direction – structural, political, cultural, you name it. Like many other media organizations, CNN has recently felt some of the uncertainty and heartache that comes with all of that,” he wrote. “There’s no magic wand that I or anyone else can wield to make this disruption go away. But what I can say is that where others see threat, I see opportunity – especially given CNN’s great brand and the strength of its journalism.” 

But transforming a business in decline is no easy task. The impact of that long decline has manifested itself in the form of layoffs and cost-cutting. CNN, of course, had significant layoffs under former head Chris Licht, but CBS News, NBC News, MSNBC and ABC News were no different. Even Fox News, which once prided itself on stability, acknowledged in its latest earnings report that it was reducing expenses at Fox News, specifically in digital and “newsgathering costs.” 

Transformation requires investment, and it is not immediately clear how much WBD is willing to invest in CNN given its cost-cutting ethos over the past year and a half. While the cable bundle may be slowly melting, that does not mean that these channels have a long window to transform. That’s especially true for CNN, which finds itself in a ratings and relevance funk.

“You’ve got to move pretty quickly, and I think in this case, that’s exacerbated by the imminent 2024 political season ramping up,” a top media executive says of Thompson’s priorities. “What I would be afraid of, is if CNN does not achieve real relevance in the 2024 election, it will be hard to get it back. I don’t think there is the luxury of time.” 

The rise of independent options, be they podcasters like Joe Rogan, Pod Save America and Megyn Kelly or upstart cable channels like NewsNation and Newsmax, have also siphoned away some cable news loyalists. 

And while the cable bundle may be slowly melting, that does not mean that these channels have a long window to transform. That’s especially true for CNN, which finds itself in a ratings and relevance funk. 

In his McKinsey case study, Thompson opined that “the hard stuff for this company is the new stuff.” At CNN, the challenge will be building that new stuff, while repairing the old.