Time Warner’s CNN Seeks Digital Deals to Gain on Fox

(Corrects television show’s name in 15th paragraph in story that ran Dec. 19.)

Time Warner Inc. (TWX)’s CNN, the pioneer news network that’s fallen behind newcomers Fox News and MSNBC, is looking to acquisitions as part of an effort to regain ground by pushing more programming to tablets and smartphones.

The cable news channel, based in Atlanta, wants deals that could help it capitalize on the growing consumer interest in television viewing on multiple devices, also known as “TV everywhere,” according to CNN President Jim Walton.

“As more tablets are sold and smartphones, it’s only going to continue to grow,” Walton, 53, said in an interview. CNN is looking at companies that could aid its expansion onto new devices as well as its efforts to produce more content, Walton said. “If it helps us in that goal, we’ll be looking,” he said. “I wouldn’t rule anything out, but our focus is on digital.”

“TV everywhere,” a catchall concept for replicating the full television feed on any digital device, already helps CNN draw viewers via iPads, iPhones and the Web. The network streams its entire lineup on those platforms for people who pay for television. A startup that fits CNN’s digital distribution strategy might be a good target, especially at a time when subscriber growth in pay-TV is slowing, Walton said.

CNN acquired Zite, an iPad app that fashions a digital magazine from Web content based on the user’s reading habits, in August. The blog Techvibes.com reported at the time CNN had paid $20 million.

Still In Last Place

CNN trails far behind News Corp. (NWSA)’s Fox News for prime-time viewers and is closer to NBCUniversal’s MSNBC, owned by Comcast Corp. (CMCSA) CNN averaged a daily audience of 703,000 for the year through the end of November, compared with Fox News’ 1.86 million and MSNBC’s 778,000 for the same period, according to Nielsen Holdings NV.

CNN has grown more this year than its competitors. The network increased its prime-time audience 18 percent for the first 11 months of this year compared with the same period last year, while Fox News declined 9 percent and MSNBC increased 2 percent, according to Nielsen. Among people aged 25 to 54, the group advertisers seek, CNN grew its prime-time audience 31 percent to 228,000. Fox News fell 15 percent to 427,000 and MSNBC dropped 0.8 percent to 246,000 for the same period.

Migrating to Web

CNN, nonetheless, remains in last place among the major 24- hour news providers, and appealing to audiences via the Web and increasingly popular mobile devices has become crucial to its growth, according to Walton. The network plans to bundle its digital audience with its television audience to advertisers.

Consumers are already migrating to the Web more readily for news content than other television programming, JPMorgan Chase & Co. analyst Alexia Quadrani said, making digital acquisitions a vital strategy to news operations like CNN.

“He’s right to focus on it,” Quadrani, who is based in New York, said of Walton’s plans. “As an area of investment it makes sense to me.”

Unlike its competitors, CNN offers its entire programming digitally, on the Web and on Apple Inc. (AAPL)’s iPhone and iPad, as long as the viewer confirms they pay for television through a cable or satellite provider, otherwise known as “authentication.” The news company is working on a version for smartphones and tablets that run on Google Inc. (GOOG)’s Android operating system. CNN’s digital stream is currently available to 70 million pay-TV customers, according to the company.

Time Warner Cable (TWC), which split off from CNN parent Time Warner in 2009, is the only major cable operator that doesn’t offer CNN’s “TV everywhere” service. Christa Robinson, a spokeswoman for CNN, declined to comment on how many people have accessed CNN Everywhere.

New Programs

After seeing one of its worst ratings performance last year, the network made a number of changes to its prime-time lineup. The company moved “Anderson Cooper 360” up two hours to 8 p.m. New York time and brought on British journalist Piers Morgan to take the 9 p.m. helm from Larry King, who left the network at the end of last year. Former CNBC anchor Erin Burnett debuted on CNN this fall at 7 p.m. Christiane Amanpour this month decided to rejoin the network to anchor CNN International.

The new programs have worked well, according to Walton, who pointed out the time slot for Piers Morgan grew its audience 10 percent this year to 736,000. “CNN is one of the only news networks to show year-over-year growth,” he said.

“Piers Morgan Tonight” still lags behind Fox News’s “Hannity,” which drew in 2.1 million viewers on average for the month of November, compared to 620,000 for “Piers,” according to Nielsen. It also trails MSNBC’s “Rachel Maddow Show,” which attracted 983,000 people that month.

Higher Ad Rates

CNN still enjoys higher advertising rates despite smaller audiences, Walton said, declining to offer exact figures. Fox News has narrowed that gap in ad rates with CNN, said Rino Scanzoni, chief investment officer for advertising firm WPP Plc (WPP)’s media-buying division GroupM.

“CNN has only a slight advantage over Fox in CPMs,” he said, referring to advertising rates that are priced at every thousand impressions. Both CNN and Fox bring in similar categories of advertisers, he said.

“Marketers aren’t concerned what the political bent is,” Scanzoni said of the contention Fox News is seen as a more conservative voice in its political coverage. “Reality is, CNN had this market to themselves and Fox came along and changed that in very short order.”

Generates $1.5 Billion

As part of Time Warner’s Turner division, CNN stands as the company’s main worldwide brand and is often the first source people turn to when major news breaks, RBC Capital Markets analyst David Bank said.

“It’s a fantastic global brand,” he said. “Obviously, the property is going to be more valuable when there’s really important news going on, such as election cycles.”

Bank estimates CNN accounts for around 14 percent of Time Warner’s cable-derived revenue, or about $1.5 billion annually, and offering a digital distribution service in the form of “TV everywhere” will add value. “TV everywhere is one of their best shots of perpetuating 360 degree utility and getting people to pay for it,” he said. “People want it.”

Like every cable network, CNN is looking to get more revenue for its content from cable and satellite operators, according to Walton. “You can’t not have CNN,” he said. “CNN, it’s a utility.”

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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