Why CNN Needs a Partner

The cable-news giant is hungry for the massive prime-time viewership that ABC -- or NBC, CBS, or Fox -- offers

By David Shook

Toward the end of summer at the swanky Michael's restaurant in midtown Manhattan, where power lunches are common, Fox News Chairman Roger Ailes was seen seated with CNN Chairman Walter Isaacson. The CNN chief is hardly close friends with Ailes and once referred to the TV networks as having "lost their baritone of authority" in the news business.

Yet the lunch didn't surprise observers who speculated that Isaacson and Ailes might have been discussing the possibility of combining AOL Time Warner's 24-hour cable news with Fox's news operations. "The fact is, CNN has been talking to all four broadcast networks about a partnership for some time," says Porter Bibb, founder of Technology Partners Holdings, a media consulting firm in New York.

That's the backdrop of the acknowledgement by CNN and ABC News on Sept. 24 that they've been discussing for 18 months the possibility of combining their operations. For now, no deal is imminent, both sides say. But that doesn't mean CNN won't hook up with one of the networks at some point -- despite considerable odds against such a union working successfully.


  Before the latest discussions with ABC, CNN also was talking with CBS, Bibb says. And CNN and ABC under previous management several years ago considered a possible partnership, says Richard Wald, media professor at Columbia Graduate School of Journalism and a former senior vice-president of ABC News who remains an adviser to the company. What's more, Ted Turner, CNN's founder and now vice-chairman of AOL Time Warner, has in the past expressed interest in combining CNN with the broadcasting prowess of NBC.

Those deals were never reached in part because CNN couldn't agree with the respective networks on which organization would break significant news stories first, how much of the newsgathering costs would be shared, and how to deal with the monumental egos in place at each organization.

The same holds true for the current round of talks between CNN and ABC. While the deal seems logical because it would give CNN entree into prime-time broadcast TV and give ABC the chance to be on-site in Kabul for the breaking story du jour during Peter Jennings prime-time hour, the culture clash and sparring of egos would make such a successful combination remarkably difficult. "Can you imagine Christiane Amanpour as the voice of authority on Peter Jennings' World News Tonight? Bibb asks rhetorically. "A joint venture of ABC and CNN certainly makes sense on paper, but it might not be workable for other reasons."


  That hardly takes away from the authority that Amanpour does have on CNN, especially when news is breaking. In today's ultrafast-paced, 24-hour newsgathering industry, where the competition is fierce to be first, a linkup between the granddaddy of such coverage, CNN, and a major broadcast network seems reasonable. And the costs that each network would save in newsgathering, production, and transmission would be highly beneficial to both sides, says David Joyce, media analyst for Guzman & Co. in Miami.

In this matchup, CNN is still the ratings underdog. ABC boasts on average 9.8 million viewers for its early-evening half-hour newscast, while CNN pulls in around 1 million on average during prime time, accorging to Nielsen Media Research.

However, "it isn't the ratings that drives discussions like this. Both sides want to save as much cash as they can because newsgathering is getting more expensive," Columbia's Wald says. Indeed, cost-cutting is likely the most appealing aspect of any linkup between CNN and a broadcast network. That's especially true in the current economy, where advertising has been a difficult sell for all forms of media.

"Just look at September 11. The need for better, more expensive TV news coverage intensified after the terrorist attacks just as advertising plummeted," Joyce points out. "You can imagine what that did to the bottom line at CNN."


  A deal to spin off CNN from the beleaguered AOL Time Warner would also make sense for several reasons. In addition to increased competition from Fox Cable news, CNBC, MSNBC, and so on, CNN still tends to get crushed in the prime-time ratings, where the broadcast networks rule. ABC News is posting respectable ratings relative to NBC News and CBS News, but a Jennings/Amanpour newscast would give ABC a tremendous advantage over its rivals.

And that would help ABC's parent, Disney, which is having its own problems keeping shareholders happy in an environment where profits are difficult to come by and where poor ratings for prime-time entertainment programming are battering the ABC network itself.

"These talks are a logical proposition on financial grounds, a difficult one on editorial grounds," says Wald. "There is the possibility of saving a great deal of money in combining the two companies into one. The problem is who controls the resulting partnership and how is it controlled? That has always been the sticking point."


  Isaacson himself pooh-poohs the recent revelations that he has been talking to ABC. In a statement on Sept. 24, he said "CNN is not close to making a deal.... It's no secret that for many years CNN has had talks with other news organizations that currently have no 24/7 cable news distribution," he explained. "Many different ideas have been put forward.... Models already exist that combine broadcast and cable news networks. So the idea is intriguing, and we expect that these talks will pick up again from time to time."

If ABC and CNN don't ink a deal soon, it will probably be the impossible-to-avoid culture issues in such a merger that kill the idea. Still, with ABC, CBS, and NBC neck-in-neck from one year to the next and CNN fighting to stay on top against a passel of "me-too" 24-hour cable-news products, a marriage between CNN and one of the networks may be inevitable.

Shook is a writer for BusinessWeek Online in New York

Edited by Beth Belton

Before it's here, it's on the Bloomberg Terminal.