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Ownership

Ownership

The story of cable news ownership is clear: It is the province now of big media, and that is a far cry from where it started and the days when network critics derided Ted Turner as the Mouth of the South and CNN as Chicken Noodle News.

But the aspirations of cable may actually have been more serious then. Its profile is far more corporate – and financial – now.

All three cable news channels today are owned in whole or in part by three big media companies – Time Warner, News Corp. and G.E./NBC (in part).

CNN

Time Warner is the world’s largest media company, and CNN, while a major player journalistically, is a relatively insignificant part of the company financially. CNN’s $798 million in 2002 revenue represents 2 percent of Time Warner’s overall revenue that year.1

Time Warner purchased the company when it bought Turner Broadcasting in 1996, making CNN part of the Time Inc. family. The company attempted a variety of synergistic opportunities between the magazines and the cable network, but for the most part found them financially and journalistically unsatisfying.2 After the merger between Time Warner and AOL, a battle emerged inside the new company over just what synergy should mean. How much did it involve active merging of content? How much was it a matter of selling advertising across platforms? How much did it involve using some platforms, such as CNN, to promote other parts of the company? Or was AOL-Time Warner better off as a confederation of parts that operated largely independently, looking mostly for economies of scale.

To some the merger of CNN and Time Inc. was empirical proof that synergy, as opposed to simple economies of scale in business, would not work. For others, it was not a repudiation of synergy, but a sign that AOL-Time Warner did not understand how the concept really worked. The first visible effort was the “Newsstand” magazine show, which suffered from the ill-fated opening show fiasco over the “Tailwind” investigation. Time Warner saw synergy as a poisonous viper after that.

The AOL-Time Warner merger, which came later, may have suffered from a lack of understanding of two different corporate cultures and the inflated value of AOL, and perhaps, as was the case in the CNN-Time Warner merger, different definitions of what synergy should mean. Similar questions emerged. Did it mean operating different units separately but looking for economies of scale? Or did it mean using media platforms to market other AOL products? Or did it mean looking for ways to sell advertising across multiple platforms. Or did it mean looking for special areas where cross platform cooperation was possible in content and marketing? Whether these failures suggest a lack of corporate understanding and planning, or a sign that synergy at least in media may be overblown, and should be more limited, is open to debate. A full treatment of this issue is beyond the scope of this report, but the issues deserve mention.

Fox News

Fox News’s founder, Rupert Murdoch, likes to contend that his corporation, News Corp., is not really a major media company.3 In one sense, his statement appears valid. In terms of total revenue, News Corp.’s was a little less than half of Time Warner’s in 2002 and one-eighth of all General Electric’s revenue.

Yet looked at more closely, Murdoch’s contention is hard to accept. In terms of media revenue alone, NBC gets only a little bit more than what Fox News does ($7.4 vs. $6.5 billion). Time Warner is bigger than both (with $29 billion in media revenue), yet that definition of media includes a lot of entertainment media that are apples and oranges.

If one looks at the world of journalism, News Corp. is perhaps more a behemoth than its cable rivals. Where G.E. has a TV network and Time Warner magazines, cable and online, Murdoch, in magazines like The Weekly Standard, newspapers as diverse as The New York Post and The Times of London, and television outlets as broadly placed as Sky News overseas and Fox News here, has influence that reaches much farther into the halls of government and opinion making in many more countries and has influenced the trend toward tabloidization in media globally more than anyone else.

The sibling Fox broadcast network and Fox News on cable are not nearly as integrated as NBC and MSNBC, although some Fox News programs occasionally air on the broadcast stations. Fox executives have expressed interest in extending the Fox News brand into such new areas as business or entertainment news.4 This would allow Fox News to copy the CNN and NBC models of spreading newsgathering costs across multiple television networks.

MSNBC

MSNBC has two owners. General Electric, through its NBC subsidiary, owns half of MSNBC. Microsoft owns the other half. The network is managed by people who report to executives at NBC.

In 2001 Microsoft’s CEO, Steve Ballmer, told Reuters that if he had to do it over again he would not have invested in MSNBC.5 The terms of the deal were never fully disclosed, but it is generally believed to be a binding arrangement that will be in place for some years to come. In other words, although Microsoft may regret its investment in MSNBC, it is probably unable to pull out of the deal without significant financial penalties.

While it may not have turned into a great gain for Microsoft, the deal has been a boon to the financial health and visibility of NBC. For example, NBC’s news gathering can be distributed through multiple outlets and a 1998 article said that some on-air correspondents were feeling overworked: “They are asked to file for MSNBC regularly, for CNBC sometimes, and for MSNBC.com, the Web site the network operates jointly with Microsoft.”6

Indeed, having a cable sibling may now be a key to success in television news. Unfortunately for ABC and CBS, however, the window may have closed. They have likely missed their chance at an independent cable operation. CBS’s 1997 attempt, “CBS Eye on People,” flopped and was sold to the Discovery Channel in 1999. ABC had plans to build a cable network when it was the dominant No. 1 network in news. But after Disney bought the network, it pulled the plug on the idea. Since then, ABC News and CNN had talks about some kind of joint venture or even merger, most recently in the fall of 2002, according to published reports. But the idea seems for now to have fallen apart.

The landscape for cable could change perhaps if the London-based BBC moves forward with plans it has reportedly considered to move seriously into the American market with its 24-hour cable channel, BBC World. Currently, it produces a U.S.-focused program called “World Update” which is aired on PBS stations throughout the country. Meanwhile, former Vice President Al Gore has been involved in negotiations to purchase a Canadian all-news network and possibly adapt it for American viewers. But for now, at least, the cable world is the province of three major media players.

Footnotes

1. Kagan World Media unpublished data, http://www.kagan.com (CNN revenue), AdAge, “100 Leading Media Companies, 2003 edition” (total revenue), available at: http://www.adage.com.

2. See, for example, Matt Kempner, “Timing flawed on AOL spinoffs,” Atlanta Journal-Constitution, May 26, 2002, p. 1E.

3. Testifying before a House of Representatives committee regarding News Corp.’s plan to acquire the satellite service DirectTV, Murdoch said, “In any event, neither News Corp. nor Hughes is among the top five media companies, by expenditure, in the United States. As you can see in the chart attached to my testimony, News Corp. is sixth with 2.8 percent of total industry expenditures, and Hughes [DirectTV’s parent company] is eighth with 2.2 percent. Even combining the expenditures of News Corp. and Hughes would place the company fifth in expenditures behind AOL Time Warner with 10.1 percent, Viacom with 6.4 percent, Comcast with 6.3 percent, and Sony at 5.3 percent.” Testimony of Rupert Murdoch before the Committee on the Judiciary, May 8, 2003, available at http://www.newscorp.com/news/Murdoch_testimony_5_8_03.pdf.

4. Michael Starr, “Two new Fox channels,” New York Post, October 2, 2003.

5. Stefanie Olsen, “Ballmer: Would not launch MSNBC again,” CNET News, June 7, 2001. Available at: http://news.com.com/2100-1023-268073.html.

6. Lawrie Mifflin, “Big 3 networks forced to revise news-gathering methods,” New York Times, October 12, 1998, p. C1.