Within the corridors of CNN, there’s a palpable sense of relief as Warner Bros. Discovery, the network’s parent company, opts for a merger with Netflix over Paramount Skydance. The latter’s association with the Ellison brothers, Larry and David, who are perceived as Trump supporters, has sparked apprehension among CNN employees who fear a potential takeover could jeopardize the network’s integrity as “The Most Trusted Name In News.”
Although the Ellisons’ political affiliations raise eyebrows, it’s unlikely they would dismantle CNN. However, the anticipated Netflix merger presents its own challenges. According to insiders from Wall Street, the merger would likely result in CNN being spun off as a separate public entity. This move would subject the network to the pressure of public shareholders, complicating matters given its existing debt and the relentless demand for profitability.
More daunting still is the prospect of CNN being further detached from this new entity and sold to a private equity firm. Such firms often prioritize profit over content, potentially leading to significant cutbacks and a focus on maximizing returns before flipping the network to the next buyer.
In contrast, the Ellisons propose a different strategy. They aim to acquire not only the streaming and studio components but also the cable operations. Those familiar with the Ellisons’ vision suggest they intend to expand cable offerings, integrating CNN and CBS into a global media empire.
Nevertheless, the idea of working under Bari Weiss, who currently manages CBS for the Ellisons, is unappealing to CNN staffers. Weiss has steered CBS towards a more conservative audience, aligning with the 77 million voters who supported Donald Trump, a demographic CNN is wary of courting.
Despite these concerns, Weiss has not transformed CBS into a MAGA stronghold. Moreover, the Ellisons’ partner in the Warner Bros. Discovery bid, RedBird Capital, is led by experienced media banker Gerry Cardinale. His team includes familiar CNN figures like former anchor Chris Wallace and ex-chief Jeff Zucker. If Paramount Skydance succeeds, Wallace is expected to play a pivotal role in shaping CNN’s future.
Indeed, it’s CBS that could be moving its news-gathering operations to CNN’s Atlanta headquarters, I am told. It will be the Tiffany Network’s cash-strapped news operation that needs to downsize the most as they combine operations, which makes sense if you compare the numbers of both networks.
CNN churns out an estimated $500 million to $600 million in annual cash flow, I am told. (WBD doesn’t break out its financials; this is an estimate from an ex-senior exec.) That’s pretty darn good considering the network’s third-place ratings among the cable news giants, and it shows there’s a business here because cable news carriers believe it has an audience.
Ellisons wouldn’t kill it
It’s also why the Ellisons wouldn’t kill it as the many inside the network fear despite the fact cash flow has been halved from just five years ago. There will be cuts and those dreaded synergies that bankers talk about, but that’s a far better future than CNN being at the mercy of some PE bean counter.
No matter how much shade is thrown at Larry Ellison’s backstop of his son’s hostile offer for Warner Bros. Discovery, the Oracle co-founder is still worth more than $240 billion and will use it to invest in a business where CNN won’t be a nuisance but the tip of the spear in Paramount’s news operations.
And if you’re at CNN and worried about the Ellisons’ political motives (Larry was an early Trump supporter), I don’t think they’ll be Trump patsies. Based on recent comments by the president (he said they weren’t such great friends), neither does he.
Suffice to say, lots of paranoia here, and real proof that many journalists need to spend some time taking finance 101: Netflix in “winning” the monthslong WBD bake-off is just buying WBD’s Warner Bros. studio and HBO Max streaming service, while CNN and WBD’s other cable properties are spun out to the wilderness as a publicly traded company with an estimated $15 billion to $18 billion of debt.
That’s right: A news company with lots of debt answering daily (based on its stock price) and quarterly (based on its earnings) to analysts and investors demanding a return in a business that’s declining because of cord cutting and more.
CNN has been busy slashing costs in recent years, but this means cuts will get steeper to make the numbers work given the trajectory of rising debt service payments while cash flow from the cable properties is going in the opposite direction.
For the record, I’m not gloating over CNN’s uncertain future. True, I work at a competitor, Fox News, along with my duties at The Post, but I’m a journalist who believes the business needs to survive because you can’t have a functioning democracy without it. Trump rips the network’s political commentators, but CNN’s news product is formidable, with bureaus around the world reporting 24/7.
Journalism writ large is a tough business, so if you’re in it like I am, you better hope for an owner who doesn’t see news as a nuisance.
