David Zaslav was the CEO of Warner Bros. Discovery all the few hours when he learned he had a problem.
On April 11, the day his newly merged company began trading on the Nasdaq, Mr. Zaslav greeted New York City employees with pasta and ice cream, giving an impromptu shout to his new wards. He was on his way to Washington, DC, the next stop on the coronation tour, when a call came.
His team had just gotten their first look at CNN + data, a popular subscription streaming service launched two weeks earlier, and the news was bleak. Less than 10,000 viewers watched at any one time, despite a multimillion-dollar advertising campaign and large tenants like Chris Wallace. They recommended a cold-eyed examination.
Three days later, shortly after Mr. Zaslav appeared with Oprah Winfrey for the company’s town hall, he gathered his deputies in a low-plaster building in Burbank, California, at the Warner Bros. studio, and said he agreed. with their conclusion: close it.
The near-instantaneous collapse of CNN + has become one of the most spectacular media failures in years, a $ 300 million experiment that ended abruptly with upcoming layoffs and careers in disarray. The corporate tug of war has revealed deep philosophical divisions about the future of digital media as executives struggle to navigate the rapidly changing market, where technology and consumer habits change every day.
And that reflects the awkward regulatory dance of two media giants merging, even when a high-profile project is nearing completion. Discovery had some concerns about CNN +, but was limited to targeting one of its streaming competitors directly until the deal was completed.
Now CNN must emerge from one of the most chaotic periods in its history: the dismissal of top-rated presenter Chris Cuomo; the removal of longtime President Jeff Zucker over an undisclosed affair with a colleague; and the takeover of the parent company WarnerMedia by Mr. Zaslav’s Discovery.
Accompanying damages include the long-standing friendship between Mr. Zaslav and Mr. Zukar, former allies in business and in life. Mr Zucker, who once called the Discovery boss “the best friend anyone can ask for, and I’m lucky he’s mine”, has not spoken to Mr Zaslav since leaving on 2 February.
CNN employees are stunned. “This is not easy news and I do not want to minimize it,” Chris Licht, the network’s new chairman, told CNN + staff in a solemn call announcing the shutdown. “I’m proud of that,” he added. “I am proud of this team and I am upset about what this means for you.
This account is based on interviews with a dozen people familiar with the rise and sudden decline of streaming service. They spoke on condition of anonymity to share the details of sensitive conversations.
CNN + was unveiled on March 28, the day before its debut, with an exciting party on the 101st floor of 30 Hudson Yards, the futuristic skyscraper in Manhattan that houses CNN. Network stars posed for photos of a giant fiberglass sculpture of the CNN + logo, New York, lying at their feet.
But inside the service network, the most prominent champion was missing.
Mr. Zucker, CNN +’s biggest advocate, was out. Jason Killar, CEO of WarnerMedia, was a streaming evangelist; he toasted the CNN + party, but it was among his last public appearances before leaving the company a week later. Left to defend the platform internally was its guru, Andrew Morse, CNN’s digital director general, who previously ran Bloomberg TV.
Find out the turmoil on CNN
It didn’t have to go that way.
CNN unveiled plans for CNN + in July 2021, declaring it the network’s most important undertaking since its inception in 1980. Mr Zucker called it a bold and necessary foray into subscription-based digital news at a time when consumers were abandoning traditional cable TV. Hundreds of new employees will be hired to produce eight to 12 hours of live programs a day.
Most importantly, AT&T – which at the time controlled WarnerMedia and CNN – was on board.
AT&T has already agreed to separate WarnerMedia from Discovery and leave the entertainment and news business. But in June 2021, the telecommunications giant’s leaders met with Mr. Zucker in Dallas and approved a $ 1 billion four-year budget for CNN +.
Mr Zucker has started hiring people, attracting stars such as Eva Longoria, who signed up for a Mexico-based tourist show, and Oddi Cornish, a former NPR star. The starting date was set for March 2022.
Mr. Zucker then abruptly resigned, followed by his deputy, Alison Golust, a week later. In addition to not revealing their relationship, the two were accused of violating the news standards of the network. (They both denied it.)
Mr. Morse, who oversaw all of CNN’s global digital operations, decided to act. In late February and again in early March, he asked if his team could share their vision for CNN + with Discovery staff before the merger was completed. He said preparing an early case was the best way to convince Discovery that CNN + was the future.
Both times the demands were not granted. In transactions between large companies, executives are afraid of breaking the rules that preclude “jumping in arms”: coordinating their business activities in the critical days before closing deals.
Then came an ominous sign. On March 14, two weeks before CNN + began, Gunnar Wiedenfels, Discovery’s chief financial officer, appeared at a Deutsche Bank conference and said WarnerMedia’s Discovery + and HBO Max would be brought together in a giant mega-inflating platform.
Mr Wiedenfels did not mention CNN +. After that conference, Mr. Morse asked again if his team could talk to Discovery; for the third time such a meeting did not take place.
His worries were justified.
Discovery executives were skeptical of CNN +. Mr. Zaslav and his team were unlucky with one-threaded streaming services; their niche platforms dedicated to cars, food and golf were expensive and ended in failure.
A pioneer of cable television, known in the industry simply as “Zas”, Mr. Zaslav had devised a deal that brought together Discovery and Warner Bros., a late career move that made him one of the most influential people in the media.
Discovery believed in the power of streaming services in large tents, especially given the crowded market. He was also on track to take on $ 55 billion in debt from the merger, and executives had to find $ 3 billion in savings.
Despite the skepticism expressed by Discovery, Mr. Killar – who watched Mr. Zucker’s release and has a reputation as an iconoclast – did not consider canceling the start of CNN +. He suggested that Discovery fully understood when it agreed to the merger that WarnerMedia was preparing a new ambitious digital product for CNN.
Furthermore, Mr Killar does not believe that CNN + contradicts Discovery’s all-in-one streaming philosophy. He had already planned to include some CNN + content with HBO Max, while still offering CNN + as a standalone service.
He stood forward. “It would be difficult to exaggerate how important this moment is for CNN,” he wrote on Twitter the day the service launched.
Mr. Zaslav and his team were confused. Discovery was ready to take over the company in weeks. Why didn’t you just slow down?
However, Mr Zaslav’s aides acknowledged one advantage: they will see a CNN + performance, similar to the film’s box office on the first night. Maybe after looking under the hood, CNN + will exceed their low expectations.
Immediately after the merger ended on April 8, Discovery staff began asking for data on CNN + ‘s progress. They didn’t like what they saw. A worrying sign is that downloads for the service are declining, despite the huge marketing boost.
On April 11, when the “WBD” symbol appeared live on the Nasdaq, CNN + employees met with the new management of Warner Bros. Discovery presented their arguments, an opportunity they had been looking for since February.
Mr Morse said CNN + had provided 150,000 paying subscribers in the first two weeks and was aiming to meet its first-year targets. He claims that consumers are willing to pay for high-quality digital news (CNN + costs $ 6 a month), citing the success of The New York Times.
Representatives of Mr. Zaslav, including Mr. Licht, the new chairman of CNN, and JB Peret, longtime head of Discovery streaming, were not convinced. They said they were suspending external marketing for CNN + for two weeks pending an official review.
The next day, CNBC and Axios reported some unpleasant statistics. CNN executives were frightened. And they became suspicious of their new Discovery bosses, believing the data had leaked to create an excuse to shut down the service.
Mr. Zaslav, after meetings with CNN officials in Washington and Atlanta, arrived at the site of Warner Bros. at Burbank on April 14. He appointed Mrs. Winfrey, who set up her OWN cable network in tandem with Mr. Zaslav and Discovery, to interview him on stage for an introductory town hall with staff.
Later that afternoon, Mr. Zaslav convened his think tank in a building where Jack Warner, an earlier Hollywood mogul, worked from the 1930s to the 1960s.
They agreed that CNN + was consuming too many resources and that its potential as a digital destination could not justify its small audience and huge costs. Mr Peret, who called from London, said it was time to end the operation. Mr. Zaslav agreed.
Next week, Zaslav’s team will finalize the details. Mr. Licht, along with Adria Alpert Rom, CEO of Warner Bros. Discovery argues that CNN + employees should receive three months’ pay and a chance to stay with the company; each fired person will receive an additional six months’ compensation.
Early on April 21, Mr. Licht told CNN senior officials that the service would end on April 30. Mr. Morse was also not …
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