CNN+ streaming pulls the plug: Do news brands have space to play in OTT?

CNN is shutting down its newly launched CNN+ a month after the roll out which, according to The Wall Street Journal, CNN reportedly spent US$300 million developing. The decision was made by the new management following the merger of WarnerMedia, CNN's previous parent company, with Discovery to form Warner Bros. Discovery earlier in April.

CNN's report said that there were hundreds of CNN+ employees who are expected to lose their jobs, and CNN CEO Chris Licht who said in an internal memo that this was "a uniquely sh*tty" situation shared that the company will continue to pay all CNN+ employees for the next 90 days. The employees will also continue to receive benefits during that period of time to "explore opportunities at CNN, CNN Digital, and elsewhere in the Warner Bros. Discovery family".

CNN is known for having popularised the 24-hour news cycle and holds the gold standard for breaking news and real-time analysis. With CNN+ however, the brand was looking to take on a lifestyle approach banking on content around history, pop culture, food and travel, race and identity, and true crime. Some of the heavy hitter hosts CNN enlisted for CNN+ include actress Eva Longoria, NYU marketing professor Scott Galloway, journalists Chris Wallace, Kasie Hunt, and Jemele Hill. According to The Wall Street Journal, on top of the US$300 million already spent, the previous management also had plans to invest another US$750 million in the next few years on the platform. 

Meanwhile, the company has already begun offering its 150,000 customers who signed up prorated refunds of their subscriptions priced at US$5.99. According to a CNN article, some of the dedicated programming may eventually be available through the single streaming service while other programming might shift to CNN's main TV network. 

Why pull the plug?

According to Licht the offering was "simply incompatible" with Warner Bros. Discovery's plans, and the vision for CNN+ simply "ran counter" to Warner Bros. Discovery CEO David Zaslav's plan to have all of the company's brands under a single streaming service.

Also, CNN said that the streaming service launched just two weeks before the completion of the merger between WarnerMedia and Discovery, which "exasperated" leaders at Discovery as they had a different strategy but "could not legally communicate with CNN executives before the deal was official".

Jean-Briac Perrette, president and CEO, Discovery Streaming and International, further explained that the company also wants a "more sustainable business model" to grow its future investments in great journalism and storytelling. Perrette also reportedly said during a town hall meeting with CNN+ employees that "some of this was avoidable". However, CNN's previous leadership, which comprised of former CNN CEO Jeff Zucker and former WarnerMedia CEO Jason Kilar, decided to keep pushing on with the planned launch of CNN+ in March despite the upcoming merger, CNN said. Perrette was also of the view that consumers today yearn for simplicity and an all-in service that offers a better experience and more value than standalone offerings, especially in a complex streaming market.

Can news brands find success on OTT platforms?

While CNN might have put its offering in the ground, other news companies have found success in their streaming app. FOX Now, for example, allows viewers to stream their favourite shows, news and even sports matches live and on-demand. Meanwhile, NBCUniversal's Peacock streaming service also allows users to watch hit shows, new movies, exclusive originals, live sports, and news.

So why didn’t CNN simply integrate what it is best known for - hard news - into its offering? Well, according to WSJ's podcast titled "The Quick End to CNN", pay TV distributors in the US, such as Comcast and DirecTV pay CNN "a lot of money" to carry the network on their cable services. Hence, CNN is limited on how much similar content it can put on its streaming service. As such, if CNN had taken the route of including breaking and live news in its CNN+ app platform, the company would potentially breach its distribution agreements with cable and satellite operators and place at stake much of its revenue stream.

Commenting on the matter, Vishnu Mohan, partner and chief growth officer, Asia Pacific, at Dept Agency told MARKETING-INTERACTIVE that while it is possible for news brands to find success as an OTT offering if they create very differentiated, strong content that can be credibly attributed to the brand.

"If news brands have a genre of content beyond news that they have found a loyal audience for historically, it is theoretically possible to spin that out. There may be a few rare associations with some brands but even then, the numbers would never pan out to create a sustained business," he said. Mohan added that "stick to the core" is an age-old wisdom that would be a proven success mantra every time. He added that what CNN+'s demise brings about is a bigger question which is whether companies should jump into something simply because they have enough inventory or the capability to create enough in the future.  "I believe in the 'gold rush'; we have forgotten the consumer and their wallets," he said.

Stephen Li, former CEO of OMD APAC, also agreed that news brands can find OTT success as people are moving away from linear services. Candidly sharing, Li added:

For news brands to find success on OTT, the focus needs to be on the core product - great in-depth news and analysis - not Anderson Cooper talking about parenting.

In CNN’s case, Li shared that the corporate moves of two companies coming together with differing views led to the "confluence of judgement calls".

Better to have a holistic or standalone offering?

While CNN+’s launch mirrored the route taken by its sister brand HBO, in offering a standalone service that bundles all of HBO’s offerings, the team at Discovery led by Zaslav had other plans to place all of the company's brands under a single streaming service. The strategy Zaslav has in mind, mimics Disney+’s steps to package the numerous brands from Star World to Marvel, Pixar, Hotstar and National Geographic under one entity.

Commenting on the strategy, Dept's Mohan shared that while having a standalone brand might be more appealing, there are multiple competing offerings in every content genre. Also, consumers have a defined wallet that is not infinite and they will start making rational decisions. He predicts that they might lower the number of streaming subscriptions to two and at the maximum probably three.

"The loss of Netflix subscribers is a wake-up call. Mitigating the risk by having a diversified array of sub-brand content will give [streaming services] an enhanced probability to land in the two to three that consumers are willing to pay for," Mohan explained.

On the other hand, it also boils down to the type and quality of the content offered and the streaming service's value proposition, Digitas Singapore's head of strategy, Patricio Blasco, said. He said that a holistic approach has the advantage of a broad offering that can appeal to multiple audiences, while a standalone brand can leverage a niche strategy with more focus to relate better to a specific audience. While there is no "better approach" to one over the other, Blasco said it is important to understand users' needs, their perspectives, and the type of content they seek. 

"The importance of having a clear strategy aligned with all internal stakeholders is key for success in any digital transformation project. Being able to measure success under the right metrics and understanding the context before committing to a full rollout is crucial," Blasco added.

“Bundled offers will always work well because viewers want both choice and value,” said Li, predicting that it won’t be long before HBO ends up with a bundle within the Warner Bros.Discovery family. “CNN+ was potentially going to be bundled with HBO Max, and the discomfort of that arrangement from a viewer and marketing perspective was also probably one of the reasons for its demise,” he added.

Similarly, Vijay Anand Kunduri, PubMatic's regional VP, OTT/CTV, APAC explained that there is a place for both subscription video on demand and advertising-based video on-demand services in the region, there is a place for both holistic offerings and standalone offerings, especially since consumers have grown used to having almost limitless content at their fingertips.

"The key to growth for both offerings will be having quality content that engages the audiences you are trying to reach and a business model that offers accessibility to the audiences you are trying to reach. If that business model is ad-supported, then having the right tech in place to ensure a seamless ad experience for both consumers and advertisers, will be crucial," he added.

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