Inside the CNN+ implosion

David Zaslav had been CEO of Warner Bros. Discovery for a few hours when he learned he had a problem.

On April 11, the day his newly merged company went public on Nasdaq, Zaslav greeted New York employees with pasta bars and ice cream, shouting an impromptu rallying cry to his new charges. He was on his way to Washington, the next stop on the coronation tour, when he got a call.

His team had just seen the data for CNN+ for the first time, the much-touted subscription streaming service started two weeks earlier, and the news was grim. Fewer than 10,000 viewers were watching at any given time, despite a multi-million dollar advertising campaign and big bookings like Chris Wallace. They were recommending a cold review.

Three days later, shortly after Mr. Zaslav appeared with Oprah Winfrey at a rah-rah company town hall, he gathered his aides inside a low-rise stucco building in Burbank, California, on the Warner studio lot. Bros., and said he agreed with their conclusion: shut it down.

The near-instantaneous collapse of CNN+ represented one of the most spectacular media flops in years, a $300 million experiment that ended abruptly with looming layoffs and careers in disarray. The corporate tug-of-war over its fate exposed deep philosophical divisions over the future of digital media, as executives struggle to navigate a rapidly changing marketplace where technology and consumer habits change by the day.

And it reflected the awkward regulatory dance of the merger of two media giants, even as a high-profile project hurtled toward completion. Discovery had some concerns about CNN+, but couldn’t directly guide one of its broadcast competitors until the deal was done.

CNN must now emerge from one of the most chaotic periods in its history: the firing of its top-rated anchor, Chris Cuomo; the removal of its president Jeff Zucker for an undisclosed affair with a colleague; and the takeover of its parent company WarnerMedia by Mr. Zaslav’s Discovery.

Collateral damage has included the long friendship between Zaslav and Zucker, former allies in business and in life. Zucker, who once called the Discovery boss “the best friend anyone could want, and I’m lucky he’s mine,” has not spoken to Zaslav since his February 2 exit.

Inside CNN, employees are still stunned. “This is not easy news, and I don’t want to minimize that,” Chris Licht, the network’s new president, told CNN+ staff in a solemn call announcing the shutdown. “I’m proud of it,” he added. “I’m proud of this team and I’m devastated by what this means to you.”

This account is based on interviews with a dozen people intimately familiar with the rise and fall of the streaming service. They spoke on condition of anonymity to share details of sensitive conversations.

CNN+ was introduced to the world on March 28, a day before its debut, with a swanky party on the 101st floor of 30 Hudson Yards, the futuristic Manhattan skyscraper that houses CNN. The network’s stars posed for photos next to a giant fiberglass sculpture of the CNN+ logo, New York City spread out beneath their feet.

But inside the net, the serve was missing its most prominent champion.

Zucker, CNN+’s biggest supporter, was out. Jason Kilar, CEO of WarnerMedia, was a streaming evangelist; he led a toast at the CNN+ party, but it was one of his last public appearances before he left the company a week later. To defend the platform internally was its internal guru, Andrew Morse, digital director of CNN, who previously directed Bloomberg Television.

It wasn’t supposed to be this way.

CNN revealed plans for CNN+ in July 2021, calling it the network’s most important company since its founding in 1980. Zucker called it a bold and necessary foray into subscription-based digital news at a time when consumers were abandoning traditional cable television. Hundreds of new employees would be hired to produce eight to 12 hours of live programming a day.

Crucially, AT&T, which at the time controlled WarnerMedia and CNN, was on board.

AT&T had already agreed to spin off WarnerMedia from Discovery and leave the entertainment and news business. But in June 2021, leaders of the telecom giant met with Zucker in Dallas and approved a four-year, $1 billion budget for CNN+.

Zucker went on a hiring spree, attracting stars like Eva Longoria, who signed up for a Mexico-based travel show, and Audie Cornish, the former NPR star. A start date of March 2022 has been set.

Zucker then abruptly resigned, followed by his top deputy, Allison Gollust, a week later. In addition to not disclosing their relationship, the two were accused of violating the network’s news standards. (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 officials before the merger was complete. He thought making a case early was the best way to convince Discovery that CNN+ represented the future.

On both occasions, the requests were not granted. In transactions between major companies, executives are wary of breaking the rules that prevent “jumping arms”: coordinating their business activities in the critical days before deals close.

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 declared that WarnerMedia’s Discovery+ and HBO Max would be merged into one giant mega-platform.

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 concerns were well founded.

Discovery executives were skeptical about CNN+. Mr. Zaslav and his team had had bad luck with single-issue streaming services; its niche platforms dedicated to cars, food and golf were expensive and ended in failure.

A cable television pioneer known in the industry simply as “Zas,” Mr. Zaslav had masterminded the deal that brought Discovery and Warner Bros. together, a late career move that made him one of the most powerful people in the media.

Discovery believed in the power of big-box streaming services, especially given the crowded market. It was also about to take on $55 billion in debt from the merger, with executives needing to save $3 billion.

Despite the skepticism radiating from Discovery, Kilar, who oversaw Zucker’s departure and has a reputation as an iconoclast, did not consider canceling the start of CNN+. He assumed that Discovery had fully understood when it agreed to the merger that WarnerMedia was preparing an ambitious new digital product for CNN.

Furthermore, Mr. Kilar did not believe that CNN+ conflicted with Discovery’s “all-in-one” broadcasting philosophy. He had already planned to include some CNN+ content with HBO Max, while continuing to offer CNN+ as a standalone service.

Went ahead. “It would be hard to overstate how important this moment is for CNN,” she wrote on Twitter the day the service began.

Mr. Zaslav and his team were confused. Discovery was poised to take over the company in a matter of weeks. Why not just delay?

Still, Zaslav’s attendees admitted one advantage: They would watch the CNN+ performance, similar to a movie opening night box office. Perhaps once they looked under the hood, CNN+ would exceed their low expectations.

Immediately after the merger closed on April 8, Discovery officials began requesting data on CNN+’s progress. They didn’t like what they saw. In a worrying sign, downloads for the service were declining, despite a big marketing push.

On April 11, when the ticker symbol “WBD” went live on Nasdaq, CNN+ officials met with new Warner Bros. Discovery management and made their case, an opportunity they had been requesting since February.

Mr. Morse said that CNN+ had secured 150,000 paying subscribers in its first two weeks and was on track to meet its first year goals. He argued that consumers were willing to pay for high-quality digital news (CNN+ costs $6 a month), citing the success of The New York Times.

Zaslav’s representatives, including CNN’s new president Licht and JB Perrette, Discovery’s longtime head of streaming, weren’t convinced. They said they would suspend external marketing from CNN+ for two weeks pending a formal review.

The next day, CNBC and Axios reported some unflattering statistics. CNN executives were dismayed. And they grew suspicious of their new superiors at Discovery, believing they had leaked the data to create a pretext to shut down the service.

Mr. Zaslav, after meeting with CNN employees in Washington and Atlanta, arrived at the Warner Bros. lot in Burbank on April 14. He enlisted Ms. Winfrey, who created her OWN cable network along with Mr. Zaslav and Discovery, to interview him on stage for an introductory town hall with employees.

Later that afternoon, Mr. Zaslav summoned his brain to a building where Jack Warner, a Hollywood mogul from an earlier era, 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 enormous cost. Mr. Perrette, calling from London, said it was time to cease operations. Mr. Zaslav agreed.

Over the next week, Zaslav’s team finalized the details. Mr. Licht, along with Adria Alpert Romm, director of personnel for Warner Bros. Discovery, argued that CNN+ employees should receive three months’ salary and the opportunity to stay with the company; anyone laid off would receive an additional six months of severance pay.

Early on April 21, Mr. Licht broke the news to top CNN officials that the service would end on April 30. Nor was Mr. Morse informed until that morning. Licht called Wallace, Cornish and other main anchors to tell them that CNN would try to find a spot for them. The shows hosted by Mrs. Cornish and Mrs. Longoria had not yet started.

Supporters of CNN+ lamented that the streaming service was not given much of a chance and argued that the decision was damaging to the CNN brand, a misstep that would leave the network unprepared for a future in which few Americans still watch. cable TV.

For the base, it was a brutal blow. Rebecca Kutler, CNN+’s head of programming, took pity on the donuts, telling employees they weren’t required to come into the office if they didn’t have a specific responsibility.

Karen Hunt, who left a job at MSNBC for CNN+, finished his last show on Friday with a tribute to his staff. “They left steady jobs, some moved across the country, they all took big risks,” he said. “If you’re hiring journalists, they’re best in class.”

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