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Ownership

Ownership

There were no changes in the ownership picture of cable news in 2004. No new companies entered the field, and none of the three major cable news operations changed hands.

Cable news management came under attack on a variety of fronts, including allegations (notably in Robert Greenwald’s movie “Outfoxed”) that Rupert Murdoch had turned Fox News into a covert political operation, and Ted Turner’s castigating Time Warner for managing CNN with too much attention to short-term results and the bottom line.1 There are further signs of new competitors entering the field, including BBC, perhaps as soon as 2005.

The three cable news channels are all owned by media conglomerates, and all have corporate siblings heavily involved in other media sectors, from magazines (Time Warner), newspapers (News Corp.), local TV stations (News Corp. and NBC), and movie studios (all three).

Despite those similarities, the news channels play different roles within their respective companies that are useful to note in trying to imagine how they might evolve in the future. Fox News is one of the stars of News Corp.’s TV portfolio. CNN is a solid performer for Time Warner, but not an enormous factor. MSNBC, by contrast, contributes little financially to either of its parents, General Electric (the NBC of MSNBC) or Microsoft (the MS). On the one hand, that might suggest MSNBC is in a precarious position, which has led to speculation about its owners’ commitment to the channel in the long term. On the other, having multiple platforms to deliver news and other content may be central to both companies’ strategies.

In 2004, each company started a number of activities that attempt to create a “seamless” experience tying cable news to its online counterparts. Arguably, the cable channels are doing a much better job of online convergence than either network or local TV news. It could be that cable news is especially suited for online convergence because its 24-hour day matches well with the Internet’s “always on” nature.

In most cases, the cable channels’ attempts to boost their ties to their online counterparts have revolved around reporters and staff people discussing what their lives are like behind the scenes – posting about the techniques that got them a particular story, the day-to-day business of putting on a television show, or their personal lives. News is not the star – the “cast” is the star.

It is noteworthy, however, that the standing of the three cable networks in the TV ratings does not correspond to their online popularity. Among all news sites, in December 2004 CNN.com was the most popular, with 21.3 million unique visitors; MSNBC was in second place, with 19.5 million visitors, and FoxNews.com trailed in 15th place, with 5.0 million visitors.2 (See also Online/Audience.)

Let’s look at the economics of the three news channels one at a time.

CNN

Despite the trends — declining viewership and flat revenues in 2004 — CNN is still a tremendously profitable organization. In 2004 its roughly $858 million in revenue represented just under 3% of Time Warner’s total revenue for the year.3 Publicly, Time Warner management expressed satisfaction with CNN’s performance, and even lashed out at its rivals — in particular Fox News, which Time Warner’s CEO, Richard Parsons, called a network for “crazy people exchanging views.”4

On the other hand, there are apparent signs of strain. In late October, CNN announced that it would be shutting down its business news channel, CNNfn. Even with the backing of Time Warner cable, the channel was never widely distributed. CNN executives said they would be consolidating operations and focusing their efforts on CNN and Headline News.

In addition to synergy across networks, CNN is closely integrated with CNN.com, which has been one of the most popular Web sites since it was first established (even before Time Warner’s merger with AOL). Its high popularity has made it easy for CNN television’s sales staff to arrange cross-platform deals with CNN.com.5

Another important component of CNN’s business model is CNN NewsSource. NewsSource works on a subscription model: local TV stations around the country pay a fee to have access to the system, and they can both contribute their own video to the NewsSource system and download clips and packages from other stations in order to put together stories on news events from around the country. NewsSource handles the technical aspects of gathering, labeling, and distributing the video over satellite feed systems; it has some 700 clients, the vast majority of them television stations. Indeed, in most markets multiple stations subscribe to the service.6 (For more on feeds, see Local TV/Content Analysis.)

Thanks to the NewsSource system, CNN itself has access to video from throughout the country. Indeed, in some cases when a particularly vivid news story is breaking (such as a fire or car chase) CNN has been able to broadcast video from Fox-owned-and-operated stations that is unavailable to Fox News, because station contracts with NewsSource say CNN takes precedence.

CNN might branch out by producing news for other cable channels, such as through news updates or syndicated programming, the way networks such as CBS and Mutual do on radio. Or it could try to create new channels of its own. The latter approach seems unlikely. CNN tried it with CNN/SI, a sports channel to challenge ESPN, and CNNfn, a business channel to challenge CNBC. CNN/SI never proved successful and was shut down in 2002; CNNfn lasted nine years before it was dissolved in the fall of 2004.

Fox News

In 2004, News Corp., the parent company of Fox News, moved its incorporation from Australia to the U.S. In some ways this could be seen as the final step in a process that began in the 1980s when Rupert Murdoch, News Corp.’s main shareholder, became an American citizen to comply with FCC regulations forbidding foreigners from owning TV stations. One reported motivation behind the decision to leave Australia was to take advantage of looser corporate regulation in the United States.7 Another was to make it easier for News Corp. to raise money on Wall Street.8

Within News Corp, Fox News appears to be a more crucial element of the corporate organization than either CNN or MSNBC are of theirs. Besides becoming the most-watched cable news channel, it is also the most successful of News Corp.’s American cable channels.9 A Smith Barney report in June 2004 estimated that Fox News accounted for a third of Fox’s cable income.10 (News Corp.’s other networks are all based on entertainment, including F/X, the National Geographic channel, various regional Fox Sports channels, and others).

Online, however, Fox News’s presence, however, is lacking compared with both of its competitors. Despite the lead in the TV ratings, FoxNews.com has never broken into the top-ten most-visited news sites, while CNN and MSNBC are habitually in the top three with more than 20 million unique visitors a month. FoxNews.com usually hovers between 10th and 15th place.11 In the hope, it seems, of parlaying its TV popularity into online success, Fox News anchors and reporters are being featured more prominently on the Web than they were in earlier years. The anchors of the morning show “Fox and Friends,” for instance, have a group blog where they discuss everything from their kids’ elementary school graduation to how an interview went.12

That, however, may strike some more as marketing rather than real brand extension. And it is not yet clear that the strategy will prove successful. As the network was gaining more viewers toward the end of the year, FoxNews.com made impressive strides, going from 4.9 million visitors in July 2004 to a peak of 7.9 million visitors in November. But in December 2004 it had dropped back to 5.0 million viewers, less than one-fourth of CNN.com’s visitors.

Meanwhile, Fox News has also developed a unique new model of synergy via radio. It has long had connections to radio, both in personality and in personnel. The TV hosts Sean Hannity, Bill O’Reilly, and Tony Snow all have their own talk-radio shows. This year, the linkage was made explicit when Clear Channel announced a deal for Fox News to provide its stations with news programming, including both hourly news updates and a nightly news program.13 In a separate deal in Seattle, one radio station owned by Fisher Communications announced that it would start branding itself as “Fox News” radio and featuring talk shows from Hannity, Snow, and Alan Colmes.14

News Corp. executives have suggested that they might launch their own business news channel as soon as the summer of 2005.15 But with CNBC limping along in the ratings (at 150,000 viewers, on average, in 2004, down from 317,000 in 199916), Bloomberg TV struggling for distribution (the channel currently reaches roughly 25 million homes, or less than a third of all homes with cable17) and CNNfn mothballed, the prospects for a new channel’s success are uncertain. Moreover, business news programming tends to be watched in offices during the day, where Nielsen does not have a ratings measurement system in place. This means advertisers don’t have a firm measuring stick for comparing the performance of business channels against each other, or against other cable channels, and may balk at moving money into a new network so long as the U.S. economy is growing slowly and the outlook for investment is sluggish.

This year News Corp. completed its purchase of the satellite-TV provider DirecTV. News Corp. has been established in the satellite business overseas for years, through its subsidiaries BSkyB in Great Britain and Star in China. Now, for the first time, it has its own distribution system in the United States and is competing with cable systems for subscribers. (See Economics)

With its American incorporation making it easier for News Corp. to borrow money, the company may be looking forward to a period of further expansion, including that new Fox business channel.

MSNBC

MSNBC is in an unusual position, thanks to its co-ownership by Microsoft and NBC. Its inability to break out of third place among the cable channels has led to questions about whether it is a worthwhile investment. Media commentaries about MSNBC often point to the widely held belief that G.E., NBC’s corporate parent, prefers to be in the #1 or #2 position in its various business sectors, suggesting that MSNBC’s third-place position puts its survival in question.18 Perhaps in response to the market speculation, in August, members of the Microsoft and NBC corporate managements issued statements pledging that they would continue supporting MSNBC. A report on the joint statements noted that “Unwinding the complex partnership between Microsoft and NBC would be very difficult, as the deal between them runs for many years,” and estimated that Microsoft was contributing $30 million a year toward MSNBC operations.19 Other advantages seem to balance out MSNBC’s prognosis.

For example, MSNBC is a useful outlet for spreading out NBC expenses. That has been particularly true for news operations. During the national political conventions, NBC was able to set up a facility to churn out material not only for NBC network news and MSNBC, but owned-and-operated NBC and Telemundo stations as well. That has also happened in other instances: MSNBC served as an extra channel for coverage of the Athens Olympics, airing some 130 hours of events, or 7.5 hours a day.20

MSNBC has also been a way for Microsoft to publicize Internet services such as MSN (Microsoft Network). In other words, beyond what it contributes to the bottom line on its own, which may have proven disappointing, MSNBC has become useful, perhaps even primarily useful, as an effective platform for promoting NBC and Microsoft products and services, and as a way of amortizing NBC’s news costs.

In terms of content, TV/online synergy hasn’t worked yet as smoothly as was optimistically expected when the channel was first created.21 But it may be too soon to discount that potential.

MSNBC.com has been one of the most popular spots on the Web since its inception, thanks in part to its ties to MSN. While the site has always featured stories from the NBC News staff and Newsweek magazine, in 2004 it became a showcase for MSNBC cable’s talk shows and personalities to a greater degree than it had been before. As the Democratic convention began, the Web site introduced “Hardblogger,” a blog featuring commentary from “Hardball”‘s Chris Matthews, Joe Scarborough of Scarborough Country, Joe Trippi and other MSNBC commentators, and stories from the MSNBC staff about what happens behind the scenes. (The new prominence of “Hardball” on the Web might explain, in part, why the TV show surpassed “Anderson Cooper 360,” its competitor on CNN, in the Nielsen ratings in summer 2004.)

Indeed, examine the list of major Web news sites and it becomes clear that some connection to television is enormously important. Eight of the top 20 sites have a TV channel to promote them. Nine more are connected to brands with significant print reputations that would be hard to match – The New York Times, The Washington Post, USA Today and Tribune Company. The other three are connected with portals – Yahoo, Google, and AOL.

With both MSNBC-TV and MSNBC.com achieving profitability in 2004, the company leadership may be willing to tolerate the TV channel’s low ratings in order to keep the brand alive, at least until they can figure out a way to translate MSNBC.com’s popularity into TV viewers.

Some people in cable believe MSNBC is the channel to keep an eye on at the moment. With all the potential for synergy with the rest of the news division, it has always had potential. Now with the former ABC and CNN executive Rick Kaplan in charge, it is poised for a major overhaul. Kaplan has already installed a policy of regularly alerting viewers how many minutes ahead certain stories are coming and trying to avoid repeating stories without substantive updating. Plus, with FOX and CNN aiming at each other, accusing each other of bias and sniping about how they count audiences, MSNBC has an opportunity to experiment and go further than ever before in defining itself. On the other hand, much of that has been true since it began in 1996.

The BBC Factor

It is widely understood inside the other English-speaking news operation that already produces a cable network, BBC, that it, too, wants in on the American cable news market.

BBC staff people in the U.S. say the UK-government-financed news operation would like to enter the American market as early as 2005. BBC has already gained attention with a half-hour American broadcast on more than 200 PBS affiliates both in the morning and evening. On average, roughly 930,000 U.S. households were watching the version of BBC World produced for American audiences in the summer of 2004 — twice the 466,000 households of November 2001.22

The prospect of a BBC channel oriented for the U.S. has interesting possibilities. None of the American channels could compete with it in sheer newsgathering muscle. A generation ago, Ted Turner initially built CNN on a philosophy closer to BBC than to CNN’s current orientation. Turner created a large number of bureaus worldwide with the vision that they would provide disinterested information that could be seen globally as trustworthy and ideologically neutral. The issue was whether, on the air, CNN knew how to execute the vision. How good, how distinctive, was the product?

In recent years, in the face of competition, CNN’s new owners, Time Warner and then for a time executives from AOL, began to lean toward Fox’s personality-based approach. More of CNN’s schedule is now built around hosts and shows rather than the news. The people in charge have tried to trim expenses, shed themselves of older correspondents and, for a while, reduce bureaus and correspondents.

BBC, by contrast, has 41 bureaus outside the British Isles (including 6 in the U.S.), while CNN has 28 non-U.S. bureaus; Fox and MSNBC have less than ten foreign bureaus apiece.23 The British news style is not focused around show hosts and anchors, who are called news readers.24 A BBC channel might well be designed to enter the cable market in much the same way The Economist has made huge progress in the American magazine market (which now makes up half its overall circulation) by peeling off some of the most sought-after magazine demographics. BBC, in other words, could become a high-end-demographic cable alternative.

That could prove particularly difficult for CNN, which has heretofore tried to convince advertisers that it was the elite cable news brand.

The main obstacle in BBC’s way would be getting clearances. Even in a so-called “500 channel” universe, there is fierce competition for spots on cable system lineups. BBC may face particular resistance from Time Warner Cable and DirecTV in its efforts. But BBC has the benefit of its existing partnership with Discovery Networks, which arranges distribution of BBC America in the U.S. Discovery, in turn, is partially owned by Cox, the fourth-largest American cable provider.25 With Cox’s backing, it might be easier for a BBC news channel to get distribution because Time Warner and News Corp. both have an interest in making sure their channels get distribution to Cox cable households.

There is also an unspoken question here: Will Americans embrace a news organization operated by the government of a foreign county? If so, it would defy expectations, in light of Americans’ historic lack of interest in international news. But between 2002 and 2004 the number of Americans saying they followed international news “most of the time” increased from 37% to 52%, suggesting that some Americans might welcome news programs with an international perspective.

As the cable news channels grow into maturity, they are likely to grow ever more dependent on their corporate owners. Given the wide reach of those companies, it seems probable that new cable news competitors will find it difficult to enter the market without the backing of another substantial corporate owner with its own distribution system.

Footnotes

1. Ted Turner, “My beef with big media,” Washington Monthly, July/August 2004.

2. “Top news sites for December [2004],” Cyberjournalist.net, January 12, 2005. Online: http://www.cyberjournalist.net/news/001831.php.

3. CNN 2003 revenue: Kagan Research. Time Warner revenue: Ad Age, “100 Leading Media Companies.”

4. John Eggerton, “Parsons takes shot at Fox,” Broadcasting & Cable, August 6, 2004.

5. Julia Angwin, “The right price: for Fox News, ad-sales market isn’t fair, balanced,” The Wall Street Journal, May 20, 2004.

6. In spring 2004, NewsSource became briefly notorious when it became a conduit for retransmitting a video news release praising the administration’s Medicare bill. For more on the system, see Ken Kerschbaumer, “CNN heats up with Pathfire,” Broadcasting & Cable, February 3, 2003.

7. Wendy Frew, “Murdoch packs his kitbag and heads off,” Sydney Morning Herald, November 3, 2004.

8. Louis Chunovic, “A ‘fierce warrior’ learns the ropes,” Broadcasting & Cable, October 25, 2004.

9. According to Dave Devoe, News Corp. CFO, in a conference call with investors published by business news wire FD Wire on May 6, 2004.

10. Smith Barney Citigroup report, June 17, 2004.

11. Nielsen NetRatings, “Top 20 Online Current Events & Global News Destinations,” October 2004.

12. Allison Romano, “Behind the cameras,” Broadcasting & Cable, July 12, 2004.

13. “Clear Channel chooses Fox for news deal,” Associated Press, December 6, 2004. Online: http://www.forbes.com/associatedpress/feeds/ap/2004/12/06/ap1694545.html.

14. “KVI, Fox News partner for first Fox-branded radio station,” Radio Ink, September 20, 2004.

15. Harry Berkowitz, “Murdoch plans summer launch of new financial channel,” Newsday, November 17, 2004.

16. See Lisa de Moraes, “The sync that sank Ashlee: ’60 Minutes’ has it covered,” The Washington Post, October 29, 2004.

17. Bloomberg Television fact sheet. Online: http://about.bloomberg.com/pressctr/factsheets/television.pdf.

18. On G.E., see, for example, Robert Brokamp, “General Electric and its army,” The Motley Fool, January 20, 2000. Online: http://www.fool.com/news/2000/ge000120.htm.

19. Joe Flint, “NBC, Microsoft declare support for MSNBC unit,” The Wall Street Journal, August 27, 2004.

20. NBC press release, June 10, 2004.

21. For example, titles of early programs included “Internight” and “The Site.” See Kevin D. Thompson, “MSNBC and the cable news war,” Palm Beach Post, October 27, 2004.

22. Don Melvin, “More Americans turn to BBC for news,” Cox News Service, August 26, 2004. Online: http://www.rockymounttelegram.com/featr/newsfd/auto/feed/features/
2004/08/26/1093533522.18121.3516.7738.html.

23. Adrian Van Klaveren, “Newsgathering,” BBC News, November 4, 2004. Online: http://news.bbc.co.uk/newswatch/ifs/hi/newsid_3960000/newsid_3964600/3964687.stm

24. For a comparison of how BBC World and American cable news covered the war in Iraq, see Jeff Bercovici, “BBC World, for those in the know,” Media Life Magazine, March 31, 2003. Online: http://www.medialifemagazine.com/news2003/mar03/mar31/3_wed/news4wednesday.html

25. Charlie Gibson, “BBC World plugs into US cable talks,” The Evening Standard, September 27, 2004.