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Ownership

Ownership

By the Project for Excellence in Journalism

Introduction

In a year when the cable channels largely defined themselves around the 2008 presidential campaign, the corporate owners of MSNBC and Fox News got immersed in the political identity of its news channel while CNN’s owner looked for ways to further its brand.

MSNBC’s more partisan tone drew strong ratings success, but created friction with the journalistic sensibilities at NBC News. The complaints eventually reached General Electric (GE), the owner of both organizations.

Fox News, owned by media mogul Rupert Murdoch, performed well as a crown jewel in News Corp.’s businesses. Still, with Murdoch’s investment in newspapers and digital properties, there were questions raised about his affection for the conservative news channel he launched.

Time Warner, the parent company of CNN, took steps toward strengthening its content arms and scaling back from its ancillary businesses. This resulted in the creation of a new wire service and the spinoff of Time Warner Cable, its cable television distributor.

The parent companies of the three major cable news channels were not untouched by the U.S. recession, but the channels themselves stood out by the year’s end as profitable highlights in the otherwise hard-hit portfolios of GE, News Corp., and Time Warner.

MSNBC

Tensions Over Brand

MSNBC’s reliance on left-leaning hosts, such as Olbermann and Maddow, attracted viewers, but it also created differences with the NBC news tradition of nonpartisan reporting. Tensions got so high that the corporate parent, General Electric, eventually got involved.

Early in the year, NBC executives sounded enthusiastic about the notion that MSNBC would become, over time, the news brand of the company.

Following the union of the two news operations in 2007, NBC Universal president and CEO Jeff Zucker looked forward to the further merging of MSNBC and NBC in 2008. “The definition of NBC News is really changing,” Zucker told the Harvard Business School’s annual Entertainment and Media Conference in February 2008, “and it’s becoming more MSNBC and MSNBC.com.”1

Phil Griffin, the president of MSNBC, talked excitedly about synergy and the increasing appearances of NBC correspondents on MSNBC. “I wish this had happened years ago…. You have everybody interacting,” Griffin said.2

But that notion might be easier to talk about than to execute. In both content and staff, MSNBC in 2008 was becoming a news brand increasingly tied to opinion and attitude, particularly opinions that reflected a liberal or Democratic point of view. Those leanings were documented in content studies of the channel during the election (see Content for more).

What seemed in January a clever strategy soon was creating tensions between the MSNBC and NBC brands, and problems within General Electric itself.

At an annual dinner for Washington-based NBC News personnel, NBC correspondent Andrea Mitchell complained to GE chief executive Jeffrey Immelt about the opinionated MSNBC hosts anchoring the conventions, according to one report.3

Griffin initially publicly defended the news channel as well as the NBC news brand, arguing that Olbermann and Matthews knew where to draw the line between opinion and straight reporting,4 but ultimately both were removed from the anchor chairs in the midst of the Republican convention.5 Fox News denied the story.

Murdoch himself entered the feud when he asked Olbermann to cancel his plan to air footage of an activist protesting outside O’Reilly’s home. The footage was not aired.

By the end of 2008 Olbermann and Matthews still had their own shows and were joined by another liberal, Rachel Maddow. (Gregory, meanwhile, had been named host of Meet the Press, the job held by Tim Russert before his death several months earlier.)

NBC Acquisitions

Aside from the branding tensions over MSNBC, NBC Universal added to its properties during the year.  In July, it signed a deal to buy The Weather Channel from Landmark Communications for $3.5 billion, in partnership with two private equity firms.6

Immelt explained why it made sense to partner with the firms, Bain Capital and Blackstone Group. “If you like investing in cable the way I do, every now and then I like getting a couple of validation points to say here’s what you ought to be paying, and you get two of the shrewdest guys in the world helping you validate it because we’re not done doing cable deals.”7

In September, NBC Universal forged an agreement with Google. In the arrangement, NBC would allow the Web giant to sell television advertising on NBC’s channels, capitalizing on the company’s record of targeting and customizing ads for niche audiences.8

NBC Universal reported a 6% drop in profits for the fourth quarter of 2008, echoing a pattern caused by the troubled economy. These losses, however, were not nearly as deep as those experienced by NBC Universal’s parent company, GE, which saw a 46% drop in earnings in the fourth quarter.9

MSNBC was one of the bright spots in the otherwise dismal quarter for its parent. The official statement from GE was that “strong cable earnings were offset by declines in local stations.”10

CNN

In a year of relative success and fairly limited controversy at CNN, strategic shifts were taking place at its corporate parent that appeared to further boost the prominence of its news operations. With a new corporate president, the sale of Time Warner Cable and the announcement of a new CNN wire service, CNN headed into 2009 with its news mission solidly in the forefront.

Time Warner Company, CNN’s parent, got a new president and chief executive officer, Jeffrey Bewkes, on Jan.1, 2008. Bewkes’ vision from early on was to concentrate on developing the company’s network, entertainment and publishing arms, the ones that produce content rather than distribute it. The impact at CNN included more attention to its brand promotion as an independent, nonpartisan news source as well as investment in content-gathering capacities.

Some analysts suspect the strategy, carried to its logical conclusion, could lead to a sale of the company’s Internet portal, AOL. That would allow Time Warner to focus on building brands and creating stronger content through its movie, television and publishing arms. A former Time Warner executive was quoted by Advertising Age in August 2008 as having said that Bewkes “has the view his core business is content and production. Distribution assets are not strategic in that world view.”11

One of Bewkes’ first actions, however, seemed to contradict that. In March, its AOL division purchased the European social networking website Bebo for the princely sum of $850 million.

When asked if the price tag of $850 million was too much, AOL chief executive Randy Falco argued that on the contrary, when compared to Microsoft’s payment of $240 million for a 1.6% stake in Facebook, the purchase of Bebo was a prudent investment.

The acquisition of Bebo notwithstanding, Bewkes’ vision of content production over distribution soon began to take shape.

On April 30, Bewkes announced the spinoff of Time Warner Cable, one of the biggest cable distribution companies in the country and one with solid financials. But Bewkes reasoned that without a cable operation, Time Warner could focus more on its natural strengths in television and film operations, which include Warner Bros., Time Inc., HBO, and Turner Broadcasting, the Time Warner division that is the parent of CNN.12

The spinoff was slowed down by regulators, and was not yet complete as of early March 2009.

At the same time as it was getting rid of its cable company, Time Warner appeared to be seeking ways to bulk up on content providers. Some sources, including BusinessWeek, which had interviewed Time Warner CFO John K. Martin, reported that Time Warner may be interested in purchasing Scripps Networks Interactive, which owns the Television Food Network and Home and Garden Network.13

Finally, one of the clearest indications that Bewkes’ interest in nurturing Time Warner’s content-producing arms was going on at CNN. In August, the network announced it would be expanding its domestic newsgathering by placing “all-platform journalists” in 10 city bureaus around the country. These journalists are designed to report local news for CNN cable, Internet and radio affiliates as well as serve as a source for local newspapers. CNN, then, seems to be trying to work its way into the local market as well.  This comes at a time when many media analysts are telling newspapers and local television that their best opportunity to survive is to be hyperlocal.

CNN took another big step in its content development: plans for the creation of CNN News Wire. It expanded the internal system that, according to former CNN senior Washington correspondent Charles Bierbauer, CNN has long used as an internal wire to provide information to all CNN properties. A test run of the service was conducted in several newspapers in November, and several newspapers announced in December that they planned to abandon the Associated Press. The CNN service is designed to provide national and international news to local newspapers and radio stations around the country. It will compete directly with the AP, which, funded by newspapers themselves, has long dominated American wire coverage.

As local newspapers have greatly cut back their own national and international reporting, this content has become even more important. But many papers are becoming unhappy with the AP’s presence online, which makes it a competitor rather than simply a supplier. They also have begun to chafe at the high membership fees they have to pay for the AP. (Newspapers, without any fee in return, also serve as a supplier to the AP, which takes local copy and puts it out on the wire.)

While the CNN service will not offer photos or sports, CNN’s plans almost immediately began to get attention. In December, the editors of about 30 newspapers went to CNN’s Atlanta headquarters to hear more about the service.

All of these content initiatives speak to Time Warner’s apparent decision to build the CNN brand as a non-ideological counter to Fox News and MSNBC by staying unaligned politically. As New York Bureau Chief Darius Walker described CNN’s approach to its election coverage, “Our job is to bring point of view together and let users decide.”14

If Time Warner entered 2009 with a special interest in building the CNN brand, it may have had something to do with CNN’s standout financial performance in contrast to the parent company’s other assets. Hurt by the recession, Time Warner posted a $16 billion loss in the final quarter of 2008. But it also announced that television advertising revenue saw gains for the year of 10%, and 7% in the fourth quarter.15

Of CNN and Time Warner’s other cable TV assets, the company’s chief financial officer John Martin said, “They may have been, collectively, our best performing business last year,” and that “We are disproportionately benefiting from money coming off broadcast to cable.”16

Ownership profile

Time Warner owns CNN through the Turner Broadcasting System. Of the Turner media holdings, CNN is the most recognized news and information brand. The other Turner holdings include entertainment networks such as TBS, TNT, Cartoon Network, Turner Classic Movies, Adult Swim and truTV.

The CNN brand extends to a host of entities:

CNN Radio, the radio outlet that airs CNN television content and original programming, has more than 2,100 affiliated radio stations worldwide. The radio outlet was started in 1982 and has staff based in Atlanta, Washington, Los Angeles and New York.

CNN International started in 1985, four years after CNN, and expanded substantially in the early 1990s as an alternative outside the United States to the BBC World News Service.  According to CNN, the channel has 31 bureaus. Along with 24-hour broadcasting, CNN International has a Web site and mobile services.

CNN NewsSource is the network’s syndicated news service, which U.S. and foreign television stations can access through a subscription. Through this service, CNN acts somewhat like a broadcast network, providing content to local television stations, as well as to its cable channels. Begun in 1987, it provides content to 800 stations in North America and to more than 200 international affiliates.

CNNMoney.com is CNN’s business-only Web site. Begun as CNNfn.com in 1995, along with a business television channel, the site became CNNMoney in 2001 in partnership with Money magazine. It is currently the online home of Fortune, Money and Fortune Small Business, all three print business magazines that are part of Time Inc., a component of Time Warner.

CNN Airport Network was started in 1992 and is the only satellite-delivered, 24-hour television service designed for air travelers. It is available in 42 U.S. airports and is seen at more than 1,880 gates and other public areas.

CNN en Español, CNN’s Spanish-language television channel, was begun in 1997. It reaches 20.6 million homes in Latin America and 3.9 million in the U.S. According to the channel’s website (www.cnn.com/espanol) which represents both CNN’s Spanish radio and television programming, CNN en Español features 26 news programs and has 28 affiliated journalists.

CNN Wire: was announced in November 2008 and is CNN’s potential rival to the Associated Press. The service provides national and international news to local newspapers and radio stations around the country. In November, several newspapers were already using a test version of the wire service and in December, the editors of 30 newspapers went to Atlanta to learn more about it.

Fox News

In a year that saw optimism at Fox News’s corporate owner, News Corp., tempered by hard economic realities, Fox News remained a strong performer in Rupert Murdoch’s media portfolio.

Other acquisitions performed well, too, including Dow Jones newspapers and MySpace.com. Murdoch’s attentiveness to these and other prospects, as well as a biography of the mogul, raised some questions about the centrality of Fox News Channel to his corporate vision.

Financially, News Corp. got off well at the start of 2008 but faltered near the end when the recession pulled down media profits. In the final quarter of the year (the company’s second fiscal quarter), News Corp. reported a loss of $6.4 billion, hurt by weak performances in broadcast TV and advertising.17

However, the losses were mitigated slightly by strong performance in News Corp.’s cable television sector, which saw a 27% jump in operating income compared with the same time in 2007.18

Even Fox Business Network, also a new investment by News Corp., showed signs of progress for its parent. Although the 2007 startup had yet to make up its $100 million initial investment as of August, its ratings during the financial crisis were high enough to be measured by Nielsen for the first time.19

In February, Murdoch also secured a larger stake of his own company when the FCC approved his swap of a 38.4% stake in DirecTV for an additional 16.3% stake in News Corp.20

As his company grew with the acquisition of Dow Jones and MySpace, there was some speculation in 2008 that Murdoch was losing his affection for Fox News, one of News Corp.’s signature — and more profitable — entities.

In December, a highly publicized biography of Murdoch by Vanity Fair columnist Michael Wolff portrayed Murdoch as a mogul who was growing cool to the conservative flagship and its key players, chief executive Roger Ailes and Bill O’Reilly.

Wolff, who was able to secure a series of in-depth interviews, wrote that Murdoch’s interest in the New York Times and delight over his purchase of the Wall Street Journal in 2007 betrayed his true passions, while the luster had faded from Fox News for him. It is not that Murdoch is necessarily becoming a liberal, suggested Wolff, but that he was in search of more sophisticated company.

On Oct. 6, after Murdoch got an embargoed early copy of the book, he sent a letter to Wolff asserting that it contained factual errors and that Wolff had grossly mischaracterized Murdoch’s relationship with executives at Fox News.21

The factual items were corrected, but Wolff and his publisher, Doubleday, otherwise stood by the book, “The Man Who Owns the News: Inside the Secret World of Rupert Murdoch.” Wolff argued that Murdoch’s complaint was an attempt to salve the egos of the individuals discussed in the book. And, Wolff noted, the 50 hours of interviews with Murdoch were all recorded on tape.22

Wolff, noting that Murdoch did not say that he had been misquoted, said he thought the News Corp. chairman was trying to “hedge his bets,” or have it both ways.23

There were other signs in 2008 that Murdoch’s energies were focused on new projects in the digital, cable and newspaper sectors.

In May, Murdoch’s Fox News subsidiary purchased a minority stake in Palestra.net, which Forbes described as a “Web video-based college news network featuring student reporters” and called the purchase the “latest — and boldest — move by a major media company to capitalize on America’s some 6.1 million undergrads.”24

Shortly after Cablevision announced it was selling its Rainbow Media unit, which oversees AMC, the Independent Film Channel and WE (Women’s Entertainment), Murdoch expressed interest in seeing what Cablevision had to offer.25

Murdoch’s ambition and passion for newspapers were illustrated once again by reports that he was mulling over the potential purchase of the New York Times. However, in a public conference call in February 2009, Murdoch tamped down that speculation.26 Among other obstacles, FCC regulations would present a major hurdle, since News Corp. already owns television and newspaper properties in New York City.

And though News Corp.’s second quarter (fiscal year 2009) revealed write-downs in signature newspaper properties the Wall Street Journal and the New York Post, Murdoch’s response was optimistic about his share of the newspaper industry: “I’ve got great faith.”27

In its 2008 annual report, News Corp. described itself as a diversified global media company with eight distinct businesses:

The Fox News brand extends to the business channel and a radio network.

Fox News Radio was begun in June 2005 and, like CNN Radio, is a syndicated service that distributes news programming to radio stations across the country. The network is also distributed through Sirius XM, the satellite radio service, and can be streamed online (see the Radio Chapter). In addition, subscribers can get a dedicated channel of talk programming, Fox News Talk, which features Sean Hannity, Alan Colmes, and until 2009, Bill O’Reilly, among others. All three were among the top talk show hosts on radio, with Hannity the second-most popular among all radio talk show hosts in 2008, behind Rush Limbaugh.

Footnotes

1. Marisa Guthrie, “Jeff Zucker to Print Reporters: Drop Dead,” Broadcasting & Cable, February 28, 2008

2. Felix Gillette, “When Talent Moves to Cable, Journalism Doesn’t Always Follow,” New York Observer, March 20, 2008

3. Felix Gillette, “Hard Fall: What Happened to NBC?” New York Observer, September 9, 2008

4. Paul J. Gough, “Cable Nets Benefited from Primary Coverage,” Hollywood Reporter, June 2, 2008

5. Richard Huff, “NBC News’ Uneasy Cable Hookup,” New York Daily News, September 9, 2008

6. Tom Lowry, “What Recession? Cable TV is Booming,” BusinessWeek, August 5, 2008

7. Chris Ariens, “GE’s Immelt: “We’re not done doing cable deals,” TV Newser, August 18, 2008

8. Brian Steinberg, “NBC Universal, Google to Work Together on Ad Sales,” Advertising Age, September 8, 2008

9. Stephen Manning, “GE Fourth-Quarter Profit Falls by 46%; Hurt by Finance Unit,” Associated Press, January 23, 2009

10. “GE Earned $18.1B in ’08,” General Electric Media Relations, press release, January 23, 2009

11. Nat Ives and Abbey Klaassen, “Time Warner’s Back to Its Roots: Content,” Advertising Age, August 11, 2008

12. Frank Ahrens, “Time Warner to Spin Off Cable,” Washington Post, May 1, 2008

13. Tom Lowry, “Jeff Bewkes’ $9.25 billion dilemma,” BusinessWeek, August 14, 2008. See also Tom Lowry, “What Recession? Cable TV Is Booming,” BusinessWeek, August 5, 2008

14. Darius Walker, public statement at Poynter Institute, “Who Will Pay for the News?” November 10, 2008

15. Claire Atkinson, “Cable Stays Up amid Big Media Losses,” Broadcasting & Cable, February 7, 2009

16. Claire Atkinson, “Cable Networks Likely to be TW’s Best Unit in ’09,” Broadcasting & Cable, January 8, 2009

17. Claire Atkinson, “News Corp. Writes Down Value of Assets by $8.4 Billion,” Broadcasting & Cable, February 5, 2009

18. Claire Atkinson, “Cable Stays Up amid Big Media Losses,” Broadcasting & Cable, February 7, 2009

19. Dawn C. Chmielewski, “News Corp. Posts 27% Rise in Its Fiscal Fourth-Quarter Net Income,” Los Angeles Times, August 6, 2008

20. Jim Puzzanghera, “FCC OKs Murdoch Asset-Swap Deal,” Los Angeles Times, February 26, 2008

21. Tim Arango, “Murdoch Takes Issue with New Biography,” New York Times, October 22, 2008

22. Tim Arango, “Murdoch Takes Issue with New Biography,” New York Times, October 22, 2008

23. Michael Wolff, “Tuesdays with Rupert,” Vanity Fair, October 2008

24. James Erik Abels, “Rupert Murdoch: Big Man on Campus,” Forbes, August 18, 2008

25. Tom Lowry, “What Recession? Cable TV Is Booming,” BusinessWeek, August 5, 2008

26. Robert MacMillan, “Murdoch Wants Newspapers, Just Not the New York Times,” Reuters, February 6, 2009

27. Robert MacMillan, “Murdoch Wants Newspapers, Just Not the New York Times,” Reuters, February 6, 2009