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American Journalism Review
Another Excellent Adventure for Ted?  | American Journalism Review
 AJR  Columns :    THE ECONOMICS OF TELEVISION    
From AJR,   October 1995

Another Excellent Adventure for Ted?   

Ted Turner challenges CNBC with a new business channel on cable.

By Douglas Gomery
Douglas Gomery is the author of nine books on the economics and history of the media     


Regardless of all the ink about mergers and combination, media corporations – whatever their size – need to deliver programming people will watch.

ýhus, despite all the rumblings these past few months about a Time Warner/Ted Turner deal, Turner's audacious and celebrated entrepreneurial spirit will get its greatest test in 1996. Beginning next year Turner promises he will launch a new business cable TV channel – dubbed CNN Financial Network or CNNFN – and thus directly take on NBC's cable business and talk channel, CNBC.

For a quarter century Turner has been cable TV's most celebrated upstart, but with this battle he will take on General Electric, owner of CNBC. GE is not just a media giant the size of Time Warner, but one of the biggest corporate behemoths on the planet.

Turner is smart enough not to assault GE head on. Rather, his all-business network will split the day with the domestic feed of CNN International. The initial focus of the new CNN Financial Network, as it piggybacks on CNN International, will be coverage of the global political economy, somewhat differentiating its service from today's CNBC, which focuses on the U.S. stock markets.

But in the United States CNBC is well-entrenched. It has had the financial news cable TV niche all to itself since 1991, when parent NBC bought out competitor Financial News Network. CNBC executives claim the business service will earn more than $50 million in pretax profits this year.

Financial news seems to be the hottest development on cable TV. Trading and interest in the activities of the stock markets are higher as millions of Americans with mutual funds follow the ups and downs of their holdings.

Still, one should not exaggerate CNBC's draw. During the typical day CNBC's business shows are watched by 300,000 viewers at most. Maybe Turner is blinded by the ratings increases of his own "Moneyline with Lou Dobbs," which has experienced a surge this year – because it frequently follows CNN's blanket coverage of the O.J. Simpson trial.

Just six months ago CNN and NBC held serious merger talks, but broke off this January and Turner declared war.

In response, Roger Ailes, CNBC's president and a former Reagan campaign adviser, has vowed that once CNN Financial Network is up and running he will launch a counterattack using what he knows best – spot advertising. One rumored spot would take place in a ýursing home, as octogenarians in wheelchairs stare at CNN's "Moneyline with Lou Dobbs." Ailes thus would not so subtly underline what the advertising community already knows – two-fifths of CNN's audience is over the age of official retirement. On the other hand, 18-34 year olds, the age group most valued by advertisers, constitute but an eighth of CNN's audience.

NBC has not left Ailes to joust with Turner alone. As part of the failed merger talks, NBC News President Andrew Lack was able to take a close inside look at CNN's balance sheets. He liked what he saw and has decided (with GE's backing) to retaliate by creating a competitor to all-news CNN to take a serious shot at knocking off cable TV's most prestigious news service.

In the long run, the question is: Can the economics of cable TV accommodate two business and two general news networks? Cable operators want to add only those channels that seem to make the most profits. They do this by filling new niches, not by replicating old ones.

So far movies and sports seem to provide the only genre of cable TV programming in which two or more like-minded services can survive in the long run.

The other question is: How long can Turner and GE hold out? Turner has promised to hire 40 more staffers, spend millions on promotion and initially discount what he charges cable operators so they will try his unproven service. Even Turner's own people concede that making a go of the CNN Financial Network would require five years and $50 to $75 million in losses.

In contrast, GE has pockets deeper than any player in the media world. More important for GE is the fact that the long run profitability of CNN has depended on special events. In 1995 CNN looks hot, with ratings spiked up by the O.J. Simpson trial. Projections for 1995 revenues, including subscriber fees from cable systems as well as advertising dollars, are expected to climb to $750 million, a double-digit increase over 1994.

But before O.J., CNN's ratings were down 25 percent from 1993, a year with no Persian Gulf War, no presidential election, no "trial of the century." This would not foreshadow GE's CNN clone becoming, in the long run, a money-making machine.

Whatever the outcome, the fight will certainly be worth watching. l

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