In the Room: CNN+’s Chronicle of a Death Foretold

Happy Friday, I'm Dylan Byers.

You're reading In The Room, my biweekly private email on the intrigue and inside story behind what’s going on in the media industry.

In today’s column, the backstory on CNN+'s demise, Jason Kilar's defiance, and what David Zaslav's latest move tells us about the future of Warner Bros. Discovery.

CNN+’s Chronicle of a Death Foretold

Months before the deal closed, Discovery executives made it clear to both AT&T chief John Stankey and WarnerMedia chief Jason Kilar that they had questions and doubts about CNN+'s strategy, its cost, and the product itself.

DYLAN BYERS

David Zaslav has spent the last year aggressively rebranding himself. A Patagonia-vested, GE-trained “cable cowboy,” brought up under the tutelage of “Neutron” Jack Welch and Bob Wright and John Malone, Zaslav has long focused on keeping costs low and content cheap—a strategy that coincidentally made him the highest-paid media executive in the business despite a portfolio of assets that many of his competitors privately describe as mediocre. But after engineering the deal of the decade and putting himself at the helm of a combined WarnerMedia-Discovery, with control over the illustrious HBO and Warner Bros., Zaslav has recast himself in a new light: The Hollywood Mogul, on a level with the likes of Bob Iger.

Ensconced in the Elizabeth Taylor Suite at the Beverly Hills Hotel while awaiting the remodel of his newly acquired Robert Evans estate, Zaslav took meetings with everyone who was anyone in the business and signaled a profound respect and admiration for creatives and talent. He posed for glowing profiles in Vanity Fair and Variety—the latter poolside at the suite, with multiple blazer ensembles and no vest—and spoke about the importance of restoring the luster of the storied Warner Bros. studio while creating a streaming service that could compete with Netflix and Disney. And Hollywood was receptive: On the whole, the industry's executives, creatives, and agents respect and admire Zaslav; the people I talk to describe him as a gutsy, no-nonsense leader; and they have been bullish on his new company from the start.

And yet no goodwill listening tour and no amount of puff pieces can change the fact that one of Zaslav's first objectives at his newly established media empire is to do what he has long done so well, which is to cut costs and find efficiencies. Warner Bros. Discovery has $55 billion in debt and Zaslav has promised $3 billion in cost synergies from the merger. That means that turning Warner Bros. Discovery into a Hollywood powerhouse will require a lot of job losses and a lot of pain. And if you go back through the year's worth of clips from Zaslav's rebranding tour and read the tea leaves, you can tell that Zaslav's first target was always going to be CNN+, the three-week-old streaming service that will die next week, well before anyone ever gets the chance to see if it might have taken flight.

The Full Bouquet

The blame game for CNN+ has enveloped the media, and understandably so. Zasalv’s deputies have indicated that the Discovery team always wanted one merged streaming brand that unified all their assets. CNN executives have indicated that moving forward with CNN+, the brand’s third attempt at streaming, was already underway when the merger was announced and it would have been irresponsible to unwind it prematurely. In this he-said-she-said, both sides have invoked legal protocol as one plausible explanation for how they torched a few hundred million bucks and humiliated some smart executives and talent in the process. The laws of corporate mergers, after all, dictate that acquisitive parties don't meddle in the affairs of their new asset until it is firmly under their control.

Indeed, both Discovery and AT&T, WarnerMedia's parent company, were particularly cautious in this regard, sources with knowledge of their limited and heavily-lawyered discussions told me. And yet months before the deal closed, Discovery executives made it clear to both AT&T chief John Stankey and WarnerMedia chief Jason Kilar that they had questions and doubts about CNN+'s strategy, its cost and the product itself. They also voiced a frustration, according to people familiar with the conversation: Why had Kilar proceeded with an annual investment of $350 million in CNN+ after the merger was agreed to in May 2021? Coupled with the $90 million that CNN had already invested in its streaming service, the move stood to saddle Zaslav and his team with nearly half a billion in debt beyond what it already owed.

Zaslav showed some of his concern publicly. In addition to his team’s privately stated doubts about CNN+, nothing about Zaslav's media tour suggested that he supported the streaming plan. Buried down in that Variety profile, from December 2021, was a telling quote: “We’ve had a lot more success putting all our content together than in packaging them separately,” Zaslav said of Discovery's streaming strategy in Europe. “When we put sports, news, all of our entertainment and all of our nonfiction together in some markets, we have found lower churn and higher growth.” In all his public statements about the combined strength of HBO Max and Discovery+, as well as his statements of support for CNN, he never once touted CNN+—though he and other Discovery execs repeatedly spoke about their desire to have a single streaming service that would give consumers the full “bouquet” of Warner Bros. Discovery content.

According to several WarnerMedia insiders, Kilar flatly rejected that roll-up thesis. A veteran of Amazon and Hulu, who had memorably led HBO Max’s once-controversial push into a day-and-date film release strategy, Kilar was messianic about the future of streaming and the necessity of preparing CNN for the post-linear world, sources who worked with him at WarnerMedia said. Like then-CNN President Jeff Zucker and then-CNN+ chief Andrew Morse, he believed that creating a stand-alone, direct-to-consumer news service was essential to the future of CNN itself. He didn’t see it as a mere streaming service like “NBC News Now” or “CBS News Live,” but rather as a digital platform to rival The New York Times’s own robust digital operation. He also thought Zaslav’s streaming strategy at Discovery, where Discovery+ had amassed 22 million subscribers, was a failure and thus didn’t hold Zaslav’s streaming sensibility in high regard.

In a war of dueling strategies, it stands to reason that the outgoing leadership would defer to the incoming owners. Kilar knew—and had known since May 2021—that he was going to be leaving the company at the close of the deal. And yet time and again throughout his career, including in his decision to force Zucker’s resignation in February despite all the chaos that it created at CNN, Kilar has shown himself to be stubbornly mission-driven to the very end. While Zaslav and his team were quietly signaling their desire to pump the brakes on CNN+, sources familiar with the matter said, Kilar told Zucker and Morse—and, in the final weeks, just Morse—to proceed apace for launch in Q1 2022. He seemed to believe, some said, that if he could force CNN+’s launch before the merger, it might actually get a chance to fly.

Kilar’s Moves

CNN+ launched just before the Q1 deadline, on March 30. In the days and weeks leading up to that, Kilar sent out a number of tweets stating his unequivocal support for the new streaming service—tweets that some at WarnerMedia interpreted almost as a dare to Discovery to shut it down. “Contrary to consensus opinion not long ago, I believe the data is showing that the internet has been one of the best things to ever ‘happen’ to NYT,” he wrote of the Times’s digital growth. “Excited for @CNNplus.”

On launch day, Kilar tweeted that CNN+ was “likely to be as important to the mission of CNN as the linear channel service has been these past 42 years. It would be hard to overstate how important this moment is for CNN.” He also wrote that “the launch of CNN+ marks an important mile marker for WarnerMedia” and its strategy of “going direct to consumers.” At this point, Kilar was just a month and a week away from leaving his job.

At 8 a.m. on April 11, the day that Warner Bros. Discovery launched and Zaslav officially took control of CNN, Discovery streaming chief J.B. Perrette and incoming CNN chief Chris Licht met with Morse and his deputies at CNN+ to officially review the business for the first time. By that point, the service was on its way to amassing 150,000 subscribers in its first two weeks. Morse viewed that as a success, and believed CNN would achieve its goal of reaching 2 million subscribers in the first year. Whatever Perette and Licht thought of those numbers, it did nothing to dissuade them from executing Zaslav’s plan to kill it. On Thursday, Perette and Licht announced that the service will cease operations at the end of the month. Morse would step down and leave the company.

The news hit CNN insiders hard, most notably all of the staff who had been invested in creating the product and the high-profile talent who had joined CNN+. Some, like Chris Wallace, are in talks to move their shows to CNN. Others will see their programs move to CNN Digital or different parts of the Warner Bros. Discovery empire. CNN+ staff will be given an opportunity to reapply for jobs at CNN and the broader company; those who don’t will be given nine months pay and shown the door.

More broadly, some at CNN are concerned about what this decision says about the future of the news business generally. Kilar, Zucker and Morse touted the launch of CNN+ as an essential move to ensure CNN’s existence in a post-linear world. By killing the stand-alone CNN direct-to-consumer product, some CNN insiders fear Zaslav has undermined the future of CNN itself, insofar as they believe it needs a robust digital service to stay afloat. That may be hyperbolic, given the extraordinary value of the CNN brand. What may be true, however, is that CNN is being managed into a post-cable world in which its stature, and starpower, and certainly its budget, slowly fade over a long horizon.

CNN will inevitably get another bite at the streaming apple once WBD is able to pry exclusivity of its live content from cable providers, though there are legitimate questions about how long that will take. In the meantime, Perette and Licht stress that Warner Bros. Discovery remains committed to a streaming news offering, but one that will exist as part of the company’s single, all-in streaming service.

Back in Hollywood, Zaslav’s move is being read by some as a signal about how he intends to run the larger company. If killing CNN+ saves Zaslav $350 million, the thinking goes, you still need to multiply that by nearly 10x to get his overall cost saving target, which he’ll need to achieve to move the sluggish stock price. That’s a lot of jobs, and a lot of pain. I guess that’s what the money is for.

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