CNN Tries to Regroup After Squandering Lead

Cable News Network's stranglehold on the 24-hour news niche was its to lose, and it has lost it. Now CNN is retrenching to get that lead back.

Dogged by a pack of scrappy rivals that have carved into its audience, CNN instituted a massive reorganization last week. The changes sent Rick Kaplan packing-after enduring a rocky three-year tenure as president of CNN/U.S.-and removed some responsibilities from CNN News Group chairman Tom Johnson.

Overall, CNN's management realignment was designed to tackle two elusive goals. The first is to take yet another stab at ending the double-digit ratings free fall at crown jewel CNN. Second, the company is repositioning so it can aggressively pursue the media-convergence gold mine, from the Internet to digital to new distribution platforms.

But there are no easy fixes for CNN. Just ask Kaplan, the respected and Emmy Award-winning ABC News veteran whose exit from CNN wasn't even noted in the company's press release about its reorganization last Wednesday.

As for convergence and digital, there is good reason to court that business, which includes providing content for broadband and wireless devices. Success and growth in that new-media arena could help to offset the problems plaguing CNN's core analog cable channel, with its traditional TV programming.

It's no coincidence that last week's realignment was orchestrated by Terry McGuirk, chairman and CEO of Turner Broadcasting System Inc. Convergence is a priority for CNN now that its parent, Time Warner Inc., is about to be married to America Online Inc. McGuirk will soon be reporting to AOL president Bob Pittman.

"McGuirk wants his house in order before the merger takes place," one Turner insider said.

McGuirk knows the potential bounty of new media. In the past, he has boasted to the press about how quickly profits can be turned on cable-network Web sites, with money coming in from electronic commerce, licensing and ad sales.

In fact, some observers have said that the only factor that has rescued CNNfn-which has struggled to gain distribution-from an early demise is its profitable Web site.

As the dust settled last week, the anointed rising star was Philip Kent, the former chief of CNN's international business, who was promoted to the newly created post of president and chief operating officer of CNN News Group.

"He's a leader and someone who can get people to sit down and work together, a consensus builder," the Turner official said. "It's a time when there is not room for any obstructionists."

Kent will report to Johnson on editorial matters and to TBS Inc. president Steven Heyer on business and operating issues, which were formerly under Johnson.

The Turner source said Kaplan was done in by a combination of factors, including CNN's dramatic ratings decline, the "Operation Tailwind" fiasco and his difficult personality.

Although nearly every news channel has had a tough time during this slow news year, CNN's ratings performance has been particularly disastrous.

In the second quarter, CNN posted a 0.6 in primetime, or 432,000 homes, down a whopping 33 percent from the year-ago period's 0.9 rating, or 664,000 homes, according to Nielsen Media Research data supplied by Turner.

In July 1997, less than one month before Kaplan joined CNN, it was doing a 1.0 rating in primetime, or 680,000 homes. Three years later, this July, CNN was down to a 0.5, or 403,000 households.

And in a particularly stinging defeat last December, Fox News Channel actually beat once-mighty CNN one night with its Dec. 2 GOP presidential candidates' debate. FNC secured a 1.9 rating or 853,000 homes, versus CNN's 0.6 rating, or 502,000 households, that night.

Kaplan's effort to create appointment viewing to tide CNN over in slow news periods kicked off with newsmagazine CNN NewsStand. It debuted with the "Tailwind" story, a journalistic fiasco that CNN was forced to retract, prompting a public mea culpa from Time Warner vice chairman Ted Turner himself.

In addition, Kaplan clashed with Moneyline News Hour with Lou Dobbs anchor and executive Dobbs, prompting Dobbs to jump ship a year ago and putting more wind in CNBC's sails.

Today, CNN flagship Moneyline has lost audience, and it now lags behind CNBC's Business Center. Year to date through Aug. 20, Moneyline is doing a 0.3 rating, or 238,000 homes, versus Business Center's 0.4, or 269,000 homes, according to Nielsen.

In a prepared statement last week, Kaplan said he had been offered a chance to stay at Turner, "But I believe it is best that I now move on."

In several press reports, however, Kaplan said he was totally surprised when McGuirk called him last Tuesday to show him the new organizational structure. Kaplan said he noticed that he didn't have a place on the chart.

CNN's ratings plummet has not gone unnoticed by cable operators. They will remember it when the network comes in for contract renewals, which typically include license-fee increases.

"When contracts are renewed, you have to take a hard look at the performance of the ratings," said Jerry McKenna, vice president of strategic marketing at Cable One Inc. "Consumers are losing some of their interest in CNN. That affects our customers. CNN is still not able to bring people to the network on a regular basis."

The Turner insider conceded, "CNN needs to get closer to the consumer."

Frank Hughes, senior vice president of programming at the National Cable Television Cooperative, pointed out that ratings are one of the factors discussed when programmers negotiate deals. Networks with growing ratings use that to seek higher rates, while operators cite rating decreases as an argument against license-fee increases.

"It has an impact whenever you do contract renewals," Hughes added.

CNN's critics complained that it failed to take upstart competitors such as FNC, MSNBC and CNBC seriously, laying the foundation for its own woes.

"CNN has not responded to the competition," said Kathy Haesele, senior vice president and executive director of broadcast at Advanswers Media Inc. "They seem to think they're immune, above the fray. Apparently, they're not."

Bill Croasdale, who is working for the office of the chairman at Western Initiative Media Worldwide, added, "Kaplan is an outstanding news producer, but he just got caught up in the fact that there is now competition out there. Can it be fixed? It's still the premiere news network. But you're only as good as your last ratings book."

John Quarderer, vice president at media consultant Frank N. Magid Associates, maintained that CNN not only blurred its brand under Kaplan by doing non-hard-news "appointment" shows, but it cannibalized its own niche with spinoffs such as CNNfn and CNN/SI.

"At one time, CNN was the only network with 'news' in its name," Quarderer said. "But now it's not automatic that you go there, to CNN, first. You've also got a growing cadre of local 24-hour news channels."

Al Primo, a veteran TV-news consultant based in Old Greenwich, Conn., said it's possible to turn CNN's situation around. He faced a similar challenge years ago when he created the Eyewitness News format and revived the news operation at the ABC Inc.-owned station in New York, WABC-TV.

"Lou Dobbs single-handedly made Moneyline into a powerhouse," Primo said. "When he left, there was big-league trouble. All the news, all the time should be the appointment viewing at CNN. The audience still looks to CNN as the leader, and it has great expectations. You have to tap into that base."

Primo suggested that CNN needs to build a family of higher-profile talent beyond just Larry King-something Kaplan was trying to do with hires like Jeff Greenfield-and then promote them as a team. That's a strategy that has served FNC well, with its primetime talk shows.

"[FNC CEO] Roger Ailes has done a marvelous job coming from nothing," Primo said. "He wisely selected talent who were able to cross-promote their shows on radio. It's cross-pollination."

Kaplan's former duties as president of CNN/U.S. will essentially be assumed for the time being by Sid Bedingfield, executive vice president of CNN, until his permanent successor is named.

Under the reorganization, Eason Jordan, most recently president of newsgathering and international networks, will take the new title of president of newsgathering and chief news executive for CNN News Group.

Jim Walton, most recently president of CNN/SI, will assume the presidency of CNN Networks/ USA, responsible for 15 CNN domestic networks and Web sites.

Chris Cramer, formerly president of CNN International, has been promoted to president of CNN Networks/International.

McGuirk and Johnson weren't available for comment last week. But Jordan said CNN's restructuring is the result of off-site meetings involving 30 CNN executives, and it is aimed at positioning CNN for the 21st century.

Jordan conceded that CNN has done a poor job marketing itself-one of Kaplan's major complaints-adding that the issue will be addressed.

"We have fallen short in the past," Jordan said. "We will do it in a more focused way than we have. We will be more competent on all of our platforms. We believe CNN can attract more viewers."