Prospects Look Good for CNN, Analysts Say
Cable News Network and CNN Headline News have for the first time ended a year in the black, and analysts say the operation has a healthy future.
Turner Broadcasting System Inc. announced this week that its CNN and CNN Headline News units combined for an operating profit of $18.8 million on revenues of $126.6 million in 1985.
In 1984, the 24-hour news services had an operating loss of $15.3 million on revenues of $88.3 million.
CNN, launched in 1980, has confronted several financial crises.
It faced competition about three years ago from the Satellite News Channel, a project of ABC and the Westinghouse Electric Corp. At the time, according to CNN Executive Vice President Ed Turner, CNN was about to gain financial stability.
Turner Broadcasting weathered that storm by buying out Satellite News for $25 million and taking it off the air. But the battle cost more than $100 million.
“With that episode behind us, there has been a sense of moving full speed ahead,” said Turner, who is not related to Turner Broadcasting Chairman Ted Turner.
When Ted Turner was trying to raise money last year for his acquisition of MGM/UA Entertainment Co., he considered selling a portion of CNN. Potential buyers included NBC, Time Inc. and Gannett Co.
Turner Broadcasting rejected a $250 million offer for 51% of CNN from NBC because Ted Turner refused to relinquish editorial control and because he felt the offer was too low.
Turner Broadcasting had said CNN was worth at least $600 million.
“A lot of people chuckled when Turner said that CNN was worth that much money,” said Lee Wilder, an analyst with Robinson-Humphrey Co. “But with the operating profits CNN reported this year, and the potential for greater results next year, people aren’t laughing at that figure as much.”
NBC also considered launching its own cable network to take advantage of some discontent among cable operators over TBS’ decision to increase CNN’s subscriber fees, but the network couldn’t get enough subscriber guarantees from cable operators.
“Without a threat of competition from NBC, CNN looks very strong,” said Anthony Hoffman, a New York-based investment banker. “With long-term agreements from major cable operators, CNN is positioned very, very well.”