Dividends and Before merger, quiet concern about CNN+

If you consider Netflix and Disney+, over the past couple of years the number of people who were subscribers jumped Kobland the stock increased. Streaming services need lots of people to pay the annual subscription and wonderful shows and movies for people to watch. The more people who subscribe makes every other organization in the business want to copy them.

In the entertainment business, you see copies all the time, if a particular type of movie makes a lot of money, the first. instance is not we need more quality movies similar to the first but we need more movies of the same theme and we need it now. Movie goes are used to A, B, C quality movies.

In an article by John Koblin, Michael M Grynbaum and Benjamin Mullin of the New York Times News Service , the people who run CNN watched Netflix and Disney+ and given the fact that AT&T owned the company called WarnerMedia, there was excessive cash to copy and have big plans. The head of CNN was Jeff Zucker and he wanted CNN to do something similar. The financials of people paying a subscription, because everyone in the industry wants subscription services where fees start relatively low and then can be raised every year or two. CNN+ was launched and CNN put in $300 million.

Time went on, AT&T decided to sell WarnerMedia to Discovery, the head of Discovery is David Zaslav. After buying WarnerMedia Mr. Zaslav was listening to the reports on all the media assets he had bought and learnt CNN+ had 10,000 viewers. What to do?

CNN+ had a large budget for advertising, it was projected to spend $1 billion over 4 years and Mr. Zucker left CNN and was replaced by Andrew Morse, CNN’s chief digital officer. Plans were made and CNN+ was allowed to continue and soon Mr. Morse had secured 150,000 paying subscribers through connection into the Discovery Warner assets.

Mr. Zaslav and his team were not convinced CNN+ would make money and put the plug.

Linking to dividend paying stocks, it is not unusual for new divisions to fail. Just because the company has great assets, it does not mean the new services will be a success. What is important is the great assets have wonderful margins and the company can make profits. Often times it is important to see what failures were made and how did the company deal with them. The answer of no to capital allocation is sometimes equally important to spending money. What is the line that more money is not the answer?

There are more questions than answers, till the next time – to raising questions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s