When Chris Licht became chairman and chief executive of CNN, back in May, his boss David Zaslav asked him to conduct a six-month review of the 4,500-person global news business. During the early months of that review, Licht would repeatedly tell members of his staff that the broad cost-cutting effort that was taking place across Warner Bros. Discovery would not result in layoffs at CNN. The parent company had more than $50 billion in debt, of course, and Zaz had promised to identify at least $3 billion in cost-cutting synergies across his new media empire, but Licht repeatedly assured staff that CNN would be spared: “As it relates to CNN, there are no layoffs per se,” Licht said at one staff-wide event in June. “A lay off is a downsizing, where you are given a target, and that is not happening at CNN.”
During the course of the review, however, Zaslav and his C.F.O. Gunnar Wiedenfelds asked Licht to engage in a hypothetical financial engineering exercise, sources with direct knowledge of the matter told me. If he were to cut costs at the company, how would he manage to achieve savings? Over time, the target number that Zaz and Gunnar were asking for became larger, and the exercise became less hypothetical. Then, last month, staring down the barrel of a recession and another disappointing earnings report, Zaz and Gunnar gave Licht a direct order: he needed to cut $100 million from CNN’s budget. Zaz’s team might argue that such an edict is financially responsible amid the current economic environment, but it is nevertheless significant. The figure, which CNN representatives declined to comment on, likely translates to almost 10 percent of CNN’s overall budget, sources familiar with the financials told me.
This extraordinary exercise in cost-cutting, of course, mirrors the industry recognition of various secular business challenges: a brewing recession, the decline of cable and linear, and emergent consumer behaviors. As I reported this week, Comcast/NBCUniversal will endure its own round of layoffs and cost cuts in the weeks ahead. The media is enduring a head-spinning transformation in which the largest players are seeing their market capitalizations slashed in half and the most exciting new company vectors up to the CCP. And Zaz and Gunnar aren’t asking Licht to do anything that they aren’t doing themselves: after all, as my Puck partner Matt Belloni noted yesterday, Zaz has already upped his target for synergies from $3 billion to $3.5 billion.
Licht, who entered CNN as an agent of change, appears to have already dug into the assignment. He has significantly reduced the budget for CNN’s original films and series division, and eliminated the business’s ability to make acquisitions or license outside production—a move that could get him about halfway toward his target. He has also asked CNN’s divisional leaders to identify jobs, shows, and other investments that could be cut, sources familiar with the matter told me. Those proposals were turned in this week and are now under review.
The full extent of the impending layoffs are still unknown, but it is likely that hundreds of employees will lose their jobs in order to hit the target. CNN’s chief financial officer Neil Chugani resigned this week, as I reported Thursday. In a memo to staff, Gunnar said Chugani resigned because he did not want to relocate his family from London.
The Webex Era
Meanwhile, Gunnar this week sent a memo to WBD’s top financial officers to “absolutely” stop all non-discretionary spending for the rest of the year. In accordance, Licht has suspended all anchor and correspondent travel that is not related to breaking news. Michael Bass, CNN’s executive vice president of newsgathering, wrote in a memo this week there would be “no more travel for any enterprise pieces and no anchor travel,” and no booking of outside studios. “All remote interviews should be done on Webex,” he wrote, referring to the videoconferencing service, and the network should not pay for travel for guests and contributors, a drastic departure that reminded some media insiders of the days when Condé Nast replaced town car vouchers with MetroCard flex accounts.
Inside CNN, there is a great deal of uncertainty about what the organization will look like on the other side of this transition. The cuts will touch every aspect of CNN’s business, including programming, newsgathering and digital. Well-placed sources said the cuts are also likely to take a significant toll on CNN International, including the elimination of certain shows that may be replaced by a simulcast of CNN’s domestic feed. It is possible that HLN, CNN’s sister channel, will be hit hard, perhaps even eliminated entirely. CNN may also scale back its investment in its Spanish-language business, CNN en Español; the lease on its Miami headquarters is coming to an end, and there are widespread fears there that the company will choose not to renew. (CNN spokespeople declined to comment, and would not answer when asked if HLN or CNN en Español would be eliminated.)
The long-term picture is even more bleak. In Warner Bros. Discovery’s earnings call this week, Gunnar said that the company was on track to realize $750 million in synergies this year, with an incremental $2 billion in 2023. That means CNN, like the other WBD divisions, will likely have to endure even more cost-cutting next year. As one veteran media executive put it, “based on that math, next year could be 166 percent worse.” The executive added: “When you get to that level of cutting, there’s no more fat. It’s muscle and bone. And it really really hurts.”
As I noted earlier this week, Licht has engendered more than his fair share of animosity since taking over for Jeff Zucker earlier this year, plenty of it fair, some of it unfair. And yet while many armchair economists could have predicted the decline of cable and an advertising slowdown, the speed of CNN’s transformation has been truly astonishing, especially to those inside the building. When he first arrived in Hudson Yards, many in the building wondered why Licht took so long to articulate his strategic plan, beyond some protestations about toning down chyrons and maybe mixing up a couple hours of programming. Perhaps this is why.
This article has been updated.
