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The New York Times “Daisy” subscription model was a key part of my presentation to Burda Media last week. So, it is notable that CNN is re-hiring Alex MacCallum as executive vice president of digital products and services because MacCallum “oversaw Cooking and Games, stand-alone subscription products at the New York Times as well as all other new product initiatives” between 2017 and 2021.
After the Times, MacCallum joined WarnerMedia as the General Manager of CNN+ and Global Head of Product for CNN Worldwide, a position that lasted for about 12 months and ended when Warner Bros. Discovery management decided to kill CNN+. I wrote about CNN+ back in April 2022 (“The Vibe Shift… “It’s All Happening”), arguing that it was “good, long-term business logic to begin imagining the post 24/7 linear news feed world and leveraging this moment in the marketplace to test those ideas out.” A lean start-up test “makes more sense than lumping all content together” in one app.
Warner Bros. Discovery has pursued the latter strategy, to date, and its hiring of MacCallum (who also worked under CNN CEO Mark Thompson at The New York Times) is a pivot away from/return to solving for CNN as a direct-to-consumer brand. But, New York Times management has explained to investors that Cooking and Games maps to its objective of being “more valuable to more people by helping them make the most of their lives and passions.” Similarly, NYT executive David Perpich—Publisher of The Athletic and Wirecutter—recently told The Wall Street Journal that he is “interested in the idea” of newspapers as “a bundle of information.”
The narrow question for Thompson, MacCullum and Warner Bros. Discovery is whether CNN offers anything analogous to Games and Cooking to “help them make the most of their lives and passions.” The broader question is whether CNN is a “bundle of information” that can be disassembled and reassembled into new subscriptions. This same question surfaced at ESPN and NBCUniversal’s Peacock in recent weeks. Each have different answers to these questions.
Key Takeaway
Peacock's success with an NFL Wild Card game last week suggests it has learned that the bulk of its customers’ “passions” are event-driven, but neither monthly or daily. CNN and ESPN would benefit from paying closer attention to the types of successes Peacock is finding with its streaming model.
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The NYT Daisy
I last wrote about the NYT’s Daisy—Perpich’s diagram of the NYT as a bundle of digital, retail-first, consumer-first services—in August’s “Why Disney Needs to Yahoo ESPN”. I argued Disney’s ambition for ESPN to be 100% direct-to-consumer by 2025 will not “ever happen as long as Disney is a public company and/or as long as ESPN is within Disney.” The rationale was that the corporate dynamics of management risk aversion, institutional inertia and internal politics that killed off CNN+ seem to be at play within Disney, too. Instead, ESPN would be better to pursue a path that mirrors the new, more product and digital-focused corporate cultures of The New York Times and Yahoo.
It is important to highlight here that neither The New York Times nor Yahoo offers THE answer to CNN’s, ESPN’s or any legacy media network’s struggles with consumer-first, retail-first models. That has never been my intent with these examples. There is little to no evidence that the NYT’s Daisy was always its vision or will be its business model in the future. Steve Jobs’ famous quote from his 2005 Commencement address at Stanford University—“You can't connect the dots looking forward; you can only connect them looking backwards”—does a better job of explaining the successful outcomes of both companies than anything their executives have told investors or the media.
Nor is there a “great woman” theory behind hiring MacCallum. Instead, someone like MacCallum is hired because he or she has proven they can successfully build upon insights like the one The New York Times had into Games and Cooking consumers, and then apply them more broadly within the ecosystem. The question presented by CNN—a brand whose popularity relies almost entirely on its wholesale linear channel—is that if the past is precedent, which insights have Thompson and MacCallum unearthed about how CNN helps its viewers to “make the most of their lives and passions”?
Without those, it is hard to imagine what Thompson and MacCallum plan to build. They could now be figuring out what those insights are. But, given Warner Bros. Discovery’s inclination for dealmaking, it is not clear how much time they will have to execute.
ESPN
Six months after I wrote “Why Disney Needs to Yahoo ESPN”, Disney seems inclined to do the opposite of “Yahoo-ing” ESPN. Instead, it is investing in more distribution deals—it just reached an eight year, $920 million rights deal with the NCAA—and is rumored to be in advanced talks with the NFL where ESPN takes control of NFL Media (which includes NFL Network). In turn, the NFL would receive equity in ESPN (and, a similar deal has been discussed with the MLB and the NBA). Part of the business rationale is more wholesale than retail: The New York Post’s Andrew Marchand reported that “Disney/ESPN might be able to secure better carriage arrangements for NFL Network” than the latter would on its own.
The agreement also emerged after the recent distribution deal between Disney and Charter. ESPN is guaranteed pay for 85 percent of Spectrum TV subscribers, and the deal kept all six channels in linear packages that reach around 15 million homes. Disney’s deal with Charter also subsidizes access to ESPN+ (and then later the ESPN DTC service) to subscribers in the Spectrum TV Select Plus tier at no additional fee. As I argued in September, the deal is “a more wholesale than retail outcome” for Disney’s broad streaming ambitions.
CNN is hiring talent to build something analogous to The New York Times or Yahoo platforms. But, it is not clear that it has similar customer insights. The story emerging from ESPN is that Disney has neither the talent nor the customer insights. Yet, Disney management is saddling the business with expensive rights deals—with ESPN expected to retain its NBA rights, too—as 2025 and ESPN’s “100% direct-to-consumer” timing objective fast approach. CNN’s roadmap to the future invites reasonable questions, and ESPN’s invites reasonable doubts.
On The Flip Side, Peacock
After last week’s NFL Wild Card game between the Miami Dolphins and Kansas City Chiefs, the market perception is that NBCUniversal’s Peacock has these types of customer insights and is successfully building upon them. NBCU reported the game averaged 23 million total viewers across its linear and streaming platforms, and Nielsen reported the game reached 27.6 million viewers overall. NBCU also shared that the game drove “the Internet to its largest U.S. usage ever on a single day and the largest Internet event ever, consuming 30 percent of Internet traffic during the game.”
I think this perception would be true if Peacock is evolving into a more sophisticated application. It is effectively the same interface and as it was a year ago and perhaps longer. So, there is no user-facing explanation for this data. As of Q2 2023 the app still had a high churn rate (7%+). Instead, I think the data reinforces last October’s essay “Reconsidering Streaming's Subscription Models”. I argued that NBCUniversal's success with Premium Video-On-Demand (PVOD) and TV Everywhere models seem like better solutions to consumer churn in streaming than a monthly subscription model. Peacock did extraordinarily well with an event while it has struggled to climb past 30 million subscribers.
There is a case to be made that NBCUniversal has learned that the bulk of its customers’ “passions” are event-driven, but neither monthly or daily. These data points should inevitably direct them down a different path from Netflix’s model. CNN and ESPN would benefit from paying closer attention to the types of successes Peacock is finding with its streaming model.