Fundamentally, this problem has been with CNN almost from the get-go. Here’s an excerpt from my book, Covering America, about the founding of CNN and its basic business problem.
. . .By approaching cable news this way, [CNN founder Ted] Turner was coincidentally creating a new business model for TV journalism. Unlike the networks, CNN did not plan to build a huge entertainment division that would have to create or bid for programs. And unlike public television, CNN was not dependent on public subsidies, foundation grants, or donations from the audience. Instead, Turner was adapting an older business model from newspapers. In the CNN approach, TV news would be paid for through a “dual revenue stream.” Just as newspapers made money from two sources—advertising and subscriptions—so would CNN. The company would sell ads, and it would also have a steady stream of revenue coming in from the cable operators, who had to pay CNN a few pennies per customer per month, reflecting CNN’s share of the monthly cable TV bills that Americans were getting used to paying. With low costs and two fairly reliable streams of revenue, news on cable just might work.
Ready or not, on June 1, 1980, CNN made its debut. There were the inevitable mishaps (the cleaning lady who walked across the set behind the anchor while the cameras were rolling), but the impressive thing was that it worked. CNN started covering the news that day and has done so continuously ever since—days, nights, weekends, holidays. Only the AP could make a similar claim, (though it supplies news to the industry rather than directly to the public). Soon, Turner was showing the skeptics that it was in fact possible to put news on television round the clock. Yes, it was sometimes raggedy. And yes, there was a lot still to accomplish—including hammering out reciprocal video-sharing agreements with affiliates, hiring more and more staff, opening bureaus around the world. But it worked.
By the end of 1981, CNN was getting established. It was reaching 10 million households and was clawing its way to journalistic parity with the network news divisions.18 One key issue was what is known as “pool coverage.” This occurs in many settings when there is not enough room to accommodate all the media people who wish to cover some location or event, such as a courtroom, a presidential appearance with limited access, or the like. In those cases, the answer is a pool, in which all the journalists in each medium agree to cooperate. Typically, each medium gets to put one representative at the scene. In return for that access, the chosen journalist agrees to share the results with all the other members of the pool in the same medium. In addition, each member of the pool agrees to take a turn in providing the feed. This arrangement assumes, of course, that anyone participating in the pool will produce work of high enough quality to satisfy all the others. CNN was originally scorned by the networks, which refused to let CNN crews participate in the White House television pool coverage. It took a lawsuit (which cost Turner another $1 million), but eventually CNN was allowed in.
One of the early tests of CNN as a news organization came on March 30, 1981. President Reagan gave a speech that day to the AFL-CIO at the Washington Hilton. CNN covered the speech live and then, when it was over, switched to some filler material, about sewing in China. While that was airing, the police scanner in CNN’s Washington bureau barked: “Shots fired . . . Hilton Hotel.” Almost immediately, the veteran newscaster Bernard Shaw sat down in the anchor chair in the CNN Washington bureau and began reporting that shots had been fired at the president—a full four minutes before the networks. Shaw stayed in the chair for more than seven hours, and, with help from Dan Schorr, proved that the fledgling news service could keep up with the established networks. Through the evening, CNN kept breaking in with new details: a picture of the shooter’s home, a report on his motive, pictures of the vice president in Texas heading to Washington. According to one account of that day: “Such details were hitting the air in no particular sequence. CNN’s viewers got the story in the jumbled way a journalist receives fragments of information before transforming them into an orderly, polished report. The ‘process’ of gathering news determined the form in which that news was delivered.” Before CNN, viewers had received their news in measured doses at fixed times; now they were drinking straight from the fire hose.
For years, CNN cost more to produce than it brought in through the combined revenues of cable subscriptions and advertising. The network was burning through Ted Turner’s personal wealth at an unsustainable rate. The early years were a desperate race to get CNN included in enough viewers’ basic cable packages to pay for itself. Most of the costs of gathering and disseminating the news by cable were fixed; the great variable was the size of the audience. Beginning in 1978, from the pre-launch investments in people, property, satellite time, and equipment, CNN lost an estimated $77 million through 1984.20 But then in 1985, CNN began posting profits: $20 million that year and more in the coming years. In the grow-or-die spirit of modern capitalism, Turner soon started thinking about acquiring other businesses. At the same time, a profitable CNN was looking more attractive to other investors, who might try to take it over. By the end of the decade, CNN was earning almost $90 million a year and had an estimated value of $1.5 billion. At the decade mark, on June 1, 1990, it could be seen in 53 million homes in the United States and in eighty-four countries worldwide. CNN had nine U.S. bureaus and another eighteen overseas, with a global total of some 1,800 employees. CNN had arrived. . .