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Failure of Black News Channel, CNN+ shows need for adaptable journalism business models

May 26, 2022

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BNC CEO, Princell Hair

New journalism businesses aspiring to greatness can’t rely on the playbooks of their 20th Century forerunners – they have to be more nimble and innovative, according to experts. And that’s just for starters.

Those qualities have to be supported by a top-notch business model. Just ask individuals affiliated with the two latest ventures to close their doors: CNN+ and the Black News Channel, or BNC.

Each ceased operations in their infancy. BNC announced its closure on March 25 – two years after its initial start date – and then filed bankruptcy saying the company was between $10 million to $50 million in debt. BNC Chief Executive Officer Princell Hair cited financial problems as the reason for the closure, in a memo reported by the Los Angeles Times. CNN+ closed its doors on April 30, only a month after it launched. The venture was caught up in a merger between parent company Warner Bros. and Discovery. Prior to the merger, CNN had already invested “tens of millions of dollars” in the subscription-based streaming service, according to the New York Times. CNN was planning to invest about $1 billion for CNN+ over the next four years, according to Axios Media Trends.

Sustainable journalism is difficult to obtain

“We have not yet solved the business model for successful, sustainable journalism,” said Mi-Ai Parrish, a professor who leads Arizona State University Media Enterprise at the Walter Cronkite School of Journalism and Mass Communication. “There has not yet been a truly sustainable model … nothing that truly replaces subscriptions and advertising.”

Mi-Ai Parrish, ASU professor

Parrish worked as president and publisher of The Arizona Republic/AZ Central.com. Her words echo the sentiments of various industry leaders. Lion Publishers, an independent publishing company, audited various news businesses and found layers of issues surrounding revenue models.

“In the long run, our theory is that sustainability for independent news businesses exists at the intersection of operational resilience, financial health and journalistic impact and foundational weaknesses in any one of these areas can cause the entire operation (at best) to underperform or (at worst) fall apart,” according to Lion Publishers’s study.

BNC, for example, shut down just days after reaching its biggest audience, according to Fortune Magazine and Hair’s final memo to employees. The media outlet published live coverage of the judiciary committee hearing for then U.S. Supreme Court Justice nominee Ketanji Brown Jackson. It shut down prior to meeting its last payroll.

In Hair’s memo, originally published by the Los Angeles Times, he said: “Unfortunately, due to challenging market conditions and global financial pressures, we have been unable to meet our financial goals, and the timeline afforded to us has run out.”

Hair explained that there were more than 250 Black journalists and Black production personnel. According to employees and various media reports, the company had three rounds of layoffs. One round started late last December. One former employee, who preferred not to be named because of her current job search, was asked to come back to BNC three times after being laid off. She said employees at the Tallahassee, Florida, site “heard rumblings” of closure. She added that she had worked with other startups. BNC, however, appeared to spend more money than others.

“We tried to walk before we crawled,” she said describing the financial steps the company took.

A journal article on media startups by Matthew Chew and Edson C. Tandoc Jr., said that the new companies should be willing to start off offering “low pay, no bonuses” and “you need to sell your soul.” Individuals interviewed for the study added that being a media startup “is not just about infusing journalism with technology, but also adopting an entrepreneurial disposition.”

Independent organizations have flexibility to adapt their business model

According to Axios, about 350 of the 700 people that worked for CNN+ would be laid off with pay and benefits up until July 30. Employees that do not find a job within CNN will receive about six months’ severance.

Source: CNN

“While today’s decision is incredibly difficult, it is the right one for the long-term success of CNN,” Chris Licht, chairman and CEO of CNN, said by news release. “It allows us to refocus resources on the core products that drive our singular focus: further enhancing CNN’s journalism and its reputation as a global news leader.”

Regardless of the illustrations offered by CNN+ and BNC, Parrish believes sustainability is still possible for new media startups. She serves on the board of directors for the independent, nonprofit news site The 19th. Independent news organizations don’t have the same hindrances as commercial settings. When the business climate fluctuates, she said, an independent news organization has more flexibility to adapt. She cited current events surrounding Netflix – an entertainment streaming service – as an example of an organization with less flexibility.

Netflix lost 200,000 subscribers in the first quarter of 2022. It was the first subscription decrease by the streamer in more than a decade, according to reports. The company’s leaders cut 2% of their workforce or 150 full-time employees and 70 part-time employees.

“It’s much more difficult to innovate in those environments,” Parrish said about the subscription-based, commercial environment.

The 19th, she added, is able to set up newsroom operations and revenue streams that align with the company’s values. With those values in mind, they are able to take the focus off of dollars and cents as the only means of success.

“When you do things like that, it’s easier to fundraise. There are ways to make (the business) more sustainable. You find creative ways, creative partners,” Parrish said. As an independent, you can adapt to the climate from the people you’re covering. It’s harder in a commercial environment.”

The Journalism, Media and Technology Trends and Predictions study by Nic Newman described how publishers with traditional media organizations expect to manage their revenue models in 2022.

“Publishers say that, on average, three or four different revenue streams will be important or very important this year. Almost three in ten (29%) expect to get significant revenue from tech platforms for content licensing or innovation, with 15% looking to philanthropic funds and foundations – both up on last year. Others are hoping to restart events businesses that stalled during the COVID-19 crisis,” Newman’s study said.

Publishers surveyed cite that subscriptions and display advertising continue to be the wellsprings of revenue. Other revenue streams included native advertising, events, E-commerce, funding from platforms, donations or crowdfunding, related businesses, philanthropic foundations, or micropayments, according to Newman’s study.

Parrish offered advice for all startups.

“Work the business model in advance. Having a great idea, with a great audience, will not get you business success,” she said.

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