Time Warner’s (NYSE:TWX) CNN, which was once the first news channel to provide 24-hour news coverage, has been lately struggling for viewership against its rivals such as Fox News of News Corp. (NASDAQ:NWS) and MSNBC of Comcast (NASDAQ:CMCSA). As a result, it has looked towards some digital acquisitions to capitalize on the Internet audience. Back in 2011, CNN acquired Zite – an iPad app that allows users to customize their news feed and create a personalized magazine experience. Although the acquisition was minuscule compared to CNN’s business value, the intent was reasonable. With the same intent of capturing the web audience and understanding their viewing and reading habits, CNN may be in talks with the social media news blog mashable.com to acquire it. [1]
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CNN constitutes about 6.5% to our estimated $40.2 billion value for Time Warner and makes it roughly a business worth $2.6 billion. The acquisition of Mashable is likely to be very small compared to the size of CNN and perhaps won’t move the needle at all for the news channel. It is likely to be just another brick in the wall that CNN is trying to build. The consumer viewing is shifting to the Internet and capturing some valuable sources in advance could help it build a relatively stronger base for the future.
In terms of business metrics, CNN will have a higher proportion of the total viewership, increased monetization opportunities due to higher viewership and a better hedge against the trend of viewers shifting from the TV to Internet.
Our price estimate for Time Warner stands at $40.20, implying a premium of little over 10% to the market price.
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Notes:- CNN Is Said to Be in Talks to Acquire Mashable, The New York Times, Mar 12 2012 [↩]
