With a 50% jump in prime-time audience for the quarter ended June 2013, Time Warner’s (NYSE:TWX) CNN reclaimed the runner-up slot from Comcast’s MSNBC for the first time since 2010.  The network had an average of 666,000 viewers, a dramatic rise from last June’s 21-year low figures. 
We believe the earlier decline in the network’s ratings was due to a lack of opinion based programming, which the network appears to be addressing now. This is an encouraging sign for the network, and going forward we expect the viewership to continue to grow as more opinion based programming kicks in. CNN contributes close to 8% to Time Warner’s $63 stock value. It derives more than half of its revenues from subscription, which largely depends on the network’s ratings. CNN could gain its negotiating power if it continues to grow in ratings, which would mean higher demand. This, in turn, could help it in subscription fee growth. In addition to this, growth in ratings will translate into advertising revenue growth.
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Issue With CNN’s Ratings
Despite maintaining its standard in bringing the latest news coverage promptly, CNN has suffered a viewership decline in recent years. It appears that the relative lack of opinion-based programming is one of the reasons why the network hasn’t done as well as News Corp’s (NASDAQ:NWS) Fox News.
Pew Research Center conducted a survey, which concluded that MSNBC and Fox News are focused on opinion-based programming. According to the research, 85% of MSNBC’s programming is opinion-based while the same figure for Fox News stands at around 55%. In comparison, CNN mostly focused on news coverage rather than commentary.  We continue to believe that the network needs to increase meaningful opinion-based programming by bringing in popular hosts and experts who can stimulate viewers’ thinking and keep them engaged and shows like The N Word are steps in right direction.
CNN Ratings Surge
CNN witnessed a surge in ratings in the latest quarter ended June 2013. In terms of total viewership, the network was up by equal measures in both total day and primetime while in the key demo of 25-54, its viewership jumped 77%.  However, after the major breaking news events – the Boston Marathon bombing, Oklahoma tornadoes and the Jodi Arias trial had passed, June saw the network slip to its lowest viewership.  CNN’s July 1 telecast of The N Word helped the last week’s ratings surge by a whopping 90% in the news demo of adults 25-54 and nearly 60% among viewers of all ages. An average of 612,000 people watched the telecast of The N Word, which was significantly higher than the network’s average viewership of 388,000 in the previous four weeks. 
Our current price estimate for Time Warner stands at $62, implying a premium of about 5% to the market price.Notes:
- MSNBC’s Ratings Still Dropping While Fox News, CNN, HLN Enjoy Second-Quarter Boost, Newsbusters, Jul 4, 2013 [↩] [↩]
- CNN Sinks To 21-Year Primetime Ratings Low In Second Quarter, Deadline, Jun 26, 2012 [↩]
- Why CNN could use more angry talking heads, The Week, March 18 2013 [↩]
- TV Ratings: MSNBC Suffers Worst Quarter Since 2007, Piers Morgan Drops on CNN, Hollywood Reporter, Jul 2, 2013 [↩]
- ‘The N Word’ Special Boosts CNN Ratings By 90%, Deadline, Jul 2, 2013 [↩]