CNN could be worth $5bn if put up for sale

2014-07-17 14:58
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83-year-old Rupert Murdoch made an offer to buy Time Warner (Shutterstock)

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New York - If Rupert Murdoch succeeds in buying Time Warner and CNN is put up for sale, the 24-hour cable news network could be worth $5bn, according to one analyst's estimate.

Gabelli & Co's Brett Harriss said CNN is worth about 11 times annual estimated earnings before interest, taxes, depreciation and amortisation (Ebitda) of $450m.

He based the valuation on recent media deals such as Discovery Communication's purchase of a controlling interest in Eurosport International and AMC Network's acquisition of Chellomedia.

Both transactions were valued at 10.5 times to 11 times Ebitda, Harriss said.

Murdoch's Twenty-First Century Fox said on Wednesday it made an offer to buy Time Warner for about $80bn. Fox has indicated it would sell Time Warner's CNN, a direct competitor of Fox News, to clear any regulatory hurdles, according to people familiar with the situation.

While Time Warner rebuffed Fox's offer, the 83-year-old Murdoch is unlikely to abandon his pursuit, the sources said.

Time Warner, which also owns pay-TV channel HBO and the Warner Bros movie studio, does not break out financial data for CNN. Time Warner did not immediately respond to a request for comment.

Harriss said that Walt Disney's ABC network, which does not have a cable news channel, could be a potential bidder for CNN. Disney did not immediately respond to a request for comment.

CBS is another possible suitor, according to people familiar with the broadcast network. Over the years, CNN and CBS have mulled some type of merger though the issue of control was always a sticking point, these people said. A CBS spokesperson declined to comment.

Founded in 1980 by media mogul Ted Turner, CNN was the first cable news network in the United States and now has more than 40 news bureaus across the globe, with distribution in more than 200 countries.

But CNN is struggling with declining ratings and advertising revenue as competition - especially from Fox News and Comcast's MSNBC - gained ground.

Jeff Zucker, the former CEO of NBC Universal, was tapped in 2012 to try to turn around CNN.

He has focused the network on developing original programming, such as celebrity chef Anthony Bourdain's "Parts Unknown" series, in addition to covering major breaking news events, such as the missing Malaysian Air plane.

Still, CNN continues to lag both Fox News and MSNBC with prime time audiences, according to the latest ratings from Nielsen.

CNN averaged 493 000 total viewers during the hours of 22:00 to 23:00, while Fox News averaged 1.7 million and MSNBC had 621 000. A decade ago, CNN's average total viewers was 802 000 during prime time.

CNN's advertising revenue, which is based on the number of viewers watching a show, fell to $319.8m in 2013 from $327.7m in 2012, according to data from SNL Kagan.

The price per subscriber a cable distributor pays CNN to carry the channel climbed to 60 cents per subscriber per month in 2013 from 58c in 2012, according to SNL Kagan.

Read more about: cnn  |  cbs  |  fox news  |  rupert murdoch  |  tech

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