Daniel Almeida is a journalist from Sao Paulo who participated in Georgia State University‘s Maymester course, “Media, Journalism & Business in a Global Context.” Partially supported with contributions from CNN, GlobalAtlanta, the Coca-Cola Foundation and GSU-CIBER. this interdisciplinary course enrolled both business and journalism students. Now in its second year, the course is lead by professors Tamer Cavusgil and Shawn Powers.
A world map with several small dots on all continents shows a list of countries. The place is a must stop on the tour offered at the headquarters of the communications U.S. giant CNN, in Atlanta. Following the orders of the guide, the group of students from Georgia State University (GSU) is aligned in front of the panel. I play with the guide: “Brazil is missing there.” To which he promptly replies: “The map is outdated, but the Brazilian office is already in full swing.”
In times of globalization, 10 out of 10 companies follow a strategy to plant their flags in other countries so they can grow.
According to this reasoning, with 48 offices around the world, CNN is in a really comfortable situation. “One reason we are so valuable is that we cover the world. It is something we have done for over 30 years,” says Brad Ferrer, executive vice president of finance and administration for CNN Worldwide. But the numbers and information from the network executives show that it is not so.
While CNN reaches 100 million homes in the United States, the television network is seen in twice as many homes around the world. More than 200 million homes outside the U.S., CNN executives say. Yet today, only 20 percent of revenue in news comes from international. Asia, Middle East, Africa and developing countries of Eastern Europe are areas of higher viewer growth.
It is estimated that less than 5 percent of the total revenue comes from Latin America. It’s worth remembering that CNN has a strong brand for Latinos, CNÑ en Español. And, despite the call to the Spanish speaking public, CNÑ en Español also seems to have more success in the United States. Without mentioning figures, David Gomez, executive producer for CNN en Español, said the growth of the channel in 2011 was twice as high as the year before. According to him, of all 245 million Spanish speaking worldwide, 110 million are in Mexico and 52 million U.S..
Second choice
The reason CNN still has more success at home than overseas, despite being a brand so strong internationally, dates back to the history of the network.
CNN executives say that, since the company was created, there has been the notion that CNN had a strong potential to become an international brand. “Ted [Turner, CNN’s founder] wanted the Americans to be connected with world issues. That’s why he built a number of bureaus around the world, “says Scot Safon, currently executive vice president for CNN Worldwide.
For this reason, the news was first broadcast in English. The goal was to reach the best educated American, with a keen interest in global issues, the citizen of the world, with friends or relatives living abroad. Other targets were the Americans who lived outside the United States. Hence the content is composed of big issues like wars, natural disasters etc.
The years passed by and offices in other countries were emerging. Since then, major events like the Gulf War helped CNN to position itself as an international brand. All of it was masterfully translated by the tagline “Going Beyond Borders.”
But why not take advantage of the presence in other countries and capitalizing on this, starting to produce the news also in the local language?
The first reason is obvious: cost. It is infinitely cheaper to keep a small crew – usually three people, with a reporter, producer and cameraman – in a small office / studio, than having to build a truly local operation, or, in other words, larger teams, with officials including the commercial operation in that country.
The second reason comes up against the laws of those countries. In the vast majority of them, it is forbidden for foreign companies to have more than 50 percent of a local business. With that, CNN would not have the final saying on editorial decisions (what should or should not go on the air) and that would be a risk unthinkable for a company that has built its history based on credibility.
So today, CNN only produces local content in the offices of Hong Kong, London and Abu Dhabi outside the U.S., or in the studios of New York, Washington, Atlanta, Los Angeles. “The rest are just offices in which we have partnerships,” says Mr. Safon. This strategy, set back when CNN was created, puts the network TV as a second option. A channel that you will watch after you read your newspaper, broadcasted in your language. Or a channel that you will only watch if you want to know about a major world event like the Sept. 11 attacks or the Arab Spring unfoldings.
New times
This scenario, however, is about to end. As many companies born in mature markets, like the United States or Western Europe, CNN has no longer a lot of options to grow at home. “We’re kind of toped out in the U.S.. But internationally, as the markets become more mature and enriching, people have more money to spend on things like media, therefore, our distribution tends to grow,” says Mr. Ferrer.
CNN is available in more than 90 percent of households in the United States – most cable and some satellite. In other countries, the rate of penetration is much lower. This is due to the different distribution methods. In some regions, the media has not developed as much as in the U.S.. That’s what makes the opportunity to gain subscribers internationally. “So the international subscriber rates tend to be larger than domestic,” says Ferrer.
The solution to change the game, CNN executives say, will come from the Internet. Besides being a global trend, the Web requires less investment when it comes to producing local content as compared to television. The more people are connected to new technologies, the greater the possibility that there are more consumers around the world on the Internet than on TV, explains Mr. Safon.
The format is not yet clear. It may be a website, it can be a mobile app, or readers as the IPad. While the penetration of the media on TV is 100 perent, in print it is 90 percent and the Internet, 78 percent, in IPads and eReaders, this figure is only about 19 percent. This information is from K.C. Estenson, senior vice president for CNN Digital. At the same time, each click at a desktop means two page views. At tablets this rate is aboute 4. “We are moving from the Internet to mobile devices,” says Mr. Estenson. The numbers are a barometer of what is to come.
Returning to the example of Brazil – an important emerging market in which the Internet is getting ready to take second place in the share of advertising dollars still in 2012, according to survey “Global Entertaiment and Media Outlook,” from PricewaterhouseCoopers – the CNN tour guide hunch was not wrong.
“We will go anywhere where we can imagine an audience of a relevant size, which might be interested in our product. A place like Brazil would be very interesting, “says Mr. Ferrer. “We haven’t had the opportunity to enter this market yet and we are looking for a way to do this. Probably it would be in a digital platform. “
The idea is that, once this digital strategy is defined and tested in some countries such as Brazil, it can serve as a basis for the international expansion of CNN, with the profitable production of localized content. The question is whether the company will be able to finally succeed commercially overseas, as it has succeeded as an international content brand. If this happens, the visit of new students to the map located at the entrance of CNN in Atlanta, will become even more interesting.
PS: This story was written as a final project for the course “Media, Journalism and Business in a Global Context”, J. Mack Robinson College of Business – Georgia State University (GSU).
