Why Time Warner May Jettison CNN Before Any AT&T Merger

CNN’s thinly veiled threat against an as-of-yet private citizen for criticizing the network in an internet meme is one of the more bizarre and arguably puerile moves a large media organization has made in recent memory. Never mind the moral issues behind conditionally revealing the identity of a meme-creator CNN finds objectionable. From a pure business perspective, this was a severe miscalculation. CNN obviously wanted to silence criticism against it, and now anti-CNN memes are coming out of the internet woodwork overnight in response to CNN’s ham-handed move.

This whole controversy couldn’t have come at a more awkward time, given the proposed takeover of CNN parent company Time Warner Inc. (NYSE: TWX) by AT&T Inc. (NYSE: T). The question used to be: Will president of CNN Jeff Zucker survive a merger? The question now is whether CNN itself will be a part of the deal between the two corporate giants? The answer is not so clear.

According to Pew Research, CNN took in about $1.2 billion in revenues in 2016. That’s just 10% of Time Warner’s Turner segment revenues, and just over 4% of Time Warner’s 2016 entire top line. A merger with AT&T would put that number at an even lower 0.6% of total revenues for the merged entity, considering AT&T’s 2016 revenues. Is 0.6% of what would be the combined entity’s top line worth it for the liability of taking in a brand that is now under constant attack on the internet?

If AT&T takes CNN under its wing, it could be exposing itself to the internet PR attack now being levied against the news organization. Of course the internet backlash may calm down by the time a deal goes through, but even so, acquiring CNN and its miniscule revenues relative to the merged company may not be worth the risk for AT&T, especially while the Trump administration, CNN’s avowed enemy, remains in office. Consider that CNN was already coming under attack, and still is, by James O’Keefe’s Project Veritas, which has been releasing new undercover video every few days now of CNN executives and talking heads making embarrassing statements about what goes on behind closed doors.

While it may not be over for CNN entirely, and the news agency can still recover, it may not end up being part of the merger deal. AT&T may demand that Turner jettison CNN before the $85 billion merger takes place. That would put CNN on its own, for better or for worse, but also put AT&T in a much safer position for its consumer-oriented businesses as not subject to attack from those seeking vigilante online vengeance.