How CNN Viewership Trends Impact Time Warner Stock

Includes: NWS, TWX
by: Trefis

CNN, owned by Time Warner (NYSE:TWX), is one of the top cable news channels in the US and reaches 93 million US households. It competes with other news channels like News Corp’s (NASDAQ:NWS) Fox News. We estimate that CNN constitutes about 7% of the $27 Trefis price estimate for Time Warner’s stock.

CNN has experienced gradual growth in its viewership in the last few years as a result of popular offerings that include news programs like CNN Newsroom, State of the Union, the Situation Room as well as talk shows like Larry King Live. From just over 450,000 in 2005, the number of average weekly viewers has gone up to nearly 470,00 in 2009. CNN has not been able to sustain the 2008 rise in viewership to 580,000 which was attributable to the US elections.

CNN’s viewership level stands substantially below that of Fox News’ estimated 1.95 million average weekly viewers in 2009. Almost all of the top 10 most watched news programs are aired on Fox News with O’Reilly factor claiming viewership of more than 320,000 alone.

Slow Rise in CNN Viewership

We believe that going forward, CNN’s weekly viewership will continue to increase but at a modest pace and reach around 540,000 by end of our forecast period primarily for the following reasons:

1) CNN has historically been associated with unbiased, prompt reporting, and for adopting a centrist view. Its more balanced viewpoint (compared to Fox News) gives it a wide appeal and will help it in gaining viewers.

2) Given the dominant position of Fox News, we do not expect a fast rise in CNN’s viewership. Fox claims the top 10 most watched news programs and we believe it will not be easy for CNN or other competitors to dramatically change Fox’s ranking.

2) Cable news is the fast growing segment, with viewership gains across all channels. We believe that cable news channels will continue to increase audience engagement with relevant content.

You can modify our forecast above to see how faster or slower growth in CNN’s average weekly viewers can impact Time Warner’s stock price.