There’s A Lot More to That Story About CNN Dumping Reuters

Philip Stone September 7, 2007

In the TV news agency business there is a common expression – “dropping one’s pants” -- and it refers to the spirited competition between Reuters Televsion and AP Television News over which one will drop its pants lower financially than the other in order to win new business or retain an existing customer who says “We’re going down to one agency” and then lets the two financially fight it out.

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It then became a matter for the sales managers at the agencies to decide just how much they would undercut their rate card to gain/maintain business. But then in Reuters case about 10 years ago came a new ingrediant to the mix – it wasn’t just about the money any more but it was about content rights and Reuters started to implement strict archiving and other usage rules. If clients wanted to use material after 30 days, or on platforms other than television then additional new financial and usage rules came into place. It added to the cost and restricted usage which wasn’t exactly what Reuters TV managers were looking for in an environment in which APTN (as it was then known) had rates around 30% less than Reuters and no such usage restrictions, but the clients still stayed loyal, and many more came on board because of the quality of the editorial product. You really did get what you paid for! 

But in Reuters’ 27 years of business with CNN there was plenty of “dropping one’s pants”.  Before Ted Turner sold his empire to Time Warner CNN was on a shoestring budget  and if there was one thing its executives knew how to do it was to squeeze every last penny from its vendors. When Reuters America proudly announced to its London headquarters  every few years how well it had done in renewing the CNN contracts the management back in London would  scratch their heads for surely a “0” had been left off the contract?  

The response from the US was to say they got “branding” instead of additional money and indeed CNN International (but not CNN domestically) started to credit Reuters on every piece of  video it broadcast that lasted more than a couple of seconds, something other agencies had it do in later years.

But if it hadn’t been for a strategic Reuters decision in 1992, CNN , according to none other than Ted Turner, might not even be here today.  Reuters held a majority interest in the Visnews television news agency with NBC and the BBC together owning a minority. Reuters decided, well before any other multimedia news organization, that it needed to fully own its video and so it bought out the NBC and BBC shares and renamed Visnews as Reuters Television. Reuters never really said at the time why it had bought Visnews and everyone in the industry was asking, “Are they going to start their own 24-hour news channel?”

Not long afterwards Ted Turner and Jane Fonda hosted senior Reuters executives at a big dinner in Atlanta and Turner then asked that question directly. Silence around the table. And then the senior Reuters executive answered that Reuters was NOT going into the 24-hour retail news business but rather it would stay as a news supplier. Sighs of relief from the CNN contingent and Turner then said words to the effect, “If you had answered ‘yes’ to that question then we would have continued here tonight to enjoy our meal and one another’s company, but the likelihood would be that within the weeks to come I probably would have had to close down CNN.” In other words Reuters, with all of those Visnews services and with people around the world would have been too much for the then Chicken Noodle Network.

So, what comes around goes around, as they say.Some 25 years later CNN dumps Reuters. Interestingly the announcement came from Tony Maddox, executive vice president  and managing director of CNN International (he took over from Chris Cramer who retired last year but CNN didn’t give Maddox as much power as Cramer held). Take a look at Maddox’ profile on CNN.com and it talks about all the things he has done at CNN and it talks all about his prior life as head of news and current affairs for the BBC in Northern Ireland, but there is no mention at all of his short unhappy executive life in between the BBC and CNN with none other than Reuters Television!

Anyway, Maddox explained to CNN staff why Reuters was being dropped: “To advantage CNN in the content marketplace and manage the continually rising costs associated with acquired assets, we are making significant investments in our own news gathering while simultaneously reducing our reliance on agency material.”

Now that needs quite a bit of studying for various reasons. This writer has his TV on many hours each day tuned to either CNNI or BBC World. While it’s not possible to give percentages one can say quite honestly that when there is breaking news more often than not it is Reuters credited with that news break.  At the very least one can say it is verycompetitive. For a global 24-hour news organization not to have access to that text or video is really like cutting one’s arm off.

There can be no question that CNN internationally, as opposed perhaps to US domestic that doesn’t have that much foreign coverage unless something big happens, is really going to miss Reuters and it means, simply, that there will now be times when the competition will beat CNN simply because it did not have that Reuters resource. No doubt CNN has decided to take its chances and hope that AP Television News is good enough. (As an aside,  a monthly CNN lifestyle show advertises itself as talking with people for whom “good enough” is not enough. Guess it won’t be interviewing Maddox!)

Now what usually happens in such cases when an agency is dropped is that when a really big story breaks someone at the TV network calls up the Reuters Television newsdesk and basically says, “I know we’re not clients any more, but for the sake of good relations and the hope we can be together soon again, we’d be very grateful if you would let us use this particular material.” And the newsguy, figuring why not help marketing and sales  try and get these guys back, usually says yes.

In fact, if Reuters wants any hope of getting CNN back it needs to give firm instructions throughout the company that from now on any time CNN calls and asks for permission to use video or whatever the answer is a firm, polite “no”. And that includes interviewing Reuters correspondents around the world. Not only is it not fair to existing customers who pay a lot of money for their Reuters services, but the more CNN thinks it can get stuff on the “old pal’s act” and “maybe you’ll get us back”  nonsense the less likely it will be to resubscribe.

And the company should not be shy to use its in-house lawyers to send out those copyright infringement letters if it ever spots CNN using video it has no right to. These circumstances make it very clear why “watermarking” video is so important to the agencies. Truth is, the only real way to get CNN back is to make them suffer the pain of not having Reuters.

On the other hand, of course, CNN is not the news channel it used to be. One used to watch CNN for its continual breaking news and regular news broadcasts, but now it has gone strong into “fluff” – believe the official word is “lifestyle”  And the more “fluff” one televises the less need for news programming.

Recently we were treated to a whole 30 minutes with former Gucci designer Tom Ford. Wow! Inside the Middle East shows such breaking news from that area as camel racing across the Egyptian desert. And then there is Richard Quest with his Business Traveller and Quest shows that really are entertaining and informative (how can you not like and criticize Richard Quest). But all of these lifestyle shows are shown over and over and over and over again, and they are no longer just restricted to weekends. Guess CNN has to really get back the money they are spending on sending their anchors all over the world to host these monthly programs!

In fact sending those anchors away on their junkets has gotten so frequent that nowadays they seem to be running out of anchors still at home and more and more World News Asia and World News Europe is now hosted by an Atlanta anchor  --  for example Thursday night’s 2200 CET  World News Europe anchored by Stephen Fraser in Atlanta -- so much for all the ballyhoo a few years back of how CNN was originating all such programming from its London and Hong Kong regional headquarters.

And it used to be that whenever Christiane Amanpour showed up on a story then you knew that this was an important story that CNN would own. But for the past year or so it seemed she hardly ever showed up for such, instead devoting her time to documentaries.

So when CNN says it is going to make a multi million dollar investment in its own news gathering machine (the Reuters contract was said to be worth around $3.5 million so the real question is how much of that gets spent on such news gathering and how much goes to the bean counters) it means the real issue is more “ownership” than it is “quantity”.

The reason a TV network subscribes to a TV agency is that it simply cannot afford on its own to have all the camera crews in all the locations that the agencies do. So CNN will boost its own bureau operations, and the material they produce will be their own, but its investment is not going to give it the quantity, and the speed, it got from Reuters. And pity the poor folks manning the various AP Television newsdesks around the world for the pressure will be insufferable from the CNN folks who will be ever pushing them to match and be better and faster than Reuters.

But for Reuters this incident raises several issues and indeed this CNN decision could be said to be the accident waiting to happen, and the only real question is why didn’t it happen sooner. Reuters made a strategic decision about 10 years back under orders directly from its then Managing Director, Sir Peter Job, that it was going to restrict the usage of its material by clients and when it came to archiving and usages other than the principal usage (in this case television as opposed to the Internet and mobile phones) then Reuters wanted a financial share of those pies too.

In effect whereas Reuters media salespeople always used to talk about “selling” their various products, in actual fact what they switched to doing was “renting” their products.Not only was there resistence by clients to the change, but also from the media group itself but in Reuters, as in most big companies, when the managing director says this is the way it is going to be then that’s the way it is. And 10 years on Reuters can certainly count on millions of dollars/pounds/euros etc. from implementing that policy.

But on the receiving end of that policy life was somewhat difficult. Client editors of various services had to ask whether they had video rights to use that material on the Internet, could it be used on mobile services, was there a time limit to how long the material could stay on site  and perhaps most important if they wanted to sell their services to third parties could those services include the Reuters material etc. etc. Truth is, much easier to own the material yourself and not worry about all those rights issues.

And then there is Reuters itself, competing with its own clients. While the company makes sure that its Internet products don’t interfer with what really makes the company tick – selling financial news and information to the financial marletplace and ensuring none of that material is available to the public for at least 15 minutes or so – a lifetime in the financial world – when it comes to its media clients its not really the same.

There’s a famous story from the UK about 10 years back when the Daily Telegraph newspaper had the audacity to cancel Reuters services on a cost basis and it took on AFP instead. The Reuters folks were pretty smug – the Telegraph would soon see how hard life would be without Reuters news stories.

But then the Reuters people started seeing their exclusive stories in the Telegraph anyway, but without credit. What was going on? A few discrete phone calls and all became clear. Reuters was putting all of its news on the Internet, so the Telegraph foreign desk just surfed the web, found the various Reuters stories it wanted, did a rewrite and as the London East Enders would say, “Bob’s your uncle!” Most infuriating were the exclusive quotes that were pinched off the Internet.

Eventually, the Telegraph signed a Reuters contract, but at a rate far less than at what it had paid before (and yes there were media executives at the time who said that shouldn’t have been allowed to happen, too).

So CNN will be able to do the same – surf the web for Reuters text stories, do the rewrites – even announce on air: “This just in” which for CNN would be true although others might have had it minutes before.  Copyright, of course, refers to the way a story is written – you cannot copyright facts.

Not on CNN screens any more

By letting CNN go Reuters has also marked its line in the sand. It is maintaining its various archive and usage policies and while it doesn’t like to toss $3.5 million out of the window it obviously believes it will do better with the policy it has.

The possible problem is what will its other clients do. The BBC, for instance, for years has been on a campaign of reducing its Reuters rates. It holds frequent “beauty contests” in which it says it goes for a period of time not using Reuters or not using the AP just to see how it does and to put pressure on the agencies. Usually at the end of the day pants are dropped to the level the BBC wants and life continues.

But now that CNN has dropped Reuters perhaps things could change, too at the BBC? It could say that it now wants to exploit an advantage over arch-rival CNN, having available to it competitive material unavailable to its rival. Or it could decide to go the CNN route, drop Reuters in the knowledge that it won’’t hurt competitively because  CNN doesn’t have Reuters, or it could go a third option and drop AP and then there would be two really competitive services out there – one with Reuters and one with AP. To do the latter,  of course, would mean Reuters would have to convince the BBC that it can do that job, particularly from the Americas.

In explaining the CNN action, Reuters Media President Chris Ahearn said in a message to employees, “In no way is this a reflection of the value placed upon Reuters editorial quality by CNN or the work that Reuters has done for them.” And CNN itself has basically said the same.

What it is really all about  is who owns the content and how can it be used. Life used to be easy before digital services. In the good old days there was the news wholesaler (the news agencies) and the retailer (TV stations, networks). No archive rules, no usage rules, no additional fees .

But digital changed all of that. The news wholesaler has also become a retailer, operating its own advertiser-supported web sites, selling its services to mobile phone companies and the like. And the retailor has also become a wholesaler, selling its services that contain some of the original wholesaler’s material to third parties.

What CNN has done is to make its life easier in the digital world, and it is also saying that it is not just telelvision any more -- it’s anything out there already and things not even thought about yet, and the current Reuter’s business model just plain doesn’t work for that. In CNNs case they have sacrificed excellence of product for ease of news management.

The real story will be whether others follow CNN’s move, or whether the editorial pain is far worse than expected, or whether the news wholesaler adopts its business model to make life easier for all involved.

Whatever the case, it’s a wake-up call.

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On September 12, 2007 Randy Kabrich media consultant Tampa Florida US wrote:

There is another interesting aspect to the CNN/Reuters thing that you don't know.

CNN is doing HD - Directv is about to go live with it first on their new HD Service later this month. Now granted neither Reuters nor AP stuff is not in HD now (and one wonders if this is part of the negotiations) but even with that, some people may start looking at CNN again out of curiosity as CNN HD goes live - and if they are missing video from major stories - even if it is just 4:3 with wings - while Fox and MSNBC have it, then those people will clearly go back for content over HD.

So the timing of this is not good for CNN right now.

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