On April 21, the news was announced that the CNN + project -CNN’s streaming service- was coming to an end. So far, nothing too surprising: a project that is not quite successful closes its doors. But what is striking about this news is that this project was closed only one month after it was launched and with more than 300M $ invested in these 32 days. Today, we take a look at what went wrong with the launch of this new product.

The launching: CNN creates its own streaming service together with McKinsey

In order to face its competitors and offer a better user experience to its audiences, CNN conceived a new streaming project together with the world's leading consulting firm, McKinsey. Together, they added this new business model idea to CNN's roadmap and invested massive amounts of money to make it a reality. Specifically, 330 M dollars were allocated to this new service.

The product was a new streaming service to be launched in the US market only, priced at $5.99 per month or $59.99 per year. Its contents included live information, à la carte content and interactive programming so that the client could contact the television network.

In the words of J. B. Perrette (Streaming Leader at Discovery), this service would be a simple solution for a complex streaming market and a sustainable business model for the company, a way to redirect the company's future investments towards good journalism. According to him, the streaming space would play an important role for the future of CNN.

What went wrong with the launch of CNN +?

Several factors contributed to the failure of this brand new project. On the one hand, the lack of coordination of the company itself, given the recent changes in its management. On the other, a hasty launch of the product, with a lot of investment, but not so much market validation behind it.

A harsh response from the new management team

The launch of CNN + occurs in a very particular context. The CNN company is part of the Warner Media group, which has recently merged with the Discovery group, becoming effective just a few days ago and coinciding with the launch and initial campaign of the CNN + streaming project.

According to a direct source of the project, as indicated by The Wall Street Journal, Discovery directors never had faith in the new platform, stating that it could never stand on its own and they were more inclined to integrate it with other of their own platforms, such as Discovery + or HBO Max, according to The New York Times.

Bad reception in the market or why it is important to validate an MVP

The data from the first days of the launch is revealing, and was key to making the decision to end up the project. According to CNBC, the CNN + streaming service had just 10,000 daily users and less than 100,000 subscribers, compared to 214 million Netflix subscribers, 76.8 million HBO Max or 24 million Discovery +. Considering the investment of 330 million dollars, this represents a customer acquisition cost (CAC) of 3,300 dollars.

The building of this new business was centered in the economical part of the process, instead of the most strategic, allocating a large amount of investment to the project: specifically, 330 million dollars. This methodology corresponds to the traditional way of new-business building: the new project is left in the hands of a large consulting firm, a large amount of money is allocated and the results are awaited. This is certainly a quick way to get the project up and running, but its success remains to be seen.

Other ways to build new business models for large corporations is to focus on market testing and product viability, a methodology that we use in Corporate Lab. In this case, our venture studio focuses on starting from validated assumptions, and carrying out complete market studies that define in detail the target audience and the acceptance that the product will have in the market. Investing time in validating hypotheses and minimum viable products (MVP) is key to avoid wasting time and budget. If something goes wrong, the team is prepared and has time and margin to pivot the idea and look for solutions.

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👉Learn more about building a PoC, a prototype and an MVP👈

‍The consequences of a product failure

The president of CNN has taken responsibility for what happened with some distance, stating that "it is not a consequence of what his team did." On the other hand, the executive in charge of the project, Andrew Morse, has announced that he will leave the company.

As for the product, it will eventually be absorbed by the Discovery platforms, while CNN+ subscribers will receive a refund for their subscriptions.

Are you interested in creating new business models for your company, with a methodology focused on achieving a good product-market fit? Contact our team. Let's talk about the challenges and opportunities in your sector, about how to create new opportunities for your company with a validated methodology, endorsed by our startups.

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