CNNfns Real Hang-Up: Slow Distribution

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This summer, not long after Lou Dobbs left the company,
Time Warner Inc. vice chairman Ted Turner met with the staff of CNNfn in New York. At the
session, Turner was asked when he thought the network, which now reaches roughly 12
million households, would get wide distribution.

"Not in my lifetime," he said, which was not
exactly the response CNNfn employees were expecting to hear.

CNN News Group vice chairman and chief operating officer
Steve Korn said last week that Time Warner remains fully behind CNNfn and that
Turner's comment shouldn't be taken seriously -- that it was simply vintage Ted.

"Ted loves to say things tongue-in-cheek," Korn
said. "He loves to be provocative."

But Turner's remark, facetious or not, nailed the
network's core problem: its failure to make any major inroads in distribution since
its debut in December 1995, despite the clout and leverage of its parent, programming
giant Turner Broadcasting System Inc.

In fact, one CNNfn official who was at the meeting with
Turner later said, "I'm not sure [Turner's comment] was
tongue-in-cheek."

On top of that long-running issue, the fallout from the
June departure of Dobbs -- who was CNNfn's president and a financial-news icon --
continued last week.

Executive vice president David Bohrman was relieved of his
duties and escorted out of CNNfn's Manhattan headquarters. Bohrman's departure
upped the total to a half-dozen executives who have exited the business channel since
Dobbs left.

Korn said TBS Inc.'s decision earlier this month to
scrap its proposed The Women's Network spelled good news for CNNfn in terms of its
prospects for increasing carriage.

In theory, it means the company's infrastructure can
focus more attention on the business-news channel, as well as on several other new
networks it has in the hopper.

Nonetheless, CNNfn still faces a difficult time on many
levels, according to skeptical industry observers, and many of them think the
network's Web site will always remain its most successful and profitable element.

While The Women's Network is now out of the picture,
seemingly helping CNNfn, Turner has two other new channels to pitch to cable operators
along with CNNfn: classic-cartoon channel Boomerang and regional entertainment service
Turner South.

Those two networks may have more appeal to MSOs than CNNfn,
several industry insiders said -- especially since CNBC has built such a strong,
entrenched presence in the business-news niche during the past few years.

"CNBC is an excellent business service that has pretty
much pre-empted the field," said Jedd Palmer, a media consultant and former head of
programming at Tele-Communications Inc. (now AT&T Broadband & Internet Services).
"It's just a really tough, uphill battle to get distribution when there's
no crying need for a second network in that niche."

Korn brushed off any gloom-and-doom talk about CNNfn's
future.

"We just decided not to make a large investment in
[The Women's Network], in part to increase our effort to grow distribution for CNNfn
and CNN/SI," he said. "We are in this for the long haul. We are not going to
just walk away. Our commitment to CNNfn is unshakable."

When more shelf space opens up for programming services due
to digital technology, Korn added, CNNfn will be there, ready for cable operators to add
to their channel lineups.

When asked how amenable CNNfn was to digital carriage,
rather than analog carriage, Korn said, "All distribution is acceptable."

It now appears that Dobbs' dream of having CNNfn air
24 hours of daily programming instead of 18 is way on the back burner.

In January, Dobbs told Multichannel News CNNfn would
start airing 24 hours a day by the start of the fourth quarter, late summer or early this
fall. Bohrman repeated that assertion shortly after Dobbs left in June. In fact, Dobbs
threatened to quit in 1997 if he didn't get a firm commitment from Time Warner about
CNNfn going 24 hours.

But Korn said that at this time, there are no plans for
CNNfn to go to full, round-the-clock coverage, although it's a possibility in the
future, when the market's hours are extended, for example.

According to Turner sources -- and despite Dobbs'
remarks to the press -- there was never a formal plan submitted to, or approved by, Cable
News Network or TBS management for CNNfn to go to a full 24-hour schedule later this year.

Dobbs believed CNNfn becoming a full-time network would
help it to gain carriage. But at 70 million homes, and with the recognition it has built
with consumers, CNBC is way ahead of CNNfn on the distribution front.

"Most operators feel that they don't need another
financial-news service on analog basic," one cable-programming authority said.

"I'm willing to look at any network,"
FrontierVision Partners L.P. vice president of programming Bonnie Busekrus said, "but
CNBC has a far stronger track record and consumer awareness, and therefore, it has an
edge."

Another MSO programming executive, who just dropped CNNfn
at a system, agreed. "We perceive it as somewhat of a weak service," the
official said. "CNBC has a lot more visibility."

Turner himself told CNNfn staff that there was no easy way
for even him to convince, or force, Time Warner Cable systems to universally carry CNNfn,
because the company is so decentralized and its cable units operate pretty independently.

In fact, two sources said, Time Warner Cable didn't
even support or want to carry Turner's proposed women's network.

And at least one CNNfn official, as well as an executive at
another rival network, both said they believed the Turner hierarchy never really supported
CNNfn in terms of distribution because they felt it was Dobbs' pet project.

"Turner never stepped up and put out aggressive deals
for CNNfn," the competitor said. "It's been half-hearted. They could have
maybe taken a haircut on TNT's [Turner Network Television's] license fees to get
CNNfn carriage. Those guys are not shy."

NBC is currently seeking long-term renewals of its
affiliation deals for CNBC and MSNBC as part of a package that includes the Olympic Games
on cable.

Some operators are balking at the deal, since it includes a
$1-per-year, per-subscriber surcharge for the Games and big rate hikes and long extensions
for CNBC and MSNBC. But NBC has already signed up AT&T Broadband and direct-broadcast
satellite service DirecTV Inc. for the package, and it claimed that it has 100 other deals
signed.

This doesn't bode well for CNNfn in terms of carriage
with operators that take NBC's package. But CNNfn could make inroads with operators
that don't want to cave in to NBC's pricey demands for CNBC, and that may
consider substituting CNNfn for it.

"We're very frustrated with this CNBC
situation," Cable One vice president of strategic marketing Jerry McKenna said.
"It's very doubtful that we will pay an Olympic surcharge. CNBC is forcing us to
see if continued carriage of that network is in our best interest."

As for CNNfn's internal discord, Bohrman, who has
one-and-a-half years remaining on his three-year contract, had started arbitration
proceedings over what he claimed was a breach of his contract.

Bohrman contested the fact that Jeff Gralnick, who is in
charge of CNN's Moneyline News Hour, was given control of two-and-a-half hours
of new daily business programming that will be simulcast on CNN and CNNfn. That dispute
led to Bohrman literally being shown the door.

"We were unable to reach an agreement with David in
respect to the scope of the new financial-news programs," Korn said. "He's
been relieved of his responsibilities."

Bohrman, reached at home, declined to comment.

But CNNfn sources saw Gralnick's rise in stature as
part of an attempt by CNN corporate in Atlanta to take back control of CNNfn from
Dobbs' New York lieutenants.

CNNfn insiders also questioned the wisdom of CNN, under
president Rick Kaplan, adding more business coverage to its schedule, in effect competing
against its own financial-news spinoff.

Bohrman was immediately replaced last week by Teya Ryan, a
respected executive who most recently served as executive producer for CNN's
primetime magazine series, CNN & Fortune.

In the meantime, Korn is still searching for a new
president for CNNfn to replace Dobbs. His target was to have had a replacement named by
Labor Day, but he added, "My real goal is to get the best person."

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