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MANILA, Philippines – Employees of CNN Philippines, the only predominantly English-language channel on free TV in the Philippines, anxiously await the outcome of a management-level meeting on Thursday, January 25, as rumors of a company shutdown circulate.
Sources, mostly insiders, confirmed to Rappler that a management meeting was held on Thursday regarding the company’s future. Rank-and-file employees and talents have not yet been briefed on the matter, with some telling Rappler they were “at a loss.” A general assembly has been scheduled on Monday, January 29, according to insiders.
Rappler has reviewed the latest financial statement of Nine Media Corporation, the TV company which has the rights to carry the CNN brand. Auditors cast doubt on its ability to continue as a business, according to documents obtained by Rappler from the Securities and Exchange Commission.
It’s worth noting that Nine Media’s deal with Turner Broadcasting System Asia Pacific is set to expire on December 31, 2024.
The two companies first struck a deal in October 2014, which allowed Nine Media to use CNN-branded materials and programming for five years. The network debuted in 2015. The licensing deal was renewed in 2019 for another five years, or up to 2024.
The financial statement showed that CNN Philippines’ cash flow was completely dependent on the advances made to it by its parent company, JRLT-JHI Corporation, a financial holding company. In 2022, JRLT-JHI Corporation gave the company P181.5 million. Prior to that, the parent firm gave the TV network P118.6 million.
Reyes Tacandong & Co., the firm that audited the network, flagged Nine Media’s losses amounting to P231.4 million and P239.7 million in 2021 and 2022, respectively, as well as its capital deficiencies of P226.2 million and P465.2 million during the same period.
“These conditions indicate a material uncertainty which may cast a significant doubt about the Company’s ability to continue as a going concern,” the audit read.
In 2022, revenues grew by 4.6% to P407.3 million, but this was outpaced by cost of services, which increased by 6.7% to P514.89 million. Cost of services includes salaries, licensing fees, and other production costs.
With costs growing faster than revenues, gross losses ballooned by 15.17% to P107.59 million in 2022. Net losses reached P239.7 million, a 3.6% increase from 2021.
Meanwhile, license fees that Nine Media had to pay Turner Broadcasting System increased from P108 million in 2021 to P139.3 million, up by 29%.
Nine Media also had a separate deal with RPN, a former government-controlled TV network, to air its shows on free TV Channel 9. The deal allowed RPN to collect P8.2 million monthly from Nine Media for airtime fees. In 2021, RPN granted a 20% discount, but this discount ended in December 2022.
Nine Media said in its 2022 financial statement that management was aware of these conditions and had put in place plans to stop the hemorrhage.
Nine Media attributed the drop in revenues to the pandemic.
In 2022, the company banked on a post-pandemic economic recovery and advertising spending of politicians for the national elections that year. These, in Nine Media's own words, "did not materialize."
“The national elections held in May 2022 and the campaign period leading to it, while contributing to some increase in the spending behavior of people, did not significantly impact on the traditional advertising revenues, with the campaign efforts focused on social media platforms with funds channeled to social media influencers, vloggers, and content producers,” Nine Media said.
After the elections, advertising sales did not immediately pick up as agencies and companies struggled with inflation.
A similar trend could be observed from bigger media companies.
GMA Network reported a 20% drop in advertising revenues, from P15.77 billion in January to September 2022 to P12.68 billion in the same period in 2023. The Kapuso network's bottom line dropped by 51% to P2.47 billion in the first three quarters of 2023.
"Advertising revenues remained the lifeblood of the Company, comprising a huge chunk of the total revenue pie. This segment was also the hardest hit due to the absence of election-related placements this year," GMA Network said.
ABS-CBN's advertising revenues were flat at P4.8 billion in the first three quarters of 2023. The Kapamilya network, however, no longer draws most of its income from advertising.
Since its departure from free TV due to Congress denying it a franchise renewal in 2020, it pivoted to placing its shows in former rival networks and increased its presence in digital streaming services.
Advertising revenues comprised 36% of ABS-CBN's revenue pie, while consumer sales accounted for 64%. This pivot, however, is still a struggle, as consumer sales fell by 8% to P16.1 billion.
CNN Philippines' cost-cutting measures
Against this bleak economic backdrop, Nine Media implemented cost-reduction measures, including a discounted airtime rate and migrating to a less costly satellite service provider. It even stopped certain service-level agreements and system maintenance costs and suspended several marketing and human resources activities.
These cost-cutting measures resulted in a 10.95% reduction in its general and administrative expenses.
Towards the latter part of 2022, Nine Media adopted ABS-CBN's strategy of aggressively selling blocktimes and co-production contracts with revenue-sharing terms.
Recall that CNN Philippines and Manny Villar’s Advanced Media Broadcasting System entered into a deal in 2022 to air the former’s flagship news program News Night in Filipino on weekdays. It was short-lived, however, after AMBS hit pause for most of its shows in the first quarter of 2023.
Nine Media was optimistic for 2023, citing forecasts from the government of an improved economic climate.
It even went on to say that advertising revenues would improve in 2023. The company also implied that the absence of the Lopezes’ ABS-CBN on free TV would be beneficial for Nine Media.
“Thus, advertising budgets are expected to also rise and the Company is poised to benefit from this development, particularly with the absence of the erstwhile biggest TV network in the country. In the coming years, the Company will further strengthen its branded content sales, blocktime revenues, co- production deals, digital content sales, and program distribution efforts,” it said.
The network derives most of its revenues from advertising. Yet, in 2022, advertising revenues increased by just 5%, according to the same documents.
Despite Nine Media's declared optimism, the auditor did not modify its opinion on the company’s financial health.
Nine Media’s financial statements for 2023 are not yet available.
On December 22, 2023, Nine Media and Manny Pangilinan’s TV5 agreed to air the PBA’s Commissioner’s Cup Season 48, as well as episodes of the popular noon show E.A.T. Bulaga on CNN Philippines’ weekend programming starting January 6, 2024.
This was intended to improve the reach of PBA games and E.A.T. Bulaga on free television, aside from improving Nine Media’s revenues. It remains to be seen what will now happen to this deal.
Parent company to the rescue
Nine Media underscored that it can continue operating “given its ability to obtain funding and commitment of support from its major stockholder.”
Nine Media, incorporated in January 2010, is wholly owned by JRLT-JHI Corporation, a financial holding company.
It is part of businessman Antonio Cabangon-Chua’s ALC Group of Companies, a conglomerate with various interests, which includes insurance, real estate, security, education, and even other media companies.
It is widely speculated that tycoon Ramon Ang funds the network, but his name does not appear in any of the companies related to CNN Philippines.
Nine Media's financial statement showed that its cash flows from operations and investing activities were both in the red for both 2021 and 2022. The only reason CNN Philippines had cash was because of the advances made by its parent company JRLT-JHI Corporation.
CNN Philippines is home to some of the country's veteran journalists. Its top talents include Pia Hontiveros, anchor and chief correspondent; Pinky Webb, senior anchor and correspondent; Rico Hizon, director of news content development and senior anchor; and Ruth Cabal, anchor and senior correspondent.
Nine Media has around 300 employees. – with reports from Lance Yu/Rappler.com