Snag in Media Merger Stirs Tensions Over Trump-CNN Feud

Early this year, President Donald Trump's son-in-law and aide, Jared Kushner, met a top executive at CNN parent Time Warner Inc. and raised concerns about the network's coverage of the presidential election.

Mr. Kushner told the executive, Gary Ginsberg, that CNN should fire 20% of its staff because they were so wrong in their analysis of the election and how it would turn out, people familiar with the matter say.

A White House official said Mr. Kushner didn't intend the comment to be taken seriously, and was simply trying to make a point. Inside Time Warner, it wasn't taken lightly.

Now, as the government has raised concerns in its review of Time Warner's pending sale to AT&T Inc., people within the companies and on Wall Street are speculating that the Trump administration's feelings about the network could be influencing the deal.

The government has denied politics is playing a role in its examination of the merger, and AT&T Chief Executive Randall Stephenson said Thursday he has no reason to suspect that is a factor.

But Mr. Stephenson expressed some doubt at a meeting Monday, when AT&T executives visited the Justice Department. Mr. Trump's recently confirmed antitrust chief, Makan Delrahim, raised the prospect that the companies would have to sell either Turner, parent of CNN and other cable networks, or the DirecTV satellite unit, people familiar with the talks said.

Mr. Stephenson responded by asking whether the notion of a Turner divestiture was really just a demand to sell CNN, people close to the companies said. He asked what problem that would solve.

People familiar with the government's thinking on the meeting dispute this characterization of events.

For well over a year, CNN and the Trump camp have been at loggerheads over what the administration says is unfair treatment of the president. Representatives from the two sides have come together multiple times to try to de-escalate the feud, but ultimately those meetings produced only brief lulls before hostilities flared up again, say people familiar with the matter.

Mr. Trump was on good terms with the network early on in his campaign, calling into its shows regularly. When Corey Lewandowski was the campaign manager, he would call to complain, but CNN found the situation generally manageable, people familiar with the relationship say.

After Mr. Lewandowski was fired by Mr. Trump in June 2016, Mr. Kushner took on a greater role. On behalf of the campaign, he began lodging regular complaints with CNN executives. The turning point was a speech by Mr. Trump in New York on June 22 about everything from the economy to Hillary Clinton's Wall Street speeches, people familiar with the matter say.

Mr. Kushner was irate at the fact-checking CNN did and called CNN President Jeff Zucker, the people say. He said campaign officials wouldn't appear on CNN because of their view that the coverage was unfair and the fact-checking was poor. Mr. Zucker defended the reporting and didn't take kindly to the threat, the people say.

Trump campaign officials complained that the makeup of CNN's expert panels were tilted against them, that even the Republicans weren't really pro-Trump, the people say. CNN came to its own conclusion that it needed to actively recruit more contributors sympathetic to Mr. Trump, they say.

In July 2016, Mr. Trump himself called Mr. Ginsberg to express his frustration at the coverage, according to a person familiar with the call. Mr. Ginsberg said the network was being fair, highlighted the new contributors who had been hired, and read a list of seven of them, the person said.

Later that month, as the campaign's boycott of CNN was going into full swing, Messrs. Zucker and Kushner met to try to resolve the issue. Mr. Zucker told Mr. Kushner that the Trump administration's posture of freezing CNN out of major interviews made no sense, because the network was the best avenue to reach independents, whose support Mr. Trump would need, people familiar with the discussion say. Mr. Kushner vowed to focus on local TV and online avenues to reach voters, and argued the campaign didn't need CNN, a White House official said. The rapprochement failed.

Relations continued to deteriorate and the Trump campaign expressed frustration at coverage of the Republican National Convention, when CNN showed polls that said its audience approved of Mr. Trump's speech, while several panelists were criticizing it, the people familiar with the matter said.

Things didn't improve after the election. When Mr. Kushner made his remark about cutting 20% of CNN staff, Mr. Ginsberg told him there was no scenario under which Time Warner would do that, one of the people familiar with the matter said.

In September, the companies thought they were on the verge of getting Justice Department approval, with conditions that appeared mostly in line with similar deals, people close to the companies say. But last month, after Mr. Delrahim was confirmed, the government pushed more forcefully for structural changes, not just promises of adhering to certain behavior, they say.

Some Justice Department officials have been frustrated with what they viewed as a campaign by the companies to create a sense of inevitability around the deal's approval, according to people familiar with their thinking. The Justice Department was considering a possible challenge to the deal before Mr. Delrahim was confirmed to lead the antitrust division, they say.

When it approved Comcast Corp.'s acquisition of NBCUniversal in 2011, the Justice department imposed "behavioral" requirements such as making NBCUniversal content available to rivals. People familiar with the government's current deliberations say some in the Justice Department believe those sorts of conditions were ineffective, and shouldn't be repeated this time with AT&T.

Mr. Stephenson, speaking at a conference Thursday, said he was never told the price of getting a deal done was CNN, and that he won't sell it. He said the company is prepared to take the fight to court.

"I have never been instructed by the White House on this or any other transaction under review by the antitrust division," Mr. Delrahim said.

Even if the deal closes, concerns about CNN's independence could linger, as some staffers still aren't sure what kind of steward AT&T would be. The telecom company has repeatedly vowed to protect CNN's editorial independence.

If AT&T wanted to make a change in leadership at CNN, it would be in position to do so at the end of 2018, when Mr. Zucker's contract expires, people familiar with the matter say. In a statement to Vanity Fair last month, AT&T said, "As it relates to CNN, it's clearly a great organization, they are having a great year, and Jeff Zucker is doing a terrific job."

A few months ago, AT&T executive John Stankey, who would be charged with running the Time Warner media assets if the deal goes through, asked to visit CNN's newsroom and get a better sense of the editorial operations, said a person familiar with the matter. The request was an unusual one for CNN, where visits from corporate executives at Time Warner are rare.

Mr. Zucker declined, feeling that the optics of an AT&T executive making the rounds wouldn't be good before the merger closes, people familiar with the matter say.

The fate of the merger and Mr. Zucker are hot topics within the network. "It's been the looming question," one staffer said.

--Drew FitzGerald, Brent Kendall and Joe Flint contributed to this article.

Write to Amol Sharma at amol.sharma@wsj.com

(END) Dow Jones Newswires

November 10, 2017 18:07 ET (23:07 GMT)