CNN Effect

The CNN Effect is a phrase, advocating how continuous communication, through 24/7 news networks, like CNN, impacts the economic and political situations across the world. These 24/7 channels show the major effects of real-time news coverage on public opinion, foreign policy agendas, market activity, and investor behavior.

News outlets have used it to set agendas regarding a country's economic, political, and social policies. It has led to increased accountability in businesses and government along with diversion from real issues of public concern. Moreover, it tries to run an agenda of some entities, parties, or social groups with vested interests.

Key Takeaways                                                               

• The CNN Effect is a theory that proposes the significant influence wielded by 24-hour news networks such as CNN over the economic and political climate of both the national and the international community.
• Its primary objective is to highlight the profound effects of real-time news coverage on various aspects, including public opinion, foreign policy agendas, market activity, and investor behavior.
• The CNN effect highlights the connections between media, public opinion, policy choices, and market dynamics.
• The advent of cable television and 24-hour news coverage revolutionized media, enabling real-time dissemination of information, raising public awareness, exposing hidden events, impacting markets and investors, influencing foreign policies, and ultimately leading to societal changes.

CNN effect can be stated as a theory that continuous coverage of major events on news networks, especially CNN, on a twenty-four-hour basis impacts the foreign policy and domestic regulations of major world powers. Its main aim lies in creating a directed response of the public towards particular events and encouraging discussion among them to generate predetermined policy actions for such events being covered.

CNN effect works by non-stop coverage of an event to garner the focus and attention of the audience for more than one day until the audiences start forming strong and biased views on these activities. As a result, the public, consumers, and investors start giving stronger reactions, which may not have happened without the effect. Consequently, the market values of firms, natural disasters, the public image of a celebrity, or the perception about a country get affected negatively or positively without any proper fact or half-baked truth.

Its pros may be the faster new dissemination, creation of public awareness, and effect the foreign policy and domestic regulations to benefit the local population. Nevertheless, it also leads to a bad image of a celebrity, propaganda news, fake news, the unnecessary overreaction of markets, CNN's effect Gulf War, and social unrest on a global level.

From an economic point of view, the CNN effect theory tends to affect consumers to use the information rationally or irrationally. If irrationally used, then the markets become efficient and add to market growth. Otherwise, if used irrationally, it may lead to negative market sentiments and a lower evaluation of company shares. Understanding the effect helps assess the market changes critically and leads to rational financial decisions.

The CNN effect underlines the influence of ongoing news coverage on public opinion and market activity, alongside CNN's effect on foreign policy, while also emphasizing governmental and corporate responsibility.

Let us go through a few examples to get a grip on the topic.

Example #1

The CNN Effect became evident during the Gulf War in 1991, as CNN's continuous coverage of the conflict significantly influenced public opinion and policymakers. The relentless broadcasting of heart-wrenching images showing refugees fleeing Saddam Hussein's army in Kuwait prompted a strong public response, ultimately leading Western nations to intervene militarily.

Example #2

The CNN Effect has been observed in recent years concerning natural disasters. For instance, the extensive media coverage of the devastating Hurricane Katrina in 2005 profoundly impacted consumer behavior and market outcomes. The reporting created a sense of urgency, resulting in a rush for essential supplies in the affected region and a subsequent sell-off of stocks connected to the affected area's infrastructure. This example highlights the role of media in shaping public response and influencing economic activities.

Before the advent of cable television, news dissemination happened slowly, and its responses were considerate of all factors and parties involved. However, after cable television became prominent with 24-hour news coverage, it changed every aspect of media coverage and landscape. Moreover, the speed of information dissemination is multiplied by manifolds. It gave the public real-time coverage of the nation's important political, calamity, and social upheavals to the people.

It made people more aware of the situation and respond to it accordingly. Earlier, that news and events hidden by government or private entities started coming out in the public domain. Likewise, market movement and volatility started getting reported to the public, affecting investors in both ways. Sometimes, it has even led to false propaganda against some of their countries, resulting in wars and social upheavals. Also, many countries shaped their foreign policies based on the CNN effect.

However, nowadays, social media has overtaken the effect and taken the media coverage to other dimensions of growth and diversification. As a result, many effects of it are yet to be seen and analyzed on the global scale and society of the modern era.

The CNN effect emphasizes the connections across media, public opinion, policy choices, and market dynamics in a world dominated by global information. Therefore, its importance has been highlighted below:

1. Market activity: Its 24*365 coverage affects investor and consumer decisions, leading to market volatility.
2. Policy agendas: Domestic and foreign relations get shaped due to this effect. Influencing public opinion forces policymakers to address the urgent and important issues brought forth by the media through appropriate policy agenda formation. It has successfully created awareness in the public concerning humanitarian suffering, forcing the authorities to act and respond to it constructively.
3. Accountability: Media outlets continuously show the inner functionality of the government, thereby enhancing the government's accountability. These media channels expose many corrupt and illegal actions and policies of the authority. As a result, more transparency is brought about by the government, which promotes good governance and creates public awareness.
4. Understanding Market Dynamics: These media houses have numerous informative and critical coverage of financial markets, allowing investors to make sound investment decisions. It offers an average person easy navigation to complex market fluctuations and invests wisely.
5. Influence on Media Landscape: It has led to the need for real-time news, unlike true and fact-based news coverage. It has also led to propaganda-based news coverage spreading false news on a large scale, leading to unprovoked wars and political instability.

The CNN effect covers 24-hour news networks, whereas the Al Jazeera effect looks at the impact of Middle Eastern news coverage. However, there are much more differences between the two, as shown in the table below: