To Merge or Not To Merge

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Could time be right for CNN, CBS News to partner?

By David Bauder
The Associated Press
Wednesday, May 5, 2010; 6:38 PM

NEW YORK -- CNN and CBS News have romanced each other off and on for more than a decade, and they are checking again to see if the time is right for a serious business relationship.

Talks aimed at joining forces have foundered in the past due to questions of editorial control and complex labor issues. But the gloomy financial outlook for broadcast network news and CNN's need to kick-start its domestic network's ratings gives executives at both organizations a greater incentive to overcome the problems.

Jeff Bewkes, chairman of CNN parent Time Warner Inc., said Wednesday that "it's no secret" that CNN talks with broadcast networks and suggested they need CNN more than CNN needs them.

"There is a lot of fiscal strength at CNN that essentially puts us in a pretty good position offering a solution to the cost problems and profit squeeze that go on in network news," he said during a conference call with investors. He said it's entirely possible that CNN and a broadcast partner can come to an agreement sometime during the next year.

Executives at both news organizations, speaking under conditions of anonymity because of the sensitive nature of the talks, said nothing is imminent. But there appears to be a seriousness of purpose that was missing in the past.

Both CBS and ABC News have been losing money as viewers increasingly get their news through cable networks or the Internet. Both news divisions have sharply cut back on staff; ABC cut its news staff by a quarter over the past couple of months, primarily through buyouts. Neither network has the advantage of NBC News, which is not only atop the ratings but can amortize costs through cable affiliates MSNBC and CNBC.

Some have questioned whether ABC or CBS' news divisions can survive long-term by going it completely alone.

"The landscape is a little bit worse" than when the two companies talked about some way to combine forces in the past, said Marcy McGinnis, a former CBS News executive who was involved in negotiations with CNN more than a decade ago. "They both have more incentives to talk about economies of scale."

With a far more extensive newsgathering structure both domestically and internationally, CNN can offer CBS more extensive reporting power, allowing CNN reporters on broadcasts like the "CBS Evening News." For all of its ratings problems, that broadcast is still seen by more people than anything on CNN.

In return, CBS can offer some of its expertise and personnel for use on CNN, strengthening a cable network that has recently suffered severe domestic ratings problems. There is frequent speculation that CBS' Katie Couric could offer her interviewing skills to CNN, perhaps as an eventual replacement for Larry King.

The news division's crown jewel remains "60 Minutes," which generally operates as an island unto itself.

The two companies have worked together in the past and, in the case of CNN's Anderson Cooper, even shared personnel. Cooper, host of a nightly program on CNN, also does occasional reports for "60 Minutes." CBS in the past year has hired CNN reporters Erica Hill, Elaine Quijano and Betty Nguyen.

Most recently, CBS News and Sports President Sean McManus worked for several months with Time Warner executives to craft a 14-year, $10.8 billion contract to televise the NCAA men's basketball tournament on CBS and Turner Broadcasting stations.

What held CNN and CBS News back from any kind of merger were turf issues - meaning whether CNN or CBS would officially make news decisions. CBS also has many unionized employees, while CNN does not.

The two networks may not necessarily enter into an official merger, but simply extend agreements to share resources, executives said.

Both CNN and CBS would not comment publicly on their discussions, first reported by New York magazine's website.