CBS still pondering CNN pairing

Redstone, Moonves talk merger at meeting

CBS chairman Sumner Redstone and CEO Leslie Moonves reignited the prospect of a merger between CBS News and CNN at CBS’ annual meeting — and this time they’re talking about a full-blown acquisition of the cable news net.

Serious talks on such a merger ended years ago.

But at the meeting, Redstone told shareholders, “CNN would be a lot better off if CBS owned it.” Moonves reiterated that he’d be “very interested” if Time Warner were willing to sell.

Not a chance, says Time Warner spokesman Ed Adler. “CNN is not for sale,” he says, “and is doing very well as part of Time Warner.”

Sources at both CBS and Time Warner say no talks are under way and no formal approach has been made.

“It’s a trial balloon to see if anyone bites on the idea; they’re shaking the tree a bit,” says media investor Harold Vogel.

The last time CBS made a full-court press for CNN was under then-CEO Mel Karmazin. The year was 2003, and CNN was still spinning after Fox News Channel blew by the network in the ratings.

At the time, the two sides were negotiating a joint venture that would cede much of the news gathering to CNN, while CBS News would become a producer of high-end news programs such as “60 Minutes.”

A merger between the two would have its advantages: CBS News would benefit from CNN’s massive international newsgathering apparatus; CNN would benefit from an infusion of star power and a network promotional platform.

A combined entity would allow both to better attract and develop talent, in the way NBC uses MSNBC as a farm team for its network shows.

While the cost savings were tantalizing, talks fell apart over which side would run the joint operation. Even then, CNN was so much bigger than CBS News in terms of personnel and revenue that the Eye had a hard time justifying that it should be a 50-50 partner.

CBS execs worried a deal would mean the end of CBS News.

Back then, Dan Rather was still in the anchor’s chair; the “Evening News” was in third place; and CBS News was very much running on the remaining fumes of its Tiffany network era.

Now CBS has shaken up its news division with a new head in Sean McManus and is paying Katie Couric $15 million a year. But ratings for “Evening News” are at historic lows, which makes it more difficult to establish the next generation of correspondents coming into America’s living rooms.

That partly explains why CBS reached out to CNN talent like Anderson Cooper, Dr. Sanjay Gupta and Lou Dobbs for “60 Minutes,” “Evening News” and “The Early Show,” respectively.

CNN may be losing its battle with Fox News, but it increasingly appears that CBS is the one that needs the help, which may be why the rhetoric has shifted from merger to all-out acquisition.

A spokesman for Redstone said the controlling shareholder of CBS and Viacom made the comment half in jest; indeed, raising the idea of a CBS-CNN merger is something of a tradition when CBS speaks about its prospects to Wall Street.

It’s an expensive proposition, but one that would allow CBS to amortize the cost of newsgathering as audiences for network newscasts dwindle.

Even though Redstone’s last effort to nab CNN failed, the two networks have long shared core values and, increasingly, DNA.

In addition to the talent moving both ways, Jon Klein, a 17-year CBS veteran, runs CNN. Rick Kaplan, once head of CNN, produces the Eye’s “Evening News With Katie Couric.”

But now that network news, like newspapers, seems to be a slowly dying business, in many ways CNN can offer more opportunity (and money) for talent. CBS made no secret of its desire to land Cooper full time, but CNN was able to offer him a two-hour nightly show.

The last time CBS made a play for CNN, part of the rationale was that CBS could help CNN produce some compelling programming for primetime that would help it do battle with Fox News.

But the type of programming that works best on cable news nets — opinionated talk — isn’t exactly in CBS News’ sweet spot. “Let’s say you had a program at 8 p.m. that was the best of what CNN and CBS produced all day,” posits one former network exec. “If that program went up against Bill O’Reilly and Keith Olbermann, I’m not sure it would do any better than Paula Zahn.”

With “The Early Show” averaging 3 million viewers and “Evening News With Katie Couric” last week dipping below 6 million, it’s more difficult than ever for the Eye to establish its own next generation of stars to replace Bob Schieffer, Leslie Stahl and company.

CBS shares hit a 52-week high the day Redstone reiterated his interest in acquiring CNN, but analysts say there are no Wall Street forces compelling a move.

CNN is enormously profitable for Time Warner, while CBS News is a small part of the network’s financial picture compared to its primetime sales, while the company’s share price has outperformed Viacom’s since the split of the two companies in 2005.

“No analyst is going to downgrade CBS because Katie Couric’s ratings suck,” says Sanders Morris Harris entertainment analyst David Miller.

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