ABC and CNN news merger moves closer

NEW YORK – The prospect of AOL Time Warner and Walt Disney merging their television news operations, bringing together CNN and ABC News, has moved a step closer as the Disney CEO Michael Eisner said he favoured the deal.

News that a possible deal might happen emerged last month as the need to cut costs and boost profits rises.

Speaking on CNN financial TV programme Moneyline, Eisner said: "I can't say I know it's going to happen. I think I can say I'd like it to happen."

The deal would give ABC access to CNN's global audience while CNN would break into millions more American homes.

Eisner said that a deal was also favoured by AOL Time Warner CEO Richard Parsons and that regulatory and financial issues did not appear to be major stumbling blocks.

"We all have to sit down at some point - and we're not sitting down yet - to figure out how one and one adds up to four, not financially but culturally. I think it makes great sense, but that doesn't mean it's necessarily, absolutely going to happen," Eisner said.

The deal would see AOL Time Warner control two thirds of the new venture, which would have revenues of more than $1.6bn (£1bn), with $600m accounted for by ABC News.

AOL Time Warner has been shopping around for a partner for some time. It was first in talks with Viacom-owned CBS, but these talks stalled on CBS's reluctance to give up control of its news operation.

It is unclear what the internal structure of the new operation would be like, but it comes at a time when CNN is facing ever-increasing competition in the cable news market, with the Fox News Channel and MSNBC providing strong competition.

During the interview, Eisner paid tribute to CNN founder Ted Turner, whose support in making the deal happen is seen as being crucial. Eisner said Turner was one of "CNN's major assets".

The pressure to do a deal has been increased by the advertising downturn and the drain on AOL Time Warner caused by its troubled internet division America Online. ABC has suffered poor ratings and its news operation, although respected, has high overheads and expensive anchor stars such as Peter Jennings, Barbara Walters and Diane Sawyer.

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