There is resistance on both sides to cutting a deal, but the pervasive desire to reduce operating costs is driving the deal forward. AOL Time Warner would 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.
According to Disney spokesperson Zenia Mucha: "We've had conversations for the last 18 months and no deal has been reached."
The pressure to do a deal has been heightened by the severity of the advertising downturn and the drain on AOL Time Warner caused by its troubled internet division America Online. ABC's lacklustre ratings are set to lead to a loss of $500m. 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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