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What’s next for CNN and ABC News

Feb 17, 2003  •  Post A Comment

Now that the parent companies that tried to arrange a cost-conscious marriage between their news operations have accepted that they cannot make it work, what does the future hold for CNN and ABC News?
AOL Time Warner announced Thursday that a merger between CNN and ABC News presented too many complications and that the high-level on-again, off-again talks that started last year are dead.
“After careful review, it was decided that although there are great merits and possibilities to a merger of ABC CNN News, the potential problems associated with the completion of such a transaction and the integration of these two distinct and great cultures was more than we want to pursue at this time,” AOL Time Warner said.
“Whatever pressures promoted the discussions obviously haven’t gone away,” said CBS News President Andrew Heyward, whose own participation in less-sweeping talks with CNN over recent years gives him insight into what drives such talks (sharing of costs and resources) and what chills them (the difficulty in ceding any control and in sharing on-air resources without diminishing them).
Wistful thinking
“A transforming strategic alliance remains a tantalizing but elusive dream,” said Mr. Heyward. In fact, he believes it is “virtually impossible” to merge two complex news organizations without one’s being effectively consumed by the other.
On the other hand, he would expect to see both CNN and ABC looking for low-level ad-hoc arrangements such as CBS and ABC forged during the war in Afghanistan when they shared equipment that gave each easy access to two uplinks for the price of one in some locations.
“My only disappointment was that it wasn’t ABC that made the announcement,” said Bruce Baker of Cox Television, who heads the ABC affiliates advisory board. Mr. Baker has made no secret of his feelings that any merger of two such different cultures as ABC News and CNN would have little but downside for the ABC News brand.
Indeed, the reaction from ABC parent Disney seems tinged with a wistful reluctance. “We both thought this would have been a good move for both companies, and unfortunately, the circumstances did not permit the process to move forward,” said a spokeswoman for Disney.
In recent years, CNN has considered a number of ways in which it might partner with ABC and CBS that would give it access to big-name talent. In return, the broadcast partner would gain access to valuable resources around the world as well as the 24-hour news channel.
But the talks that began last year had a breathtaking scope, proposing that ABC News and CNN be spun off into a separate company that both parent companies would own.
The impetus came out of projections embraced by both parties indicating that they could save as much as $200 million a year while attracting a combined revenue of more than $1.6 billion.
Questions about who would control the partnership-a sticking point that scared off potential partners for CNN before-again rose. But there were numerous other complications, including near-universal negative reaction to such a merger from a chorus of critics. Ted Turner was one such critic. He is the CNN founder and recently resigned as vice chairman of AOL Time Warner, which has become the poster child for too-big mergers.
AOL Time Warner Chairman Richard Parsons earlier this year indicated that the ABC-CNN talks were on hold.
Sources at both CNN and ABC reported mostly relief among the rank and file when informed that merger discussions were off. A merger presumably would have led to dramatic cuts to accomplish the savings both sides insisted were possible.
Since ABC News is the heaviest in star-size salaries on and off the air, many at the network had been planning, or at least talking about getting into other lines of work. There was a sense last week that because the merger talks are definitely off and the Bush administration’s war on Iraq seems definitely on, alternate-career planning is on hold.
However, it is now clear that ABC, which has the smallest profit margins of all major network news operations-some say as little as $50 million-will have to find ways to enhance its profitability without a news channel and in an environment where reality programming is cutting into newsmagazine audiences that once generated so much income for news divisions.
And CNN, which frittered away its cable news dominance to upstart Fox News Channel and scared off potential partners with its insistence in being on top, seems likely to have to develop-not marry into-programming that brings back viewers.