The long-rumored merger between news powerhouses CNN and ABC News is off, a top executive of AOL Time Warner Inc., CNN's corporate parent, told company leaders yesterday.
More than 150 executives from various divisions of AOL Time Warner began two days of meetings yesterday at a hotel in New York's Battery Park City to receive the 2003 agenda from company chairman and chief executive Richard D. Parsons. During a question-and-answer session, Jeffrey L. Bewkes -- chairman of the company's entertainment and networks group -- was asked about the progress of the merger.
In his view, the deal was dead, Bewkes said.
"After careful review, it was determined that although there are great merits and possibilities to a merger of CNN and ABC News, for us, 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 in a news release last night, confirming Bewkes's remarks.
ABC, which is owned by Walt Disney Co., was not shocked by the announcement, said a source. The two sides had not talked since late last year. Disney did not issue a statement.
Both sides say the potential merger was called off because AOL Time Warner is occupied with other, more pressing tasks. The company still is trying to right its flagging America Online Inc. unit, which for the first time ever lost Internet subscribers on a quarterly basis, losing 170,000 members in the last three months of 2002. Though AOL is still the company's leading cash generator, bringing in $8 billion in revenue in 2002, AOL Time Warner has told investors that AOL's advertising revenue will continue to drop off through 2003.
In late January, AOL Time Warner reported a $98.2 billion loss for 2002, largely thanks to AOL's steep drop in value. Further, the company is still dealing with federal probes into its accounting at AOL, and the recent resignations of Chairman Steve Case and Vice Chairman Ted Turner. Turner, who created CNN, was thought to be a motivating factor behind the merger talks with ABC, but his decision to step down in the weeks before yesterday's announcement is coincidental, an AOL Time Warner source said.
AOL Time Warner and Disney considered merging their news units to reduce costs and to create one news-gathering giant that would combine ABC News's national staff with CNN's international reporting and reach. Network news operations have sought the distribution -- and growing ratings -- of cable in recent years. NBC partnered with Microsoft Corp. to create MSNBC and CNBC. Fox News now is the top-rated cable news channel, ahead of CNN.
CNN, however, continues to have a strong international reputation and presence and star correspondents, such as Christiane Amanpour.
It is unlikely that ABC News will pursue another partner because of the unique assets CNN possessed, a source said.
That the deal was terminated as the U.S. appears on the verge of war with Iraq is irrelevant, a source said, because it would have taken up to two years to consummate, because of regulatory hurdles and the complexity of combining the two staffs.