NEW YORK -- William S. Paley, the cigarmaker's son who bought a fledgling radio network for $400,000 in 1928 and turned it into the $3 billion-a-year communications conglomerate known as CBS Inc., died last night. He was 89.

Paley died at his Manhattan home, said Ann Morfogen, vice president of media relations at CBS. He had been ill with pneumonia.

Paley controlled the Columbia Broadcasting System for more than half a century as president or board chairman of its radio and television networks and its film, publishing, recording and other subsidiaries.

His television network played both to conscience and the average American, becoming the video showcase for Edward R. Murrow and Jack Benny, Walter Cronkite and Archie Bunker, Eric Sevareid and "I Love Lucy."

More than a decade after normal retirement age, he was still reporting for work at his sumptuous office atop "Black Rock," the black marble-faced tower in midtown Manhattan housing CBS headquarters, and giving the final approval to all major policy decisions.

In April 1983, he turned the reins of CBS Inc. over to Thomas H. Wyman, only the second chairman in the company's history.

"Bill Paley not only created this company, he created much of the broadcasting industry," Wyman said at the time. "And to it, he brought an extraordinarily sensitive stewardship characterized by creativity, energy, integrity, style, wit and an enormous sense of the public interest."

On retiring from active leadership of CBS, Paley became a partner in the Whitcom Investment Co., which has wide-ranging communications holdings, including the International Herald Tribune.

Born in Chicago on Sept. 28, 1901, grandson of a Russian lumber magnate, Paley attended University of Chicago before receiving a bachelor of science degree from the University of Pennsylvania in 1922.

Upon graduation, he joined his father's firm, the Congress Cigar Co. of Philadelphia, as vice president and secretary.

He became interested in radio when he discovered the impact of radio ads for their La Palinas cigar. In 1928, using money borrowed from his father, he bought the year-old United Independent Broadcasting Corp., changed its name to Columbia and began his broadcasting empire. By 1986, according to Forbes magazine, he was worth $320 million.

Paley became almost as towering a figure in New York society as in broadcasting, with the help of his second wife, "Babe," the former Barbara Cushing, one of the three daughters of a famed Boston neurosurgeon, Harvey Cushing.

During their 31 years of marriage before her death from cancer in 1978, the Paleys entertained lavishly in their apartment in the St. Regis Hotel and on an 85-acre estate in Manhasset on Long Island's exclusive North Shore.

Paley had two children, Jeffrey and Hilary, by his first marriage to Dorothy Hart Hearst, from whom he was divorced; two by his second marriage, Kate and William; and two stepchildren, Stanley Mortimer and Amanda Ross.