Time Warner, GE in Talks for NBC : Entertainment: The owner of Warner Bros. would buy network and its cable interests for $2 billion to $2.5 billion, sources say.

Time Warner Inc., the New York-based entertainment conglomerate that owns Warner Bros., HBO and Time magazine, is in negotiations to buy the NBC Television Network for between $2 billion and $2.5 billion, industry sources said Wednesday.

The stock-swap deal would be the first major merger between a television network and a company owning a Hollywood studio and, if successful, could trigger another round of combinations among the giant media and entertainment companies. Government regulations that once barred such mergers have been eased, paving the way for talks between networks and studios.

According to people familiar with the talks, Time Warner would acquire NBC’s television network, its cable channel CNBC and other cable interests. However, Time Warner is not negotiating to acquire the seven highly profitable TV stations owned by NBC.

The deal would give Time Warner a network with more than 200 affiliates and an important outlet for its TV programs. Warner Bros. is the largest producer of TV programming in Hollywood, with hits such as “Murphy Brown” and “Full House.” Sources said one of the factors propelling Time Warner is the entertainment giant’s fear that recent deregulatory actions will lead to a smaller market for its programs.

NBC’s parent, General Electric Co., declined to comment and Time Warner could not be reached for comment. Sources close to the talks described them as “very serious” but cautioned that the negotiations could still fall apart. The past year has seen two big media deals collapse after they were announced: the merger between cable TV company Tele-Communications Inc. and regional phone company Bell Atlantic Corp., and the proposed merger between CBS Inc. and home shopping channel QVC Inc.

NBC has been rumored to be for sale almost since the day GE acquired it in 1986. GE bought NBC as part of its merger with RCA at a time when the network was achieving its prime-time ratings apex due to such mega-hits as “The Cosby Show” and “Cheers.”

However, in the nearly 10 years since GE acquired NBC, the network has steadily lost its grasp on the ratings crown and is now ranked No. 3. Under GE management, NBC has trimmed hundreds of jobs and invested heavily in the cable TV industry. In the process, Robert C. Wright, the GE-appointed chief executive of NBC, has led the campaign to make the network more competitive and free it from decades-old regulatory restrictions in Washington.

The acquisition would make Time Warner, already a powerhouse in cable TV, even bigger.

The company already owns HBO--which has been built into the largest pay cable TV network in the world under Chairman Michael Fuchs--and its sister channel Cinemax; a minority stake in Turner Broadcasting System, and 50% of Comedy Central. In addition to owning CNBC and the new cable network America’s Talking, NBC--through its partnership with Cablevision Systems Corp.--owns stakes in American Movie Classics, Bravo and 12 regional sports channels.

Industry sources said Time Warner and Cablevision Systems Corp. may try to negotiate a third-party deal whereby Cablevision would swap cable systems it owns in the New York area for NBC’s stakes in the programming services. Such a deal would give Time Warner the dominant cable operator in the country’s biggest market.

By not acquiring NBC’s owned TV stations, Time Warner is ducking a potentially difficult regulatory hurdle that prevents broadcast companies from owning cable systems in the same markets where they operate TV stations.

GE may also want to hold on to the stations because, unlike a broadcast network, they are a reliable source of revenue. In the past, GE Chairman John Welch has said the network is not for sale, but last year he signaled his willingness to do something “strategic.”

One question mark is what Time Warner plans to do with a fifth broadcast network it is launching in January in conjunction with TV station group Tribune Broadcasting. Under current government regulations, companies are allowed to own only one broadcast network.

In recent years, several interested buyers have approached GE about acquiring NBC, including cable entrepreneur Ted Turner, former Fox Inc. owner Marvin Davis, QVC Chief Barry Diller and even an investor group headed by NBC’s top star, Bill Cosby.

But GE has balked because it has NBC valued on its books at more than $4 billion and did not want to take an offer below book value.

Warner Bros. boasts Hollywood’s most stable management team in co-Chairmen Robert Daly and Terry Semel. The studio ranked second behind Disney in domestic box office share last week with hits such as “Natural Born Killers” and “The Client.” Warner also had its share of box office disappointments this summer, including “Wyatt Earp.”

* ORION PICTURES: Billionaire John Kluge to fold ailing studio into global media company. D2