Turner Broadcasting System Inc. and Microsoft Corp. are holding “serious” discussions about Microsoft acquiring a $1-billion to $2-billion stake in Turner that in turn would help the broadcasting company make a bid for CBS Inc., executives involved in the talks said Friday.
Turner Broadcasting Chairman Ted Turner, who has been frustrated in his attempts to buy a television network, wants to outbid Westinghouse Electric Corp., which made a $5.4-billion offer for CBS last week but is awaiting regulatory and other approvals, the executives said.
Turner and Microsoft Chairman Bill Gates met recently in the Seattle area along with several top executives of their companies to discuss their plans, the sources said.
Gates is said to be interested in having access to video material and the brand names of Turner’s Cable News Network and its other cable channels. The software giant is launching its new on-line service, Microsoft Network, on Aug. 24 as part of the release of Windows 95, its new version of the popular software. Turner’s video material could be offered on the Microsoft Network. Turner’s holdings also include a huge movie library, the Cartoon Network, the TNT movie channel and the TBS superstation.
Officials at Turner Broadcasting and Microsoft declined to comment Friday.
The talks with Redmond, Wash.-based Microsoft are occurring as Turner continues to negotiate with Tele-Communications Inc. and Time Warner Inc. over Time Warner’s 18% stake in Turner Broadcasting.
Time Warner’s stake has been an impediment to Turner’s negotiations to buy a network because he must get the approval of his board to make a bid. Time Warner--which held its own talks with NBC about a merger earlier this year--holds three of the 15 seats on Turner Broadcasting’s board and has opposed Turner’s plans for buying a network.
However, TCI--the nation’s largest cable system operator--and its chairman, John C. Malone, support Turner’s plans to buy a network. Malone--whose company owns 20% of Turner Broadcasting and also holds three seats on Turner Broadcasting’s board--told his stockholders this week that he wanted “to do everything possible” to help Turner get a network.
In his talks with Gates, Turner “has the full support of John Malone,” one executive said. TCI recently invested $125 million to acquire a 20% stake in the Microsoft Network.
The investment by Gates, plus the backing of Malone, would strengthen Turner’s hand in a bid for CBS. Gates’ investment would not constitute any change in Turner’s management or control in Turner Broadcasting, sources said.
It is unclear whether Time Warner could block an investment by Gates in Turner Broadcasting. Turner’s discussions with Gates are parallel but separate from Turner’s talks with Time Warner, sources said, and at this point are not a direct attempt by Gates to buy Time Warner’s stake in Turner Broadcasting.
Time Warner has been seeking to get a valuable asset, such as the successful Cartoon Network, in exchange for its stake. But executives at Time Warner are also under some pressure from investors to pay down debt. One executive there said this week that Time Warner wants to “monetize” its Turner investment.
Access to CNN news feeds would give Microsoft a continuing stream of fresh material for its on-line network. As speedier modems become available over the next year, on-line customers would be able to watch CNN news clips, just as they can now read Associated Press stories and download music hits.
The CNN brand name would also give worldwide credibility to the Microsoft Network’s news offerings.
Although the software company has hired more than 20 editors to gather news from wire services and other sources to put on its network, questions have been raised about the software maker’s ability to offer an objective menu of news stories. CNN is already providing news footage through a desktop service in offices called CNN at Work.
Microsoft is a partner with TCI in a pilot project to offer interactive television in the Seattle area. Gates could see the value of a movie library both for offering movies over such systems and for developing related software titles.
Although Microsoft has never made an investment on the scale being discussed, it has recently become more aggressive about using its huge cash hoard to boost its market presence in new areas. In March, Gates announced that Microsoft would make a significant investment in an interactive venture with DreamWorks SKG, the new entertainment company formed by Jeffrey Katzenberg, David Geffen and Steven Spielberg. Earlier this spring, Microsoft made a $2.4-billion bid to acquire personal finance software maker Intuit--an effort that was scuttled in part by antitrust concerns.
Microsoft signed an agreement with NBC in May that gives it access to the network’s programming in the on-line world. Gates offered no equity investment in that deal, although Microsoft agreed to cover the cost associated with translating broadcasting programs into a form that could be used on a computer.
Hall reported from New York and Helm from Seattle.