ABC to Launch a 24-Hour News Channel by ’97 : Media: But analysts say the network may have a tough time finding space on cable television systems.

Capital Cities/ABC Inc. said Tuesday that it will launch a 24-hour news channel by early 1997, becoming the latest television network to telegraph plans to take on the lucrative Cable News Network owned by Turner Broadcasting System Inc.

Although ABC hopes to leverage its position as the leading provider of TV news in many local markets to launch a competing all-news channel, sources say the network and any other newcomers will have trouble finding space on cable systems for such services.

“This is a logical extension for any network news division,” said Tom Wolzien, an analyst at Sanford Bernstein & Co., “but it’s a tough go because of limited distribution capacity and an entrenched competitor in CNN.”

At a news conference in New York on Tuesday, Robert Iger, the president of Capital Cities, called distribution “our biggest challenge,” adding that the network is in preliminary discussions with cable operators. He said ABC will grow slowly until digital technology expands cable capacity and in the meantime will take advantage of alternative distribution offered by satellite dish services and telephone companies.

Iger did not rule out the possibility of taking on an equity partner that could provide distribution, and some analysts speculated that the network announced the launch a full year in advance to flush out possible partners. Although coming telecommunications reform will lift cable regulations that inhibit operators from adding channels, analysts doubt it will open the floodgates for new services.

“Cable operators can’t raise rates much by putting three or four new channels on their systems,” Wolzien said. “They’d be better off turning over capacity to pay-per-view channels, where they get 50% of the take.”

ABC hopes to differentiate its service from CNN by focusing on local news provided by its more than 200 television affiliates, which will have an undisclosed financial interest in the venture. ABC’s star-studded lineup of TV anchors and correspondents, including Peter Jennings and Diane Sawyer, and its inventory of widely watched reports such as “World News Tonight,” “Good Morning America,” “Nightline” and “20/20” will do double duty on cable.

Roone Arledge, president of ABC News, which will be the parent of the new service, said that when given the opportunity to choose between ABC and CNN during major news events such as the O.J. Simpson case and the Gulf War, they chose ABC.

Analysts say there is room for more than one all-news service, although not four or five. “If ABC over time gets 20 million viewers, CNN won’t lose that many,” said Derek Baine, an analyst at Paul Kagan Associates in Carmel. He said ABC is attracted by the huge money to be made in cable. He projected $270 million in cash flow for CNN next year, right behind the cash-flow leader, ESPN, at $300 million. ESPN is controlled by Capital Cities.

The network said Walt Disney Co., which announced plans to merge with Capital Cities in July, signed off on the channel this summer.

Despite ABC’s strong news resources, analysts said NBC might have better luck launching an all-news service. NBC has not formally announced a launch, although sources at the company said Tuesday that they expect the service to be unveiled before 1997. The network’s CNBC financial news network is highly successful, but its “America’s Talking” cable talk show service has been less well received and could be converted to an all-news channel.

ABC tried unsuccessfully to launch a CNN competitor in the 1980s with Group W Broadcasting, only to sell the service to Turner, which turned it into its Headline News cable service.

Analysts and industry executives were perplexed by the timing of ABC’s announcement, though some speculated that the network might be giving the two largest cable systems a chance to show federal regulators that they would allow CNN competitors to flourish. The Federal Trade Commission is reviewing the proposed acquisition of Turner by Time Warner Inc., the nation’s second-largest cable operator.

Sources give the merger little chance of being approved in its current form because of the clout it would give John Malone, the chief of cable leader Tele-Communications Inc., who would wind up with an 8% share of Time Warner by virtue of his stock in Turner.

Together, the two companies reach more than 45% of the nation’s cable households and, with Turner, would control some of the most popular programming. Regulators worry that the further concentration of control into their hands could put services trying to compete against CNN, TNN and TBS at a disadvantage, either by refusing carriage or putting them on remote reaches of the dial.

Sources close to Time Warner said one reason the company gave Malone cut-rate, 20-year contracts for CNN during the merger negotiations was to keep him from starting a competing service with another partner. Malone has close ties and has already started a cable sports venture with Rupert Murdoch, the head of News Corp., who only last week said he was considering an all-news network.

At a cable convention last week, Malone said he was open to carrying any quality competitors to CNN on his system, although he insisted that he had had no discussions with Murdoch.

In fact, Malone has financed competing services in the past. For instance, he has interests in both QVC and the Home Shopping Network. “Malone has never been against having more than one service from the same category on his networks,” said Baine, predicting that ABC would try to set up joint ventures with Time Warner and TCI for cable coverage.