ABC News, CNN Ponder Merger

Employees at CNN and ABC News tried Tuesday to figure out how their lives would change--radically, most likely--if the two news divisions consummate a possible merger.

The idea, under sporadic discussion for 18 months, reached the highest levels yet late last week when the board of AOL Time Warner Inc., which owns CNN, examined the pros and cons of the proposal for the first time. Walt Disney Co. owns ABC News.

Both parties said Tuesday that no deal had been reached and none is imminent. But company sources said the discussions were continuing and were not discouraged in any way by the AOL Time Warner board.

The plan under discussion last week called for spinning off CNN and ABC News into a separate company in which CNN, because of its greater revenue, would have a majority stake, as much as 75%. The combined company, with projected revenue of more than $1.6 billion, would be able to slash costs by as much as $200 million annually, leading to heftier profits at both companies, sources said.

Any deal would be rife with complications and serious ramifications for the television news business. CNN’s salaries are markedly lower than those at ABC News, which built its celebrated stable of editorial employees over three decades partly by paying staffers handsomely. As budget pressures have mounted in the last year, ABC News has been asking correspondents, anchors and producers to accept salary cuts.

But employees had questions about who would have editorial control, how to merge the two operations’ very different styles of presenting the news and whether such media consolidation would be healthy. Would ABC News’ Peter Jennings and Barbara Walters appear on CNN? And which overlapping bureaus might be cut?

The merger could benefit ABC News in a place such as Moscow, where, to save money, the network is closing its bureau. Network executives say that ABC no longer needs to have a large Moscow staff now that travel is freely permitted and that a camera operator and a producer will remain.

By contrast, CNN has 41 bureaus outside the U.S. and 10 employees in Moscow, including two correspondents.

Both sides tried to reassure their jittery staffs Tuesday. ABC News President David Westin, in his morning conference call with senior staff, said the division is “stronger than it was a year ago. That means we have the luxury of doing nothing at all and continuing to grow our business. It also gives us the luxury of doing a deal--if any is done--from a position of strength.” He said any deal would be done “with the goal of making ABC News even stronger and better.”

CNN News Group Chairman Walter Isaacson told his staff in a memo that “it’s no secret that for many years CNN has had talks with other news organizations that currently have no 24/7 cable news distribution about working together or combining assets.”

He said the idea was “intriguing, and we expect that these talks will pick up again from time to time. At this time, CNN is not close to making a deal, but we will always explore scenarios that can make our journalism and business even stronger.”

Jensen reported from New York, Hofmeister from Los Angeles.