All The News That's Fit To Merge

Surely there's an easier way to make money. But execs at Disney and AOL Time Warner appear determined to go the hard route, and have fixated yet again on their long-running interest in merging their respective news-gathering operations--Disney's ABC News and AOL's CNN division. The tantalizing prize: at least $100 million. That's what many experts say the two companies could reap in savings by combining their newsroom operations, merging far-flung bureaus and thinning ranks of pricey newsreaders. Both AOL and Disney are in desperate need of some good news to deliver to investors, in the hope of propping up their embarrassingly low stock prices. The ABC-CNN negotiations came up at a recent AOL board meeting.

But the hurdles to such a deal are enormous, and some executives inside AOL tell NEWSWEEK they think the timing for such talks couldn't be worse. The company is dealing with a federal investigation into accounting practices at its AOL online unit--not the right moment to be heading to Washington regulators to seek the approval that a newsroom merger would probably require. "Why do we need that headache now?" says one executive. Outside opponents will seek to block it, too. Jeffrey Chester, executive director of the Center for Digital Democracy, says he will oppose a combination because it would eliminate one of the last few national broadcast-news operations.

Other obstacles to a potential merger are--surprise--ego and control. CNN brings in more revenue and profits than ABC, but will ABC, with its longer history and bigger audiences for shows like "World News Tonight With Peter Jennings," demand more control? Difficult issues, for sure. Even so, the advertising environment is tough, and the cost of delivering TV news is spiking in an era of covering the borderless war on terrorism. Ultimately, Disney and AOL may have no choice but to take the hard route and merge. Otherwise, the news may only get worse.