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According to several sources, including New York Magazine, CBS Corp. (CBS) is in negotiations with Time Warner’s CNN to pool their news resources, without a full combination of operations.  The talks come on the heels of a deal between CBS and Time Warner’s Turner Sports to share the rights for the NCAA basketball championship for the next 14 years.  For CBS, the attraction of this latest deal is potential cost efficiency, as well as a cable television news presence. Time Warner may also be looking to benefit from cost synergies, as its audience shrinks amidst rising competition for viewers.

The goal for both entities is likely a boost to their viewership ratings and increased market share, as the number of news outlets available to consumers continues to proliferate. Although CBS is the home of the popular 60 Minutes program, it has been in last place among the broadcast networks in terms of its evening news ratings. The hiring of Katie Couric from then General Electric’s (GE) NBC in 2006, was meant to bring attention to the network, but only pushed CBS news program below ABC and NBC in the ratings. Additionally, CBS’ morning program was recently behind those two networks, too.

CNN, meantime, is up against fierce rivals in News Corp.’s (NWS) Fox News and MSNBC (part of NBC Universal, which is 80% owned by General Electric and 20% owned by the French firm Vivendi).  Like CBS, the network has seen its ratings decline substantially of late.  Nevertheless, as a cable news powerhouse, it generated record earnings in 2009 by way of higher affiliate fees charged to cable and satellite providers.

CBS, on the other hand, does not have the support of a cable news operation to bring in viewers. Meanwhile, cable and the Internet continue to take a bite out of its audience.  A deal with CNN could help it cover the costs of its news operations through the sharing of expenses.  More important, however, the alliance would broaden CBS’s audience, by allowing it to reach cable customers in a more direct way, thus boosting ratings.  An increase in ratings would likely lead to an increase in advertising revenues. 

Despite its strong profitability, CNN could benefit from higher ratings, too, if exposing CBS’ existing audience to the cable channel’s offerings leads to more viewers.  This would be in addition to the benefits of shared programming.  At the end of the day, CBS News and CNN, both of which are currently struggling to remain potent in their respective genre, would be in better shape if their discussions result in a partnership.

CNN had been in advanced talks with ABC several years ago about a similar deal, but that agreement fell through.  A partnership appears more likely in this case, however, given other agreements between CBS and Time Warner (in addition to the aforementioned NCAA deal). Primarily, the two each own 50% of part-time broadcast network CW.  Plus, CBS purchases programming from Time Warner’s production arm, the Warner Brothers studio.  Also, CNN’s primetime star Anderson Cooper already contributes to 60 Minutes.  So the working relationship that now exists should support the potential deal on the news front.

The reason why a full-fledged merger between the two operations seems improbable, though, relates to CBS’ unionized workforce and the likelihood of a dispute over who would maintain editorial control.  A merger, however, isn’t truly necessary if they can work out a solid partnership agreement.

Comments from management on the rumors have been non-committal. CBS President and CEO, Leslie Moonves noted that the two have been talking “for years about what we can do together”. Time Warner’s Chairman and CEO Jeffrey Bewkes was vague, too, saying that the company has “long been in discussions with really all of the candidates to see if there is a way to create rational improvements for both parties.”

The CBS/CNN discussions are a symptom of the difficult environment for the business of news gathering and dissemination.  Indeed, as more and more people view their news online, traditional news outlets have been hurt to varying degrees, and are moving to deal with the changing news consumption patterns.  For some companies, such as newspaper giants Gannett’s (GCI) and The New York Times (NYT), the shift toward the Internet has brought material hardship.  In fact, despite numerous attempts to adjust to a web centric world, newspapers have had a difficult time gaining traction online.  Gannett’s most recent push is hyper local news created by both its reporters and its readers that will first feed a website and then land in the newspaper—a somewhat radical departure from the historical news gathering methods.  The New York Times, meanwhile, has been trimming staff to cut costs and has experimented, with little success, in charging for access to its website.

The biggest problem for newspapers, though, is immediacy.  In a world where information can be shared instantly, yesterday’s news feels like old news no matter how much insight is added by the reporter.  While television news stations can get beyond this, since they report news all day long, CBS has limited time slots available and, thus, all of its efforts can still result in stories that feel “stale.”  Pairing with a cable news channel can help in this regard, by showing that CBS, too, has a bead on the hot stories as they happen.  CNN, meanwhile, would get to show CBS’s loyal audience, which tends to be older than that of other stations, that it has something to offer.

Increased sharing of content by various media entities is likely to become more the norm than the oddity as the Internet continues to shape the news business.  Notably, articles from the Associated Press (a not-for-profit cooperative owned by its 1,500 daily newspaper members) has long shown that content doesn’t have to be unique to have value.  Although the AP has had a difficult time containing its copyrighted content’s movement across the web, the idea of a central newsroom that supports multiple outlets could easily broaden to broadcast television. 

For example, a single camera crew could easily support multiple reporters on less important stories.  In the CBS/CNN situation, the same reporter could easily create two versions of the same story for the two different channels.  As consumers move more and more toward the web, these types of synergies could be the edge that makes a news outlet viable over the long term.