Parsons Cools Merger Talk

First, let's figure out how a CNN/ABC News combo would work, he says

AOL Time Warner and Disney have "hit the pause button" on the merger of CNN and ABC News, AOL Time Warner CEO Richard Parsons said last week.

In theory, both sides like the concept of operating a merged entity, he said, noting approvingly that the NBC News business model consists of one big newsgathering apparatus that feeds material to cable channels and a broadcast network.

That model, he said, has "inherent merit." But short of merging AOL Time Warner and Disney (which he stressed is not being contemplated), what the companies haven't figured out is how both units can control their own air and efficiently manage the overall entity at the same time.

Then there's this odd consideration: What if it didn't work? If a venture were to be crafted with one newsgathering operation servicing both the broadcast and cable channels, Parsons said, there are good questions about how or even if it could be undone if it failed to live up to expectations.

So, while there's that inherent merit in the basic business model, there are "operational and structural questions that nobody has figured out yet."

And until those questions get answered, he said, there wouldn't be any point in resuming talks.

Parsons made his remarks at the UBS Warburg media conference in New York, where he also disclosed that, as part of an effort to shore up the company's balance sheet, executives are putting together a list of "non-core" assets that the company will consider selling.

He didn't identify specific properties—no, not AOL, he did say—but the company's interest in Comedy Central is said to be up for sale.

Job one with AOL is to fix it, he said, and that requires content creation, which is the company's strong suit. Asked specifically about an AOL spinoff, Parsons replied by repeating the question. "Could it be? Yes. Is it a good idea? No."

The company is moving forward on simplifying its corporate structure. The Time Warner Entertainment partnership with Comcast is being unwound, and MSO Time Warner Cable will be spun off into a separate public company in which AOL Time Warner will wind up owning a 70%-plus stake, Parson said. AOL officials expect the spinoff to be completed by spring.

Not surprisingly, Parsons said employee morale is a major issue that needs to be addressed. Much of that discontent comes from changes in benefits, in which the company swapped pensions and other retirement plans for company stock options for most employees. Needless to say, that switch has not proved to be a popular one given the company's tanking stock price.

"For a cable pole climber in Birmingham, a retirement plan is more meaningful than stock options," he said, indicating that the company will consider adding back certain retirement benefits on a division-by-division basis.

"It's no secret there is grumpiness throughout the land" among employees, Parsons said. What he has concluded, however, is that "the natives are restless, not mutinous."