The nation's most-watched broadcast network and leading home-shopping cable channel last week confirmed they're planning a merger that would install Mr. Diller, now QVC chairman, as CEO of the combined company.
The marriage would give CBS a leader with enthusiasm and aptitude for the evolving communications landscape, pushing the network into new-media areas it has been reluctant to explore.
Under the plan, Laurence Tisch, 71, would remain chairman of the CBS board, although he said publicly last week he's preparing to move on.
CBS has lost some luster in recent months as Mr. Diller's former boss, Rupert Murdoch, first stole the rights to televise National Football Conference games and, later, eight major affiliates.
Mr. Diller, 51, mastered broadcast TV as a young programmer with ABC and later as the driving force behind the successful rollout of the Fox network in the mid-1980s.
Now, Mr. Diller will get a shot at transforming CBS into the vertically integrated multimedia company of the future.
"Barry Diller has a twofold challenge," said Michael J. Wolf, head of Booz, Allen & Hamilton's media and entertainment practice.
"First is maintaining CBS' leadership role. Second is extending it into other areas. And that's not just new programming, but developing other new businesses."
When the deal is completed, Mr. Diller will own 4.7% of the new CBS' voting stock. Two of QVC's biggest stockholders, cable giants Liberty Media/Tele-Communications Inc. and Comcast Corp., will each end up with a 4.8% stake. Mr. Tisch will end up controlling about 10% of the new company.
While Mr. Tisch will continue as chairman, Mr. Diller-as CEO and holder of one of the five seats that QVC will have on the new company's 12-member board-effectively will direct CBS.
That's good news for CBS, because Mr. Diller has a proven track record of programming successes. After rising to the top programming post at ABC, Mr. Diller left to run the Paramount Pictures Corp.'s studio during some of its most productive years. In the mid-1980s, Mr. Murdoch tapped him to do the impossible-launch a fourth network.
While current CBS management has been dallying with cable and new-media projects, Mr. Diller will likely take a more aggressive approach. CBS last year attempted to launch a news and public affairs cable channel but was rebuffed by the industry.
Recently, CBS named Mark Harrington to VP-new technologies to begin exploring such partnerships and start-ups, and the network's marketing department began an interactive unit that is actively working with advertisers on a variety of projects, including its Prodigy marketing partnership.
CBS also has been testing electronic retailing, including direct TV sales of "Northern Exposure" sweatshirts.
Some Wall Street observers believe the merger proposal opens the door for a rival bid, presumably from long-rumored CBS suitors such as Walt Disney Co., Turner Broadcasting System, billionaire John Kluge or one of the Baby Bells that might be interested in getting into content.