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IS DISNEY-CBS LINKUP FANTASYLAND? PROBABLY YES, BUT NETWORK IS RIPE FOR A BUYER

By Published on .

It's a given that John Malone is the most powerful man in TV. But he's apparently quite influential on Wall Street, too.

In a profile in The New Yorker's issue dated Feb. 7, Mr. Malone, ceo of cable TV's mighty Tele-Communications Inc., helped send CBS' stock price upward with a mere allusion to a possible CBS combination with Walt Disney Co.

"It [CBS] will probably merge with Disney within 12 months," Mr. Malone said.

His musings were nothing more than nine words in a 14-page article by Ken Auletta dealing mainly with Mr. Malone's personal history and business career. On Jan. 31, the Monday after the article came out, CBS' stock jumped $9.75 to $306 per share.

The anecdote may say as much about the power and influence of The New Yorker under Editor Tina Brown, or Mr. Auletta, a well-known writer on media businesses, as it does about Mr. Malone's, but the lesson clearly is that the weight of a rumor has more to do with who says it than what it's about.

Indeed, the CBS-Disney merger rumor has been around for years-almost as long as the previous Paramount-NBC merger rumor-both because it's logical and recent changes in Federal Communications Commission regulations now make it feasible for a studio to own a network or vice versa.

And CBS becomes the most likely merger candidate because it's the least diversified, focusing almost exclusively on the broadcast network and station business.

Although TCI's Mr. Malone also said he believed Ted Turner would like to buy ABC or NBC and Barry Diller, chairman of QVC Network, might acquire NBC, those companies didn't see their stock values significantly affected.

CBS' upward run may also have been spurred by analysts simultaneously upgrading their recommendations to buy its stock.

"CBS went up tremendously, because the assumption was that it would be sold. Whereas the other networks are being seen more as acquirers or merger partners," said Jessica Reif, an analyst with Oppenheimber & Co.

Analysts see CBS as a likely takeover candidate not because John Malone says so, but because CBS' controlling shareholder, Chairman Larry Tisch, owns less than 25% of the stock, leaving room for an outside player to gather a controlling share at the right price.

But CBS insiders scoff at the Disney scenario, noting it is an old rumor and that it is more likely that CBS would align itself with a telephone company.

Indeed, Mr. Tisch sent such a signal when he said, after cable operators rebuffed his plans to get cash for cable's retransmission rights, CBS would explore new relationships with the phone companies rather than fight the cable people, or launch new cable TV channels.

What about a Disney merger with some other network? That scenario is not totally without merit, some TV executives believe. They maintain Disney could be a good fit with Cap Cities/ABC. After all, Disney Chairman Michael Eisner is a former ABC executive, and the two companies have had ties for years.

Industry executives also see the return of former Cap Cities/ABC CEO Tom Murphy as a signal that he wants to wrap up such a deal before turning things over to a new generation of executives.

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