AOL Buying CBS?

A few months ago rumors swirled that Yahoo was about to buy CBS. The reports were fueled by the fact that Yahoo’s market capitalization — the value the stock market placed on it — had passed that of the Tiffany Network.

Well, the fact was it hadn’t passed by too much, and the people who own CBS would be unlikely to accept an Internet stock in payment. Yahoo doesn’t really have the capacity to raise enough cash to do the deal.

The Internet-CBS rumor is back, however, and now it’s America Online that’s the rumored buyer.

This actually makes more sense. AOL is now worth $150 billion. CBS announced last week plans to buy King World, producer of “The Oprah Winfrey Show” and other classics, for $2.5 billion. (Oprah herself will take $100 million in CBS shares.) Still, even after that deal closes, the market capitalization of CBS will be “only” about $31 billion. Figure CBS chairman Mel Karmazin does some other clever things in the next month to raise the stock price, and it might be (at the outside) $40 billion.

For AOL, however, that’s still a deal that can be done easily. It could easily give CBS $50 billion. And unlike Yahoo, AOL actually has revenues, roughly $4 billion per year in revenues, growing fast. CBS has revenues of $6.81 billion, up 27% in the last year. The result would be a powerhouse in TV, radio and Internet broadcasting with annual revenues of over $10 billion, and real cross-promotion capability — something CBS doesn’t really have now.

The deal makes all kinds of sense, and unlike the Yahoo deal, this one just might get done. I’m as surprised to have written that last as you were to read it.

But what do you think. Is an AOL-CBS deal made in cyber-heaven? And what would it mean for the online world. Let’s talk about it

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