Huge is best in the media ocean

If the soap opera of corporate deal-making that has been running all summer in the American media industry had a title, it might simply be "H-U-G-E". The game is who, of all the protagonists, each more grasping and egotistical than the other, will come out the biggest by the season's end? Will it be Disney, all cheek and swagger, or the more self-regarding and starchy Time Warner?

It has a been a storyline that any studio could be proud of. Just look at the action of a month ago when two American television networks fell into the hands of outside buyers in as many days - Disney snaring ABC and Westinghouse taking CBS. Now we have a new and, if anything, even more startling twist: Ted Turner, the celebrated pioneer of cable broadcasting and symbol of American entrepreneurism, is considering selling out to Time Warner.

Have the scriptwriters of our soap gone completely nuts? A merger of Time Warner and Turner would create a media behemoth larger even than the combination of Disney and ABC. Moreover, if it were actually to happen, Mr Turner would be agreeing to make his company, Turner Broadcasting Systems Inc, a subsidiary of the Time Warner combine. So, he would be a vice-president and be paid lots of money, but Mr Turner would be from thenceforth an employee answerable to Time Warner's chief executive, Gerald Levin.

From any angle, Mr Turner does not look like employee material. He has built his cable empire, which includes the world-renowned CNN news channel, over 26 years from the inauspicious seed of his father's Atlanta billboard advertising business. While CNN itself provides about half the company's annual operating cash-flow - more than $240m last year - slightly more is brought in by its sister entertainment networks, viewed mostly in the US, which include TNT, TBS and the Cartoon Network.

Nor does his domain stop at television. His film production and distribution interests include Castle Rock Entertainment and New Line Cinema. Other less-than-modest Turner attributes include his ownership of the top-ranking Atlanta Braves baseball team and his attachment to his home in Montana, which doubles as a buffalo ranch. It was Mr Turner whose yacht won the America's Cup in 1977. He is also married to Jane Fonda.

It came to Mr Turner some time ago that, in spite of his impressive success, he remained too small to matter against players like Disney and Rupert Murdoch's News Corporation. Thus, for the best part of a year, he pursued a possible purchase himself of an American TV network. On-off talks with NBC broke down in the spring when General Electric, NBC's current owner, refused to cede control of the network to Mr Turner. When he turned his sights later on to CBS, he sought financial backing from such diverse sources as Bill Gates of Microsoft and the Havas publishing group in France.

But the quest for a network, until now at least, has never come to anything. In part, Mr Turner has been frustrated by the two outside shareholders who came into his company several years ago to help pay off its past debt, Tele-Communications Inc (TCI), a cable systems giant, and Time Warner itself. So now, Mr Turner has been forced into a role reversal. Rather than seeking to buy, he suddenly faces the option of selling up.

This new and unlikely episode started with a surprise visit to Mr Turner's Montana ranch by Time's Mr Levin on 19 August. He was reportedly picked up at the airport by Ms Fonda herself. The pitch was simple: if you are unable to buy a network, allow yourself to become part of our empire. Thus you will achieve the size you so crave, but by another route.

Few could have predicted such a move, because even from the perspective of Time Warner it at first seems unwise. Since Levin took over the company after the death of its former charismatic chief, Steven Ross, he has been battling to reduce its debt - still stuck at $15bn - and overcome the scepticism about his abilities on Wall Street. Making a new purchase for an estimated sum of more than $8bn might at first seem eccentric.

But while it remained unclear last night whether Levin's bid would succeed, analysts pointed to several areas of logic in such a merger. As with the Disney-ABC deal, it promises to combine the vast production capabilities of both companies - with their movie and television studios - with multiple distribution potential through TNT, TBS and Warner's HBO as well as through Time Warner's extensive cable system holdings. For Time Warner it would serve to tilt the balance of its interests back from distribution towards content, something which Wall Street has long demanded. Moreover, Levin is proposing financing the takeover with new shares, not new debt.

Aficionados of Hollywood may also be gratified to learn that a merger, if it happens, would reunite the old Warner Brothers movie library, which was split when Mr Turner purchased the rights in 1985 to all Warner films made before 1948.

But then there is the game itself, the central theme of the soap: who gobbles who and when? While this has never been far from the minds of the industry's leaders, it became desperately urgent when Disney made its lunge for ABC. If it could ingest Turner, Time Warner would be helping to protect itself from possible hostile bids. Meanwhile, if Levin does not capture Turner, an attractive catch by any standards, who else might try? General Electric, perhaps, or Mr Murdoch?

Luckily for Mr Turner, all this is happening at a time when his company is performing extraordinarily well. Cash flow into the Atlanta headquarters is expected to reach $570m this year, up from $441m last year. Meanwhile the Disney-ABC effect may mean that his baby may never be more valuable that it is today. So it is less surprising than it might at first appear that Mr Turner is said by friends to be "enthusiastic" about Mr Levin's proposed deal and that he may be getting his clocking-in card from Time Warner before the week is done.