AOL Time Warner's decision to pull the plug on 5-year-old CNN/SI appears to move operators one step closer to being asked to trade in a low-priced sports news network for an expensive channel featuring NBA basketball games.

Turner Broadcasting was charging just 2 or 3 cents per subscriber per month for CNN/SI for the first five years of a contract. The network reached 19 million cable and satellite homes and lost about $76 million over five years, according to Kagan World Media, the newsletter and databook publisher that, like Cable World, is owned by Media Central.

Kagan estimates that CNN/SI had costs of $135 million and revenue of $59 million.

AOL TW is close to a deal to keep a portion of the NBA's television rights. Part of the agreement would be creating a basketball channel 50% owned by the league.

Published reports say the channel will cost 50 cents per subscriber, and operators, already concerned about the high cost of sports programming, are wary.

?We're watching it carefully and anxiously,? says Andrew C. Johnson, spokesman for AT&T Broadband.

Frank Hughes, SVP-programming for the National Television Cable Cooperative, sees the new channel as a chance to fight back against the sports leagues and team owners.

?This gives the industry the perfect opportunity to say to the NBA, ?you want these games on cable, you pay us 50 cents a sub.? That's the way this ought to be working anyway. Pay us and you get the national advertising. I'm serious as a heart attack,? Hughes said.

Turner is shutting CNN/SI because changing it into an NBA channel would have been difficult. For one thing, CNN/SI's existing distribution contracts include rates and conditions that differ drastically from the new network's proposed direction.

Shutting down the network was necessary because CNN and Sports Illustrated did not want to compromise their journalistic credibility by carrying sports events; neither felt it could afford to be part of a joint venture with the NBA.

The CNN/SI partnership won't disappear. Already a separate business entity, profitable CNNSI.com will remain intact, although it may relaunch with a different name.

CNN/SI's closing will give ESPNews sole ownership of the 24-hour sports-news category. ESPNews debuted the month before CNN/SI and benefited from Disney's retransmission leverage. ESPNews reaches 33 million households and, according to Kagan estimates, pulls in four times the ad revenue of CNN/SI. But Kagan also estimates ESPNews's losses are higher than CNN/SI's $127 million.

CNN/SI's demise gives operators less leverage against ESPN, says Hughes of the NCTA. ?From that standpoint when you go to look at a sports news service you now have one choice instead of two choices. I don't think that's healthy. Unfortunately, we'll probably see an escalation of [fees for] ESPNews.?

An accounting quirk led to last week's announcement to employees that CNN/SI would disappear next fall, even though the deal for the replacement network has yet to be completed. According to company executives, stating an intention to make the move before the close of the first year after the merger of AOL and Time Warner allows AOL TW to take advantage of certain tax rules.

The long lead time also gives the 190 CNN/SI employees ample opportunity to look for new jobs. More than 25% will remain part of the sports department of CNN, according to company sources, while an unknown number will likely land at the new basketball network. Anyone who stays on through the end of CNN/SI will receive a substantial severance package similar to those distributed during last year's postmerger layoffs.

While network executives feel they succeeded journalistically, CNN/SI never took off with distribution or with viewers.

?We had a very good product. Without a major event component we were clearly at a disadvantage,? said CNN/SI general manager Steve Robinson.

?We hamstrung ourselves deliberately in some regard, because we set out to do a news network that was to be serious journalism,? explains Michael Klingensmith, EVP, Time Inc. As for the brands, he said, ?the one thing that you find going through a process like this is there's no immediate guarantee that media brands transfer across media types.?

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