CNN and ABC News may merge to create a broadcast news giant earning $1.6bn a year, a report has said.

Chiefs at CNN's owner, AOL Time Warner, have held talks with bosses at Walt Disney, which owns ABC News, to discuss spinning off the firms into a "stand-alone news powerhouse", the Los Angeles Times said.

While talks over the merger have been continuing for 18 months, they have reportedly gained momentum in recent weeks.

Both AOL and Disney confirmed that talks over changes at their news operations had been held, but declined to give further detail.

Under pressure

A heightened need to cut costs at both AOL and Disney, where poor results have increasingly concerned investors, may be behind the accelerated efforts to finalise a deal, analysts said.

The LA Times report came ahead of a Disney board meeting at which chief executive Michael Eisner was expected to come under pressure over a continued decline in the firm's profits.

Earnings have been dragged lower in particular by the overall ABC network, which has fallen behind CBS and NBC in the ratings.

Disney's theme park division has also shown signs of weakness, the firm admitted last month, a decline analysts have blamed on the overall global economic slowdown.

Sticking point

Previous efforts to merge CNN and ABC News are believed to have floundered on ownership issues.

But any deal is likely to see AOL own between two thirds and three quarters of the combined company.

CNN would account for about $1bn of $1.6bn revenues taken by the new firm, the LA Times said.

Yet CNN has seen its dominance of round-the-clock news reporting market challenged in the US by MSNBC and Rupert Murdoch's Fox News channel.

And it is seen as having few presenters with the appeal of ABC's Peter Jennings, Barbara Walters and Diane Sawyer.

Disney shares closed $0.32 down at $14.75 on Tuesday.

AOL shares ended $0.02 lower at $11.99.