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CNET Staffers Happy to be CBS Employees

CNET staffers are joking that CBS bought their company purely for the coveted News.com domain name. But nobody is complaining about the windfall.

"The scuttlebutt … around here is that News.com will be used for CBS' News operations and that our News.com will end up being a tab off that page," said one staffer, who asked not to be identified.

It's inconceivable that CBS paid a staggering $1.8 billion just for a domain name, but nonetheless, most of the reporters at News.com -- the tech news division of CNET -- are expecting that CBS will take the domain name for its own news operation, the staffer said.

"It does seem clear we will lose our domain name," the staffer said. "At least we have a parent that's solid and has some money -- and isn't News Corp."

Once the highflier of online media, CNET has recently been rocked by stock option scandals, hostile takeover attempts, layoffs and staff attrition. Skeleton crews run many departments and morale is low.

While CBS is seen as stodgy, the company is stable and has a solid reputation for supporting the expensive business of news.

Delighted rank and file are busy trying to tabulate the worth of their shares, which they've been told will all vest immediately.

CBS paid a premium $11.50 per share for CNET, a 44-percent premium above CNET's closing price yesterday.

"We feel it's pretty good news, and we're all pretty happy," said another employee at CNET who also asked not to be named. "It was a good price, and we're all going to make a bit of money off of it."

None of the staffers have yet been told CBS's plans but a company-wide meeting is scheduled for next Tuesday, they said.

"Me personally, my initial reaction was 'Oh, fuck, corporate media is getting to us.'" said one CNET designer, who also asked not to be identified. "Every channel of communication in this country is owned by five or six companies, and we're joining that group … I just don't know if there's a way around that anymore."

But the designer said, generally, the staff welcomed the acquisition.

"The general feeling in the small talk going around is that this is a positive development," the designer said. "We're finally going to have some money behind us, because CNET has been hurting for the last couple of months. The first two quarters have been kind of hard, so I think this comes as good news, because obviously CBS is a big company that has a lot of capital."

"The mood is light. People are upbeat about it," said one staffer. "There's no worrying or anything. I think people think it's a good thing overall for the company."

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When CBS appointed Quincy Smith as its new interactive chief in November 2006, CBS chief executive Leslie Moonves said the network didn't plan to make big acquisitions. "We are not going to spend $1.6 billion on YouTube," he said.

No, as it turns out, he's going to spend $1.8 billion on CNET Networks.

CBS agreed to pay $11.50 per share for CNET, an online technology information network that also owns properties such as TV.com, Urbandaddy, Chow, and Search.com. The offer represents a 44 percent premium above CNET's closing price yesterday.

With the deal, CBS says it will triple its interactive footprint and will become one of the top 10 biggest internet properties. By combining CNET with its CBS Interactive unit, Moonves predicts that CBS can generate as much as $1 billion in online revenue by 2010.

While that all sounds very promising, CBS is acquiring a very troubled business. When Moonves said in 2006 that he expected Smith to find "the next YouTube" for CBS to acquire, no one could have guessed that he meant CNET.

CNET, which was one of the first internet content companies to go public during the mid-1990s, has experienced slowing growth in recent years as competition for advertising dollars has increased. More recently, the company has been fighting dissident shareholders led by the hedge fund Jana Partners, which owns 10 percent of the outstanding shares.

Jana has criticized CNET's management for failing to capitalize on its potential, and it proposed sweeping changes to its board and senior executives. CNET laid off 120 employees in an attempt to appease Jana, to no avail.

Moonves did not speak to anyone at Jana before making the offer to buy CNET, according to PaidContent. So far, Jana has not commented on the deal.

It's hard to imagine how any CNET shareholder could quibble with such an offer. For his part, Moonves isn't too worried about revolt. "I would think that Jana that’s in at $7 and something will be pleased with us. I’m hoping that’s the case,” he told PaidContent.

It's clear that CBS has its work cut out for it with this acquisition. It's acquiring traffic and reach, and a new set of advertisers and users. But it's also acquiring a mess.

"CNET is a complex company that needs some work because it's a mix of smaller businesses, many acquired, so there are management challenges," says Larry Kramer, who was president of CBS Digital Media until 2006 and is now senior adviser to Polaris Ventures and also a consultant to Conde Nast. "But there is huge opportunity. And the relationship with CBS can be huge for CNET's ad business and in other ways."

CBS shareholders are going to need a little convincing that CNET is the next YouTube, even if it is a more complex, challenging, and expensive one. Its shares fell more than 4 percent this morning.

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