CBS to buy CNET Networks for $1.8 billion

In a marriage between old media and new, CBS has agreed to buy online news site CNET Networks for $1.8 billion in a deal that should end the recent struggle to control the board of CNET.

The move comes after CNET’s management had come under attack by shareholders for not doing enough to increase its market value. CNET is one of the earliest movers to embrace an online only format, and is one of the largest online publishers. Hedge fund firm Jana Partners had attempted a hostile board takeover of the company, and CNET recently laid off 10 percent of its work force.

The purchase price is $11.50 a share, a 44 percent premium over Wednesday’s closing price of $7.95 a share. CNET stock rose to $11.41 a share after the deal was announced. CBS will be able to make the leap to the Internet with the CNET deal. The combined companies will have 54 million unique users per month, and about 200 million users worldwide, the companies said.

However, I don’t know if it’s really going to be enough to make the companies competitive in the age of the Internet. As venture capitalist Fred Wilson wrote in a Twitter note, it seems to be about “yesterday” and not tomorrow. CNET has a lot of Web 1.0 properties – Internet sites offering little or no user interaction — in an age of Web 2.0. The combined company will have to struggle with everyone else to get traffic.

The other argument, however, is that in the age of the Web, size counts. The larger you are as a publisher, the more you can strike better deals with advertisers: You offer brands a one-stop place to reach more people on multiple channels. With CBS, this means advertisers can reach CNET’s online users, but also CBS’s TV viewers, mobile users, radio listeners and so on.

The deal is expected to close in the third quarter. CNET’s board has unanimously approved the deal, the company said. San Francisco-based CNET’s sites CNET, ZDNet, GameSpot, TV.com, MP3.com, CNET News.com, UrbanBaby, CHOW, Search.com, BNET, MySimon, and TechRepublic. CNET had $406 million in revenues in 2007.

CBS, meanwhile, has properties that include broadcast TV (CBS, the CW), cable TV (Showtime, CBS College Sports Network), local TV, radio, TV production and syndication, advertising and publishing, interactive media (CBS Interactive), music, licensing and merchandising, and movies. CBS’ Internet sites include CBS.com, CBSSports.com, CBS CollegeSports.com, MaxPreps.com, CBSNews.com, last.fm, Wallstrip, MobLogic and other TV and radio sites.