• by January 10, 2002

AOL Time Warner Inc. informed employees of CNN/SI that it will shut down the sports cable-TV network this fall, whether or not a pending deal to turn the channel into a network 50 percent-owned by the National Basketball Association goes through.

The five-year-old cable channel is available in more than 19 million homes, but never proved to be a serious rival to ESPN. The NBA, which already has a digital-cable-TV channel with limited distribution, is anxious to increase its cable reach as its presence on broadcast television dwindles.

The move had been anticipated since last month when the NBA reached a tentative agreement with AOL's Turner Sports and Walt Disney Co.'s ABC and ESPN on a six-year sports-rights deal valued at about $4 billion.

Turner Sports' TNT and TBS networks carry the league on cable now. The current broadcast-rights holder, General Electric Co.'s NBC, dropped out of the bidding, citing more than $300 million in losses on the NBA in the past two years.

CNN/SI will continue to operate until the new network is launched as part of the NBA deal, people familiar with the matter said. When that would happen isn't clear. If the new network proposal falls through, CNN/SI still will be discontinued, the people said. It was unclear how many of the channel's 190 employees would lose their jobs. Some employees could go to the new channel. Some CNN/SI executives believe about 25 percent could be absorbed by CNN.

Employees of the network have been in limbo since word of the NBA deal began circulating last month. Initially, CNN/SI staff believed the new deal would be a boon to the network, adding live sports and other properties. But employees were told that company executives had decided that CNN and Sports Illustrated, as news organizations, shouldn't be involved in a business deal with a league they covered.

CNN speeded up the timing of its news in order to meet an accounting-rules deadline which falls today. AOL now will be able to take a charge for expenses from the closure of CNN/SI that it wouldn't have been able to otherwise.

CNN/SI will keep operating until the new network is ready, largely so that AOL doesn't lose the channel space it currently holds on cable systems nationwide. People familiar with the negotiations said the deal with the NBA is close to completion. A spokesman for the NBA declined to comment.

Though the new network is so far unnamed, it likely will be called AOL Sports and would use programming developed by the NBA's entertainment division, along with other sports material.

-- Dow Jones & Company, Inc.