The deal would provide access to Yahoo via News Corp.'s satellite systems and in return allow News Corp. to distribute its content, such as the Fox News Channel, through Yahoo, according to a report published in The New Yorker magazine this week.
A Yahoo representative declined to comment on the report, and a News Corp. representative declined to comment on "rumors and speculation."
The report, citing people familiar with the discussions, said Yahoo co-founder Jerry Yang has held "several meetings" with Peter Chernin, News Corp.'s president and chief operating officer.
The deal would likely involve both companies taking stakes in each other, the report said. But the companies are not considering a merger, vying instead to remain independent, it added.
The possible tie-in is significant because it comes on the heels of America Online's planned merger with Time Warner. The new company, to be called AOL Time Warner, would have a significant foothold in Web services, e-commerce, digital music, broadband cable access and other channels for online-to-offline cross-promotion.
After the merger announcement, speculation flew as to which companies would be involved in the next marriage between traditional and new media. Analysts have predicted that traditional media companies such as Walt Disney and CBS/Viacom will need to find Internet partners to remain competitive with AOL Time Warner.
Should a deal go through, it would not be the first time Yahoo and News Corp. have partnered. In January 1999, the companies entered a cross-promotional marketing relationship using the Internet, network television and cable television.
At the time of the deal, both News Corp. and Yahoo executives downplayed speculation that the alliance was fodder for a deeper financial relationship.
"We don't see Yahoo as being our fundamental Internet solution. This is a marketing partnership," News Corp.'s Chernin told Reuters in an interview last year.
But the AOL-Time Warner merger may have been the impetus for media and Internet companies to begin dancing.
To date, News Corp.'s Internet strategy has remained in isolated pockets. The company's most recent high-profile Internet play was its $1 billion investment in online health service Healtheon/WebMD. But the company has primarily used the Internet as a promotional vehicle for its TV properties. Many analysts consider News Corp.'s narrowband Internet strategy as lagging far behind its competitors'.
Instead, News Corp. has focused heavily on satellite broadband services. The company is planning to spin off its satellite division and has been trying to lure other strategic partners to take smaller stakes in the venture.
Satellite may be Yahoo's greatest attraction to doing a deal with News Corp. Although the Web portal has become a leader in the narrowband world, it has avoided tethering itself to a broadband platform, such as cable modems or digital subscriber lines (DSL). Rather, it continues to publicly declare its noncommittal stance to broadband, opting instead to offer its services to any high-speed platform.