A recently loosened regulatory environment spurred Viacom’s merger with CBS last month, providing Viacom’s youth-oriented cable holdings (Nickelodeon, TV Land and MTV) with the company’s first sister broadcast outlet. Paramount Pictures, Spelling Television, Showtime, Blockbuster and Simon & Shuster are additional Viacom properties, along with 19 TV stations and stakes in UPN and Comedy Central. CBS owns Nashville Network, Country Music TV and Infinity Broadcasting Corp, plus 15 stations and 212 affiliates. The move raises Viacom to a number-two position amidst the top media players, with Time Warner leading and Disney falling into third place.

According to a source inside Nick-one of Viacom’s biggest cash cows-the parent company may utilize Nick’s programming resources to make CBS’s kids blocks more profitable. Asked whether the merger would mean curtains for Nelvana’s impending contract renewal with CBS (Nelvana produces all of CBS’s kids block), the source had this to say: ‘Not necessarily. Nick has had much more success with Nelvana shows than CBS has.’ Franklin, the Nelvana show that debuted on CBS’s Kids Show Saturday morning block in fall 1998, made the jump to Nick in January and has since experienced rapid ratings growth. Sources at CBS and Viacom say it’s too early to speculate about the merger’s programming impact.

Viacom will be the surviving entity in the deal, and will assume US$1.4 billion of CBS debt, with 76-year-old Sumner Redstone retaining the helm as CEO and CBS chief Mel Karmazin as COO.

In related merger speculation, Disney is expected to swallow up USA Network this month, although the move will raise problems with regulators who still guard against one entity’s ownership of two broadcast networks.