Why did media investor John Kluge kill his deal to buy Alliance Entertainment for $533 million in stock? Insiders at Kluge-controlled Metromedia International Group say it's because Alliance, a distributor of vintage recordings by the likes of Mel Torme and Rosemary Clooney, no longer generated enough of what Kluge wanted: cash. He withdrew after fading music industry sales cut Alliance's operating cash flow to about $6 million in the first quarter, way below expectations.

Kluge had hoped to enlist Alliance in creating an MTV-style operation in Eastern Europe, and he still may try such a venture. Meanwhile, he is expanding his media empire at home. This summer, he hopes to close on the $115 million purchase of debt-laden Samuel Goldwyn film studio and the $32.5 million purchase of studio Motion Picture Corp. Insiders say Kluge won't be shopping for another music company anytime soon. But one says the billionaire may use his own or borrowed money, or even an equity offering, to fund a big entertainment or telephone deal.

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