(FORTUNE Magazine) – The cable television business, until recently, has brought nothing but headaches to CBS. Twice CBS launched cable networks that flopped: CBS Cable, a high-culture network created by William S. Paley in the early '80s, was ahead of its time, and CBS's Eye on People, a 1997 startup, arrived too late. In the meantime, CBS lost young viewers by the millions to hip cable upstarts.

Now those cable channels have become CBS's powerful allies. The reason, of course, is that the broadcast network and its parent company were acquired by cable powerhouse Viacom in May. Since then Viacom's chairman, Sumner Redstone, and its CEO, Mel Karmazin, the former CBS chief, have deployed Viacom's MTV, Nickelodeon, VH1, Showtime, and TV Land cable networks to support CBS--and vice versa. "The combination is working fantastically, and we're getting along terrifically," declares Redstone.

For example, CBS agreed to turn over its historically low-rated Saturday morning programming to Nickelodeon, the most popular TV channel among kids. More broadly, CBS and its cable allies have joined forces to promote each other's shows, develop movies, acquire the rights to sports events, sign deals with TV stars, and even cover the news, whether at this summer's political conventions or at next year's Grammy Awards. "These are really complementary assets," says Leslie Moonves, the president and CEO of CBS Television. "Everyone hit the ground running, and there's been very little stepping on toes."

To be sure, there have been a few casualties; overlapping syndication properties cost one key executive his job. There probably will be more. Moonves has done such a good job revitalizing CBS that he's in line to take over Viacom's broadcast network, UPN; combining CBS and UPN programming, affiliate, and ad sales operations would save Viacom tens of millions of dollars a year, reason enough for the cost-conscious Karmazin to merge them. Top executives must also figure out whether to centralize Viacom's far-flung, money-losing Internet properties, which range from mtv.com to iwon.com, a cheesy sweepstakes portal.

Wall Street has seen beyond these issues, and so far the marriage has been rewarding for shareholders. Viacom's stock has risen by 16% this year, outpacing its entertainment-industry peers' and the S&P 500. With shares trading at about $70, leading analysts such as Merrill Lynch's Jessica Reif Cohen and Paine Webber's Chris Dixon have placed 12- to 18-month target prices of $100 or more on the stock.

Advertisers are also keen on the merged company. Thanks to CBS's work with MTV Networks, ad buyers, for the first time in decades, see CBS as a means to reach highly desirable younger viewers. MTV, VH1, and Nickelodeon helped hype Survivor, the reality show about castaways on a South Pacific island, which has become the most watched summer program in TV history. "Probably the biggest myth that we have debunked is that CBS could never reach younger viewers," says Moonves. Network researchers say the average age of CBS viewers has dropped from 53 to 48 since Survivor and Big Brother, another popular reality show, went on the air.

To help introduce Bette, a CBS sitcom starring Bette Midler, CBS asked VH1 and MTV to feature her videos in the week before the show premieres. Similarly, TV Land is trying to acquire old episodes of The Fugitive, which would be used to build interest in a remake of the show that will debut this fall on CBS.

Personalities will crisscross networks too. VH1's Rebecca Rankin contributes music news to CBS TV and radio outlets. Teen idol Carson Daly, MTV's biggest star, is about to sign a new contract with MTV only after being promised exposure on CBS as well. Daly will host a music-video show for CBS on Super Bowl Sunday, and may develop celebrity interview specials for the broadcast network. Says Tom Freston, CEO of MTV Networks: "The image rub-off of Carson Daly and MTV is going to help CBS as it ages down."

MTV will also produce the halftime show for CBS's 2001 broadcast of the Super Bowl. Nobody at MTV will talk specifics, but you can bet that the cable executives will pursue some of the biggest names in music (think Paul McCartney and Bruce Springsteen). "I don't want it to be like Disney last year, which everyone was vomiting about," says Freston, exaggerating only slightly.

Sounds as if the Viacom executives at least recognize the downside of cross-promotion: Too much shilling for corporate partners will alienate viewers. MTV fans don't tune in for CBS promos. Come to think of it, no one has ever turned on a TV to watch synergy.