Consumer Magazine Report: Same As It Ever Was

After the initial shock wore off, publishing execs agree, the Time Warner/AOL merger was no big surprise A funny thing happened to the magazine industry in the wake of the biggest merger in the history of mergers (you know, the one that promises to change the way we read, think, buy, relax, learn and live). Nothing happened. No panic. No handwringing. No "strategy reevaluations." No rush to "new paradigms." Nothing. When AOL bought Time Warner last month in a union that was heralded with swelling hyperbole and pronouncements about the future of all media, any reasonable observer would have concluded that the future for everyone was about to change. And magazines certainly seemed to have been at the top of the list. If the world's most popular online company buys the world's biggest publisher of magazines, then an earthquake of significant magnitude would appear to have just taken place. But the obvious--at least in this instance--would not be a reliable guide. "I heard people say, 'Wow, that's an interesting but logical development,'" said Daniel Brewster, president of American Express Publishing, which is managed by Time Warner. "I didn't hear people say, 'Oh my God, the world is a different place.'" Perhaps that is because the world is not. AOL bought Time Warner (or both "merged," to use the more chummy designation that they prefer) to exploit a series of opportunities, but at least for now, revolutionizing the way magazines are bought, sold or read does not appear to be one of them. Time Inc. executives readily admit that they are still trying to figure out how this new marriage will work, and everyone--again, for now--is taking them at their word. But the magazine's wait-and-see attitude is also a pragmatic one, say industry leaders. The industry's courtship of the Internet has evolved over the last 18 months, and a huge number of key ventures have been launched, or are about to be. It would be imprudent, these leaders say, to suddenly scrap or revise these plans simply because a massive merger looms. Moreover, Time Warner's own Internet strategy, via Time Warner Digital Media, is evolving along with the rest of the industry's and (some observers argue) actually lags behind everyone else. The reason is that for years, Time Warner's defunct Pathfinder offered a laundry list of magazines sites, and everyone now knows that laundry lists are recipes for failure on the Internet. So Time, too, is now rapidly developing "hubs" and "communities of interest," such as entertaindom.com. And there is also a lurking suspicion that Time Warner (along with most other major multimedia companies) has failed to take advantages of synergies within its own vast hierarchy of movies, TV programs, books and magazines. Why should that change when AOL becomes part of the family? John Heins, president of Gruner+Jahr Publishing USA (who is leaving to join AOL-owned Netscape as vp for sales and international operations) says: "When people wax euphoric about synergy, they generally ignore how often it doesn't work. It can work when the component parts are already strong on their own. Otherwise, the synergistic idea is usually a big dud. In fact, Time Warner is a fabulously successful company, not because it's taking advantage of hundreds of synergies every day, but because it has focused operating units that perform very well in their markets." He adds that "the combination of AOL and Time Warner is clearly a big deal, combining the resources and offline and online assets of two extremely successful and powerful companies. That's a big deal, and we as magazine publishers have to recognize that. But it's not as if we didn't know until this merger announcement how important it is to have a clearly defined strategy for the Web--one that capitalizes on, strengthens and defends our existing brands." Certainly not. A veritable hurricane of Web-related activity has beset the magazine industry, and virtually every aspect of the business--from building subscription lists, to marketing brands, to new magazine launches--has already been revolutionized by it. And strategies are as diverse as magazines on a newsstand. Meredith recently launched a deep site that draws upon the resources of its various publications and has been operating virtual consumer shows. Amex Publishing is syndicating vast archives of information to various online companies (buybuy.com, for one). Hearst Interactive Media has been forging a variety of joint ventures with various media companies, while G+J USA--and many others--is actively seeking joint ventures with online companies or other "content providers" too. As Amex's Brewster explains, "I think magazines are increasingly viewed as more than just a title. They're viewed as brands, and to the extent that you can take that into other areas, be they print, video or cyberspace, you have the opportunity to enhance the brand, and the opportunity to increase your profits." Indeed, gone are the days when publishers simply sought to replicate a particular title on the Web. The new buzzwords are "content provider," "hub" and "community of interest." While Condƒ Nast remains the glaring exception, dozens of publishers continue, in fact, to duplicate titles on the Web. But the prevailing wisdom now is that a magazine should plug into an online community, where users exchange information and e-commerce becomes one of the engines that drive profit. Each Time Inc. title now has direct responsibility for its own site. But each will also contribute to the new hubs, which will focus on sports, personal finance and entertainment, among other areas. Said Christopher Little, president of Meredith Publishing Group: "Our philosophy is that you shouldn't view the Internet in a vacuum or as a competing or separate medium, but more as a weapon to be used in brand-building and deriving value out of the brand." The Internet, he said, "is one of the best things that ever happened to magazines." Nevertheless, there is still considerable debate over how to execute strategies, which appears to have been exacerbated by the AOL-Time Warner merger. "Anyone investing in new media today has to make a leap of faith," said G+J's Heins. "Gruner + Jahr has launched dozens of magazines, and so we generally know what works and what doesn't, and why it works or not. On the Web, you don't know. You know it's big, and you know you have to spend a lot of money. There are no guarantees in any business, but even fewer in creating new media businesses." Publishers say they have little to fear from the new giant because there is no reason for AOL to change the hugely successful model--AOL Everywhere, which meant that the service should be available to every person in the country, and ultimately, on the planet--that has fueled its growth since it was launched well over a decade ago. To attract users, AOL has boosted content dramatically. Among hundreds of ties that it has forged with content providers, AOL has signed dozens of media outlets as "anchor tenants." AOL's New York Times link, for example, duplicates the paper's Web site but loads more quickly for AOL subscribers and offers a few more bells and whistles. AOL, of course, could damage this franchise by severing links to these anchor tenants in favor of Time Warner titles. And conversely, Time Warner titles would be ill-advised to go "exclusively" with AOL. But as Meredith's Little put it, "We've had a very good relationship [with AOL], and I don't think [the merger] will impact that relationship We are leaders in the home and family area, and we don't compete directly against Time Warner, for the most part, in areas like decorating and home improvement." But what happens to those titles that do compete directly? Al Sikes, president of Hearst Interactive Media, said that "the question is whether AOL Time Warner favors Time Warner intellectual properties, and if it does, then that has a pretty major effect on the AOL business model. [So] I'm going to be paying real close attention to how the synergies that are always claimed in these deals get implemented." One observer summed up the merger this way: "AOL achieved access to [Time Warner's cable] broadband, and second, they were able to inject a cash-flow stream that begins to support their [high stock market] valuation," he said. "Conversely, Time Warner was being valued strictly as an old-line media company, and they were saying, 'Gee, how do we get a higher valuation?'" In other words, the merger didn't happen because Time Warner hopes to transfer all of its content onto AOL or because AOL hopes one day to transform itself into some exclusive enclave of T-W properties. This should give magazine publishers a little comfort. At least for now. n Verne Gay is a contributing writer to Mediaweek

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Consumer Magazine Report: Same As It Ever Was

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