Time Inc.'s Unmatched Access to Customers - Time and AOL - Brief Article - Statistical Data Included

With unparalleled audience reach, multimedia branding and targeted marketing, the AOL/Time Warner megamerger could redefine the circulation landscape. Here's what consumer magazine publishers will be up against.

When the merger between AOL and Time Warner was announced, broadcast industry executives went to the FCC to wring concessions that would protect their interests, while publishing executives could only wring their hands. Because the scope of the mega-merger is unprecedented, and because there is no comparable regulatory forum for the publishing industry to voice its concerns, publishers were at a distinct disadvantage.

Now that the merger has been consummated, the implications are no less grave for publishers than for broadcasters. And at the core of the matter are numerous circulation/distribution issues.

Mass-market tonnage

The size, scale and scope of AOL/Time Warner's combined circulation and audience reach is unprecedented. In the search for new customers, the advantages are threefold. First, these economies lead to absolute per-unit cost advantages. The per-unit cost of printing 10,000,000 pieces of mail, for example, is much less than printing 100,000 pieces. Second, these economies enable testing on an unprecedented scale, which further cuts the costs of acquiring new customers. Third, the cost and testing advantages empower management with knowledge that will allow for more effective marketing.

Audience access

Even before the merger was consummated, logging on to AOL meant seeing an ad to subscribe to Time Inc. publications such as Time, People and Sports Illustrated. No other publisher has that kind of access to millions of subscribers, most of whom log on to AOL daily. Of course, access works the other way as well. As a member of the family, AOL most likely will get to talk with Time Inc. subscribers at economically advantageous list-rental rates.

Because of its magazines' mass-circulations--particularly People, Sports Illustrated and Time--Time Inc. has benefited from its ability to buy network TV spots to sell subscriptions and extend its brand presence. Teaming with AOL extends these advantages to cyber-space in a big way.

For every brand, the fight to break through the advertising clutter, now estimated to be over 1,500 impressions per consumer per day, has never been greater. With their economies of scale and captive distribution channels, AOL/Time Warner brands have unmatched access to potential customers.

Audience segmentation

Using segmentation techniques, the advantages of scale can be amplified by targeting. Savvy direct marketers rely on overlays and segmentation. However, most make do with partial universes. AOL/Time Warner will work with such a large customer base that--in the process of identifying any interest constellations across print, broadcast and cyberspace media--its marketers are likely to define a universe.

Reaching the universes and their segments allows AOL/Time Warner to approach advertisers with tailored packages to reach mass audiences, as well as defined universes of special-interest niches. Because of lower costs per distribution unit, these packages can be priced with CPMs that set the pace for any market in which AOL/Time Warner chooses to compete.

Based on the scale of audience pulled in by their distribution efficiencies, AOL/Time Warner is in a position to go directly to the largest advertisers to offer deals that dwarf smaller players in any niche or market segment. In addition, without the 50 percent rule defining audited paid circulation, AOL/Time Warner will be in a position to define the value of disseminating information for every segment of the market in which it competes.

AOL/Time Warner--having the vision and foresight to achieve such advantages, enjoying the resources to create them, and positioning the company to reap the benefits--has redefined the landscape for would-be competitors in magazine publishing. In so doing, it may also have created a situation that challenges the ability of other publishers to develop their markets fully.

In the face of the AOL/Time Warner merger, the best strategy for other publishers is to choose a niche or pocket, define the audience universe, and then penetrate it as heavily as possible. If AOL/-Time Warner wants in, with luck, they will buy out the most credible player for a premium multiple. Hopefully, that will be you.

David Foster is president of ESI, a Morrison, Colorado-based consulting company specializing in services to publishers.

COPYRIGHT 2001 Copyright by Media Central Inc., A PRIMEDIA Company. All rights reserved.
COPYRIGHT 2003 Gale Group