International: Marketers press for product placement in magazine text
Commercial messages have seeped into the plots of movies, the very fabric of TV shows and video games, and even into the plots of novels. But that may have been just the beachhead. Now a growing number of marketers want to persuade the nation's print magazines to open the text of their editorial pages to product placements.
Commercial messages have seeped into the plots of movies, the very fabric of TV shows and video games, and even into the plots of novels. But that may have been just the beachhead. Now a growing number of marketers want to persuade the nation's print magazines to open the text of their editorial pages to product placements.
"The only way we're going to be more successful is to get even more creative and try to find ways to address this church-and-state" issue of editorial vs. advertising in magazines, said Matthew Spahn, director of media planning at Sears, Roebuck & Co.
Magazines today must answer to advertisers who demand sales executives come into a meeting with more than a schedule and rate card. Marketers and their media buying agencies want ever-more-creative ideas, and with ad-page sales still lagging for this year's first quarter, many titles are under competitive pressure from not just their own category, but other media as well. On top of that, custom publishing, where marketers can completely control the editorial content, has steadily grown in the last decade, and an emerging category of magazines, dubbed shop-a-logs, are blurring the advertising and editorial line even further.
But a product-placement push into magazines, many argue, would violate the church-and-state division between ads and editorial that, at least rhetorically, lie at the heart of magazines' time-honored pitch to marketers. Magazines sell a relationship with its readers, and an opportunity to reach them in a time of intense focus and receptivity. To disrupt magazines' signals, say editors and not a few business-side magazine executives, is to severely undercut magazines' one unique selling point, if not outright reason for being.
"No other media can offer that connectivity to the degree that print does," said Richard Beckman, Conde Nast Publications' chief marketing officer. When that church-and-state line gets blurred, he said, "the long-term prognosis for those that do it is not good."
Others -- including some who vigorously defend magazines' traditional separation of advertising and editorial -- privately wonder about what the future may bring, and worry what that separation may ultimately cost them. Other media, said one prominent publishing executive, "don't have any sort of ankle-weights on them" in terms of assembling branded entertainment-type deals. "They are running as fast as they can."
And marketers notice. Mr. Spahn spoke of "media partners working in much less traditional ways, that go way beyond just buying ad pages or buying spots. It's more about integration of the product, and becoming a part of the storyline, in ways that readers or viewers will still be interested in consuming that material." He admitted he was not fully sure what the magazine equivalent of, say, Sears' deal and appearances in ABC's Extreme Makeover: Home Edition might look like, but expressed dissatisfaction with magazines' attempts to play in this space. "They still think in terms of advertorials," which, he said, "doesn't feel like part of the fabric" of editorial.
"It's a huge challenge for magazines," Mr. Spahn conceded, but he added "they've got to figure this out. We are getting a little frustrated, frankly, trying to get them there." Last year Sears spent $47.7 million in magazines, according to Competitive Media Reporting, down 25.7% from $64.2 million in 2002.
Magazine executives testify to increased pressure from advertisers to break down or breach traditional walls.
"More advertisers ask us to blur the lines between advertising and editorial," said Nina Lawrence, president of Conde Nast's Bridal Group and publisher of Bride's and Modern Bride. "It's accelerated in the last year." Ms. Lawrence placed the blame for this squarely on branded-entertainment deals: "Advertisers are asking for what they want on TV, and they're getting it."
It may not be only advertisers seeking such deals. Peter Gardiner, partner and chief marketing officer of Interpublic Group of Cos.' Deutsch, said his company was approached by a magazine with an editorial concept worked around one of his clients. "It's a really tricky area," he said.
Concerns over this point led one incoming editor of a midsize endemic magazine to write into an employment contract a clause stating that the magazine must strictly observe guidelines governing the separation of advertising and editorial set down by watchdog group the American Society of Magazine Editors, said an executive familiar with the matter.
Any sort of product-placement deals in magazines would rather blatantly violate the industry's accepted rules. According to ASME guidelines, ad messages and ad pages should be "distinctly different from the publication's normal layout." One conceivable exception is for special advertising sections, but these sections must be "clearly and conspicuously identified as a message paid for by advertisers."
In truth, consumer magazines' dance with their advertisers is universally conceded not to be a wholly chaste affair wherein both parties scrupulously observe limits and boundaries. Key beauty and fashion advertisers, for instance, are often depicted in product layouts among magazines dependent on them as part of open-secret horse-trading of editorial "credits" for advertising.
"We usually use our fashion sections as the place to throw some of our clients a bone," said Suroosh Alvi, a co-founder of independent Brooklyn-based lifestyle title Vice.
This admission is privately echoed by top players at magazines owned by major publishers, who sometimes cite more lax ad/edit divisions at European magazines as a catalyst. But a jacket showing up in a fashion layout doesn't equal, say, a series of paid-for Cadillac references showing up in a short story that doesn't have the words "special advertising section" topping it, nor a long account of a mountaineering expedition studded with mentions and visuals of the adventurers chowing down on Power Bars.
Integrating brands into editorial is not universally sought by marketers who've played in the branded-entertainment space -- or, unsurprisingly, among key magazine executives.
"We haven't been looking at magazines at all with the whole Madison and Vine concept in mind," said Tracy Sandford, director of marketing for JetBlue. She said that JetBlue's regional tilt precluded making national print buys, but she also believes: "You have to overcome the advertorial concept. ... How can you differentiate between just an advertorial and something a little more integrated?"
"We would never ask an editor to do a product-placement deal," said Michael Clinton, chief marketing officer of Hearst Magazines. "It's just not how the medium works."
At the same time, it's clear that magazines' standard responses to advertiser demands for more marketer-centric content -- "special advertising sections," stand-alone custom-publishing efforts and event tie-ins -- are simply nowhere near as sexy as a mention on Bravo's Queer Eye for the Straight Guy, and some marketers suggest there may be middle ground in which magazines can operate.
"When it comes to print, the issues are more subtle. But I don't see a reason why you can't do what I'll call 'appropriate product placement' in print," said Philip Guarascio, a marketing consultant for the National Football League and a former top marketing executive at General Motors Corp.
The branded-entertainment concept comes at a particularly complex and delicate time for magazines. The medium's longtime circulation model is widely reckoned to be broken. Its ad recession is entering its fourth year, with few bubbles and bumps of serious forward ad momentum that, say, TV sensed through strong upfront sales.
A new generation of marketers are excited by the prospect of embedding messages in American Idol, Tomb Raider II or even novels. More broadly, the commercialization of the American landscape now encompasses the sponsorships of stadiums and arenas, and even public spaces, such as museums and national parks. In another first at Major League Baseball's opening day in Japan last month, uniforms worn by the New York Yankees and Tampa Bay Devil Rays sported logos and patches advertising Tokyo-based office equipment firm Ricoh, for which the marketers paid over $10 million.
"How do you maintain integrity in a world where the lines are blurring?" wondered one veteran branding executive.
This point is especially plangent for magazines at a time when the category with the most heat is that of pure-play shopping magazines, the frankly retail-oriented products pioneered in America by Conde Nast's Lucky. Lucky was joined last month by Conde Nast's male-oriented version Cargo. Later this year is Fairchild Publications take on the genre, Vitals, Hearst Magazines' Shop Etc., and next year will bring Lucky's take on a shelter magazine.
Lucky's editor in chief, Kim France, strongly objected to notions that her magazine has helped blur the lines between advertising and editorial. "It's annoying to me that excluding the articles about movies and boyfriends and sex tips somehow makes your hands dirty," she said.
If Lucky's readers "felt our editors were just shilling," she said, "they wouldn't respond."
But when asked about Shop Etc. in a recent interview with Advertising Age, Hearst Magazines President Cathleen Black made clear that magazines have entered a new world.
"The more interactive we can make" Shop Etc., Ms. Black said, "the more it's useful tool for the shopper. What ASME wants -- and what their rules are -- is irrelevant to Shop Etc.," a comment that had editors shifting uncomfortably in their seats. One fumed, "We have people saying" traditional notions of ad and edit separations "don't apply to certain magazines."
Slippery-slopers may find fault with Ms. Black's remarks, but the world of TV offers a useful parallel. One sees product placement in pure entertainment plays such as The Restaurant; one doesn't see them on the CBS's Evening News with Dan Rather. Is it conceivable magazines may enter a similar space, where what's unthinkable in the likes of The New Yorker and Time is acceptable within the pages of magazines purveying lighter fare?
The dividing line does vary from magazine to magazine, sometimes shockingly so. Dave Itzkoff, a former editor of Maxim who left that title in the summer of 2002, said that during production editorial pages "were reviewed by someone in the ad department, who would scan for mentions of any brand-name product." If advertisers' products were mentioned "in any disparaging way, [the ad staffer] would approach to say, 'Please delete it' " or make the reference more generic. And "if we mentioned a product in a favorable light that was not an advertiser" the ad-side would request "to find a competing product who is an advertiser" and change the reference that advertiser. Mr. Itzkoff said these requests resulted in several instances to editorial changes.
One Maxim partisan pointed out that since splitting Maxim, Mr. Itzkoff has made hay from being a disgruntled former lad-magazine employee, most prominently thus far in an extensive takedown of the genre written for Manhattan weekly New York Press. But his charges about the coziness of advertising and editorial at Maxim are confirmed by at least one other witness who told Ad Age of such events.
In a statement, Dennis Publishing's editorial director, Andy Clerkson, who oversaw Maxim for nearly three years as its general manager, said, "The idea that senior sales staff on any magazine do not try to pitch editors to treat their clients favorably is naive. However, at Dennis Publishing, the editor in chief has always had and always will retain final say on what is printed. We have never, nor will we ever, alter a product review based on advertiser concerns." (Mr. Itzkoff disputed that Maxim's editor in chief had final say.)
"There's certainly a spirit of cooperation within our magazines, and a willingness to consider new ideas. But there's also a line drawn between the editorial and the commercial," said Time Inc. Editorial Director John Huey in a brief statement prepared for Ad Age. "Crossing the line is not good for the reader. It's not good for the brand. And it's not good, in the end, for the advertiser. The notion that 'everybody else is doing it' is not a compelling argument to us." (But, again, the line is sometimes elusive. An executive at Southern Living, part of Time Inc.'s Southern Progress unit, admitted in a 2002 Wall Street Journal article that the title brought advertisers into some magazine-planning meetings.)
An editor in chief elsewhere put the commercial argument of church and state in more blunt terms. "Without a visceral relationship with the reader, it's not going to work," this editor said. "Don't be getting in the middle of that" with product placement. "My reader's gonna say, 'What's this [expletive] for?'"
For marketers, said one publisher of a blue-chip magazine, "the most important decision is allocation of media, and who gets what. What happens as the magazine industry, because of ASME, doesn't do any Madison & Vine type things? I think it ultimately puts the magazine industry in a weaker place."
"Go make the deals and then figure out how they work within ASME guidelines," shot back Susan Ungaro, editor in chief of Family Circle and president of ASME. "You are selling from weakness rather than strength if the only way you can get an ad to come in your magazine is to promise product placement."
The bigger question, of course, is if any attempts to get branded entertainment into magazines will be met with consumer acceptance -- a la American Idol and AT&T Wireless -- or consumer backlash. Flashpoints of consumer anger, at press time, are forming over Google's plans to mine e-mail messages sent on its free "Gmail" service in order to target ads to its users. But executives point out that a new generation of consumers has grown up receiving marketing messages embedded in entertainment products, and, separately, the broad acceptance of shopping magazines such as Lucky indicates consumers tolerate openly commerce-oriented titles.
Still, some sound uncertain. "Ultimately, your ability to create revenue for the advertiser will get hurt if you're jeopardizing the loyalty of the reader," said Brad Ball, the principal of the newly launched Madison & Vine firm Ball Entertainment Group, which counts among its clients Time magazine. Still, he suggested in the future "you might find an entire subject written by a well-known magazine brought to you by" a key advertiser.
Within a five-year window, he said, "the landscape of reaching audiences and choices audiences have is going to accelerate. ... The rulebooks [of marketing] will be rewritten." As such, some magazine executives speculate about product pages of the future, in which one slot is reserved for an ad placement, and marked as such.
These notions still prompt howls from some key executives. "From a Time Inc. perspective, I don't see a world where we're going to have product roundups as pure editorial that are going to have any bias towards any specific advertiser," said Time Inc.'s executive vice president, Jack Haire.
But one executive pointed to an eventual breakdown in magazines' resistance to product placement owing to the golden rule (as in: He who has the gold makes the rules). And this is clearly a marketing world in which taboos are broken daily. Last month, a Major League Baseball vice president said "never say never" to the possibility of paid-for logos appearing on baseball uniforms.
And magazines' traditional defenders of the ad/edit divide must make their case in purely economic terms, since even a key player in the one industry organization tracking this situation admits their penalty options are limited. "It's the next natural evolving demand from advertisers," said David Granger, editor in chief of Hearst's Esquire and ASME's secretary. "There's really very little an organization like ASME can do to prevent" breaches of the ad-edit divide. "All we can do is warn" offenders "and say they're not eligible for rewards."
Ms. France took pains to say Lucky was responsive to ASME concerns, and said, "I have nothing but respect for them." But when Lucky won Advertising Age's Magazine of the Year last fall, Ms. France said, "I certainly know not to expect a General Excellence award from ASME." And, she added, "I don't care so much. I know I've got the readers."
Source: Adage
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Uber appoints Lucinda Barlow as Senior Director of Marketing for Asia-Pacific
Prior to this, Barlow was Global Marketing Director at YouTube
Uber has appointed Lucinda Barlow as Senior Director of Marketing for Asia-Pacific. Barlow will be based in Australia and will be responsible for the marketing of Uber products and businesses other than food delivery service Eats.
Prior to this, she was Global Marketing Director, YouTube. She worked for Google as head of corporate communications and public affairs and later as marketing director for Australia and New Zealand. She has also worked for Symbian, the company that created the operating system for Nokia’s range of smartphones.
‘Uber has had an extraordinary impact on the lives and livelihood of millions of people. I’m thrilled to join the Asia-Pacific team to help bring further mobility, freedom and opportunity in this exciting region,’ Barlow was quoted as saying.
‘She (Barlow) is uniquely positioned to lead Uber’s Asia Pacific brand, product marketing and reputation efforts, and support the continued growth of a stellar regional team,’ a press note from Uber said.
‘Lucinda brings over 20 years experience in internet, technology and mobile business across Asia, the United States and UK. From a former mission critical systems engineer at BHP, to leading YouTube marketing globally, to launching Symbian’s first office in China, to building marketing functions at two internet start-ups, Lucinda is an agile leader with an industry acclaimed track record of delivering impact at a staggering scale.’
Barlow wrote on twitter:
Incredibly excited for my next chapter. I'm joining Uber to lead marketing in APAC. This is a company and region I'm passionate about. https://t.co/IQB5cjfECq
— Lucinda Barlow (@lucindabarlow) October 9, 2019
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ShareWPP AUNZ's Switched On to join AKQA, Australia
The joint entity’s emphasis will be on rich, innovative brand storytelling throughout the entire customer journey
WPP AUNZ has announced its Sydney-based digital marketing and media consultancy, Switched On, will join the Australian arm of global innovation and experience design agency AKQA.
This union is in direct response to client interest and demand for comprehensive digital solutions that help define, find, connect and inspire customers across all brand interactions, from acquisition through to retention. The joint entity’s emphasis will be on rich, innovative brand storytelling throughout the entire customer journey, bringing clients’ long-term brand purpose to life whilst maintaining a laser focus on short term performance.
John Steedman, interim CEO WPP AUNZ said: “This is two teams with momentum becoming one, and a bold move by them both. It’s driven by a burning desire to provide pioneering solutions from two highly experienced senior local teams.
“Joining Switched On and AKQA formalises the close working relationship both agencies already have. The partnership uniquely combines media, tech, data and design literally under one roof. The result is a stronger client offering and WPP AUNZ is proud to support them,” Steedman concluded.
By fusing their respective MarTech and AdTech capabilities, the driving principle will be to deliver on the unfulfilled promise of large technology platforms and connected transparent media investments.
“This initiative is a terrific example of our team’s growth mindset and a shared vision of the future. Both agencies are at the top of their game. It’s a powerful combination that offers a modern, post-broadcast perspective to the interface of customer and brand,” said Brian Vella, AKQA Managing Partner.
The new offering builds on the success of AKQA Media in San Francisco, an elite business that delivers a 360-degree view of brand experience for clients including GAP, Volvo and Uber through an integrated approach to media, technology, and data.
“AKQA Media is widely regarded as one of the world’s premier media and technology agencies, something we believe will resonate well with Australian marketers,” Vella continued.
“As the worlds of marketing, technology, and customer experience converge, it’s clear a strategic reprioritisation of brand building is essential. We feel what’s needed is a unified proposition that straddles the need to balance this long-term vision with the reality of short-term performance in today’s digital age. That’s why we’ve come together,” said Chris Hitchcock, Managing Director, Switched On.
The combined entity’s capabilities offer an unrivalled depth and breadth of experience with more than 300 team members covering:
- Digital Consulting
- Performance Media
- Creative Strategy & Storytelling
- CX and Transformation Strategy
- Experience Design
- Communications Planning and CRM
- Technology and Engineering
- Commerce Data, Insights and Personalisation
- Innovation and R&D
- Social and Influencer Marketing
Switched On will continue to be led by Managing Director, Chris Hitchcock, responsible for the continued success of the Switched On team and its integration into AKQA. Hitchcock will join the AKQA Executive team, reporting into Brian Vella, Managing Partner of AKQA in Asia Pacific. Both agency brands will continue, with Switched On transitioning to become AKQA in the future.
AKQA operates in 28 markets globally, with over 2100 people worldwide. In APAC the studios who collaborate closely include Melbourne, Sydney, Auckland, Tokyo, and Shanghai. It most recently was awarded two Grand Prix Lions at the Cannes Lions Festival of Creativity.
AKQA and Switched On are part of WPP AUNZ, Australasia’s leading creative transformation company.
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Helena Snowdon is Publicis Media ANZ’s new business and marketing head
The former Mindshare MD, who has also been previously associated with top global media agencies like PHD, Maxus and iProspect, replaces Mandy Henry
Helena Snowdon has been appointed Publicis Media’s head of business and marketing for Australia and New Zealand, as per media reports. The former Mindshare MD replaces Mandy Henry.
Snowdon has been previously associated with my global media agencies, including PHD, Maxus and iProspect. She was managing director Mindshare Melbourne from May 2017- September 2018.
“I feel privileged to be joining Publicis Media, working with the executive leadership team in ANZ, as well as the talented teams at Starcom, Spark Foundry, Zenith and Performics,” Snowdon was quoted as saying. “Publicis Media presents a progressive and transformative model which opens up huge opportunities for clients. I’m looking forward to playing my part in communicating this message and meaning across ANZ, and driving further impact and growth for the business overall.”
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CNN International Commercial appoints Phil Nelson as Chief Operating Officer
Previously, Nelson was Managing Director, Turner North Asia and South East Asia Pacific
CNN International Commercial (CNNIC) has appointed Phil Nelson as Chief Operating Officer (COO) to lead CNN’s operational and international growth initiatives outside of advertising sales.
As COO, Nelson will oversee CNNIC’s Business Development and Strategy, Finance, Strategic Planning and International Sales Operations as well as its Content Sales and Licensing. This includes managing and growing CNN’s relationships with over 300 digital, broadcast and Out of Home content partners – from local CNN branded channels to airlines and hotels that carry CNN content live and on-demand.
Previously, Nelson was Managing Director, Turner North Asia and South East Asia Pacific. In this role, he has overseen all aspects of Turner’s business in these regions including distribution of CNN International and taking a key role in establishing local partners CNN Indonesia and CNN Philippines. Nelson has also held other business development and strategic planning roles at Turner since he joined in 2010 and has significant digital experience from his time at AOL, culminating in him being Managing Director for AOL Asia. In addition, Nelson holds an MBA from Harvard University and, prior to entering the corporate sector, was a commander in the US Navy.
Nelson will be part of the CNNIC Senior Management team, reporting directly into Rani Raad, President of CNNIC, and will work closely with a wide range of divisions across CNN and WarnerMedia. Nelson will continue to be based in Singapore in the near-term and his team is spread across the globe, particularly in key CNNIC hubs of Hong Kong, Singapore, London and Miami.
“The CNNIC business has continually evolved since it was created back in 2013 to optimise the revenue, brand and commercial partnerships across our dynamic offering of CNN content and products,” said Rani Raad. “I am delighted that Phil joins us as we enter the next chapter of our business in a role that brings together all the operational, strategic and non-advertising sales revenue under one leadership. Phil has a first-rate track record at Turner and will bring a unique skillset of business acumen, creative thinking and forensic focus.”
“After many successful and exciting years at Turner Asia, I am very pleased that my next move is within the WarnerMedia family to a brand as remarkable as CNN,” said Phil Nelson. “CNNIC has done a great job in innovating and adapting its business to stay ahead of the competition during a period of unprecedented change in the news and media industry. I am looking forward to contributing to this success in the years to come.”
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Giorgio Presca named Clarks CEO
Presca to join in March, will manage operational, financial and commercial aspects of the business and lead the Clarks strategy with the Executive Committee
Clarks, the global casual footwear brand, has announced the appointment of Giorgio Presca as Chief Executive Officer.
Presca will be responsible for all operational, financial and commercial aspects of the business and will lead the Clarks strategy with the Executive Committee. He will join the company in March.
Presca, born in Trieste, Italy, has more than 20 years of experience in managing and developing global premium brands, particularly in the footwear and apparel industries, working across listed, private-equity-owned, family-run, and founder-led businesses.
His most recent position was CEO at Golden Goose Deluxe Brand, where he led the operating transformation, rapid growth and global expansion of the business.
Between 2012 and 2016, he was CEO at Geox where he executed a brand and company turnaround and returned the business to profitable growth. Giorgio has built his track record in senior leadership positions in Diesel, VF Corporation Jeanswear International division, Citizens of Humanity, Levi Strauss & Co. and Lotto.
Commenting on the appointment, Tom O’Neill, Chairman, said: “I am pleased to welcome Giorgio to Clarks as our new CEO. He brings a wealth of experience, including a deep understanding of the footwear market. He will work together with interim CEO Stella David to ensure a smooth transition over the coming weeks, after which Stella will return to her previous role as non-executive director. I would like to thank Stella for stepping in as interim CEO at a challenging time for Clarks and for her tireless and engaging leadership in the role.”
Presca said, “I cannot wait to join an iconic and historic brand like Clarks and work closely with the Board, the Executive Committee, its 13,000 people and operating partners across the world. Clarks faces the challenges of today’s competitive markets, changing distribution channels and the need to adapt to a rapidly evolving consumer environment but has the competences and assets to return to sustainable growth and profitability in the course of the next few years.”
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Tupperware appoints ex-PepsiCo exec, Chris O'Leary, to its board of directors
O'Leary has more than 37 years of operational and leadership experience, having served in several strategically important executive positions at companies like General Mills & PepsiCo
Tupperware Brands has appointed Chris O'Leary to its board of directors, according to media reports.
O'Leary joins the US-based kitchen and households product company renowned for its model of direct sales as it looks to ramp up global growth. He takes up the new role immediately.
Rick Goings, Executive Chairman, Tupperware Brands said, "We are pleased to have Chris join our board. He brings more than 37 years of operational and leadership experience to Tupperware, having served in several strategically important executive positions at major global consumer product companies including General Mills and PepsiCo. We believe the combination of his deep industry knowledge, broad international experience and strong, proven leadership skills will be invaluable to the Company as we continue to execute our global growth strategy."
O’Leary previously spent 16 years at PepsiCo, Inc., where he held numerous roles, culminating in serving as Chief Executive Officer and President of Hostess, Frito-Lay, Inc. before moving to General Mills. In almost 20 years there, he became head of international business before leaving the company in 2016. He holds a Bachelor of Business Administration in marketing from Pace University and a Master of Business Administration from New York University.
Commenting on the appointment, O'Leary said, "I look forward to working closely with board members and the management team to provide new insights and perspectives as Tupperware continues to take aggressive steps to advance its performance and drive enhanced value for shareholders."
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International: Hottest media property that's not for sale? Time Inc.But skeptics question top execs' real long-term intentions
Time Inc. consistently makes impressive double-digit profit margins and is considered by many a good media business, a still-growing company with as-yet-unlocked potential synergy with the rest of the Time Warner operation. Yet everyone from the Time & Life Building to Wall Street and Nebraska keeps on wondering when the property is going to be dealt.
Time Warner chief Dick Parsons recently told a "town hall" meeting of 400 employees about a conversation he'd had with Omaha investment wizard Warren Buffett on the subject of selling Time Inc. "As your friend, don't do that, it's a good business," said Mr. Buffett, according to people who heard Mr. Parsons recount the story. "But," he added, "if you do sell it, sell it to me."
And there's the rub. Time Inc. consistently makes impressive double-digit profit margins and is considered by many a good media business, a still-growing company with as-yet-unlocked potential synergy with the rest of the Time Warner operation. That fact, along with Mr. Parsons' persistent denials that there are any plans to sell, ought—one might think—to kill this story. Yet everyone from the Time & Life Building to Wall Street and Nebraska keeps on wondering when the property is going to be dealt.
It's also been noted that Mr. Parsons, whose contract is up in May 2008, is not Jeffrey L. Bewkes, Time Warner's president-chief operating officer and the company's heir apparent. And Mr. Bewkes has repeatedly said that nothing is off the table. "It is constantly looked at," Mr. Bewkes said at a Goldman Sachs media conference last September. "What should we not have? Or what should we get?" Many people believe Mr. Bewkes would sell Time Inc. for the right price.
A note to skeptics: Time Inc. could probably fetch bids above $16 billion. Try finding a CEO who wouldn't at least slow down for a look.
Anyone following the ongoing upheavals in media—not to mention the jangled nerves following round after round of layoffs at Time Inc., where McKinsey & Co. is now examining areas like information technology and finance—won't be surprised to hear that questions over Time Inc.'s place at Time Warner aren't going away.
The Monday after Mr. Parsons' "town hall," as it happens, a Bear Stearns analyst raised his rating on Time Warner to "outperform" partly because he believes the company, particularly once Mr. Bewkes takes over, will get more aggressive about restructuring its portfolio. To wit: It could merge AOL with another leading web property—or perhaps could spin off Time Inc.
"We think that the publishing division is the least attractive strategic fit with Time Warner's other video-centric businesses such as cable networks, cable systems and filmed entertainment," said the analyst, Spencer Wang, in his note. Combined with challenges in the magazine business such as slow growth due to online cannibalization, he said, there could be several benefits of divesting publishing.
A year ago, Reed Phillips—managing partner at the media-investment bank DeSilva & Phillips—would have given a Time Inc. sale or spinoff no chance. "Today I would no longer say 'never,' because Time Warner has continued to change and evolve," Mr. Phillips said. "I get the clear impression that the company is focused on operating performance and measures how each division is doing and how each division contributes to the overall company. And if there's a sense that part of the company is no longer contributing in the way that top management expects, I don't think anything's sacred."
Top management at Time Warner, like that at any public company, is under pressure to improve revenue and earnings year after year, no matter the market conditions. Although Time Inc. Chairman-CEO Ann S. Moore is expanding quickly online, moving the needle with print has proved much harder. That has forced strikingly difficult decisions, most recently last week's death sentence for the Life newspaper supplement.
"Wall Street wants to see growth," said Robert Safian, the Fast Company editor and Mansueto Ventures managing director who worked for Time Inc. titles Money, Fortune and Time during the last decade. "The bigger your base, the more you need in raw terms to show it. But if you back Time Inc. out of Time Warner and there's more growth in other divisions, then the overall growth might look bigger."
Plenty of people still consider the idea—first pushed to the front burner during Carl Icahn's 2006 drive to break up Time Warner—to be unlikely, impossible or ridiculous. For one thing, "Time" is the name on Time Warner's door, said Andrew Swinand, president-chief client officer at media agency Starcom USA. "I would be shocked if they sold it," he said. "For me, the biggest thing is that Time Warner as a company needs to be dynamically flexible. I still believe that the initial vision of integrated media was correct. I just believe that they haven't activated it."
The tax hit on any outright sale would be painful too, if less so in a spinoff to shareholders (which could lead in turn to a takeover). Time Inc. also owns huge stores of content that should prove valuable in a Long Tail world. And the company has been securing better position for showing growth by cutting costs, redirecting investment to digital projects, selling 19 magazines and closing two others.
"Corporate has worked closely with Time Inc. in developing its new online strategy, which is showing success," a Time Warner spokesman said. "We don't have any plans to spin off Time Inc." A Time Inc. spokeswoman referred inquiries about the company's relationship with Time Warner to the parent company.
Finally, there's the issue of price, but that could cut either way. Two media bankers said a premium property like Time Inc.—which really has no equal in its business—would command a sky-high multiple of perhaps 15 times earnings before interest, taxes, depreciation and amortization. Last week's client note from Bear Stearns estimated that Time Warner's publishing division will have 2007 EBITDA of nearly $1.1 billion, which could put a bid close to $16.5 billion.
That is not a figure anyone would take lightly—neither a potential bidder nor the potential seller.
But the money is out there. "Private-equity firms have become so much bigger in the past year that now that kind of bite size is attainable," Mr. Reed said. "A private-equity firm could do that transaction today. It would have been much harder to do a year ago, but they've raised so much money, and you see all the time that they're looking at big media opportunities."
Time Warner shareholders wouldn't let management ignore a $16 billion offer either. "Companies can't just stiff-arm shareholders," Mr. Reed said. "They really have to listen today, more and more."
Meanwhile, the thousands of Time Inc. employees who survived the cuts of 2005, 2006 and 2007 walk the corridors occasionally wondering what Ms. Moore, Mr. Parsons and Mr. Bewkes really think of them.
"I don't think anyone is confident that Time Inc. will stay part of Time Warner," said one former Time Inc. executive, who predicts the conglomerate will eventually split up. "From the CEO down, everyone questions whether or not Time Inc. will be spun off."
There certainly could be advantages for an independent Time Inc., such as a better ability to focus on long-term strategy. Mr. Swinand, the sale skeptic, said Time Inc. would have fewer resources on its own but would be speedier and more flexible.
Mr. Reed, the agnostic, said Time Inc. wouldn't lose much if separated from Time Warner and would retain enormous clout. "They would also be able to invest much more aggressively in taking the brands into the digital realm," he said. "They're doing a pretty good job already; it's just that they're hamstrung by having to deliver earnings to the parent company."
All the talk of speed and aggression, as a matter of fact, reflects the reality of the magazine business today. It's in transformation. The business will survive, but those publishers that adapt best will thrive the most. Others will keep having to make difficult choice after difficult choice, pinned between the need to prepare for the future and the state of the field today. Even though Time Inc. owns some incredibly powerful brands, really changing the business model might take a "reset" year—which Wall Street rarely allows public companies.
As things stand, the need to make short-term numbers all the time is breeding resentment.
"Basically the dollars are going into digital at that company," the former Time Inc. executive said. "If you're not one of the four weeklies, people are very frustrated. They are not putting money behind transforming the women's lifestyle publications. Those are the ones that have had constant growth, and yet they're not getting the investment."
Another former staffer recalled the speculation among Time Inc. employees. "There was hallway chatter about it at different times," the ex-staffer said. "Sometimes it was hopeful. 'Wouldn't it be great? Will Warren Buffett buy us?' Other times people said, 'Who would buy us and what would they do with us? They might squeeze us even harder. That Midtown real estate is expensive. Maybe Time Inc. could move to Princeton, N.J.'"
Source: Adage
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