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TIME WARNER INTERACTS WITH MORE THAN ORLANDO DEAL WITH INTERPUBLIC GIVES AGENCY GROUP ACCESS TO VIDEOGAMES, CD-ROMS

By Published on .

It is part of a company that has made perhaps more noise than any other about new-media technologies, but Time Warner's interactive unit has kept a curiously low profile.

That's changing. The Burbank, Calif.-based division hosted a coming-out party for itself at the summer Consumer Electronics Show in Chicago last month, where it also displayed its newest videogames and CD-ROMs.

Less than a week later, Time Warner Interactive formed an alliance with Interpublic Group of Cos. to create ad-supported information and entertainment products across a broad range of new-media platforms.

The deal is not exclusive, but it is unusual. By aligning itself with one agency group, Time Warner risks alienating other agencies with which it does business.

The venture's announcement marked the public unveiling of Time Warner Interactive's advertising philosophy and its answer to the question of whether marketers and their agencies will be a part of the interactive future.

The goal is to develop new forms of interactive advertising that will become a seamless part of videogames, CD-ROMs, online services and two-way TV programming, said Terry Hershey, president of Time Warner Interactive's Entertainment Division.

"We see this as an integration of the three elements of media-information, entertainment and advertising," Ms. Hershey said. "It's marrying the different elements, instead of saying, `Here's a piece of information, here's an advertisement, here's a piece of information, here's an advertisement."'

A videogame might be built around popular animated advertising characters, for example, or a marketer's products featured as part of a how-to TV show.

Ms. Hershey has kept Time Warner Interactive's profile low for the past year, and she's the one raising it now.

"When I took this place over, I said we were not going to talk to anybody until we had our act together, knew the business and knew what we were going to do," she said. "We now have all the pieces in place to really capitalize on what's happening in the business."

A compact, no-nonsense former newspaper editor, Ms. Hershey, 46, joined the old Time Inc. in 1981 to work on an electronic publishing venture. After Time's merger with Warner Communications, she was named president of Time Warner Interactive Group, the division that later evolved into Time Warner Interactive. Ms. Hershey reports to Time Warner Senior VP Geoff Holmes, who also serves as chairman-CEO of the interactive group.

Time Warner Interactive incorporates the former Warner New Media division, Atari Games and Tengen. The division has more than 400 employees and offices in Burbank, New York, London, Paris and Tokyo.

Time Warner Interactive has produced more than 30 CD-ROMs and will publish 25 more in the next year. It has a large portfolio of home videogame titles and arcade games. And it is working on applications for Time Warner's upcoming interactive TV trial in Orlando.

Last week, the unit signed a deal with Byron Preiss Multimedia Co. to distribute CD-ROM titles including a screen saver based on the NBC series "Seinfeld."

Ms. Hershey said Time Warner Interactive already has developed prototype CD-ROM and interactive TV products for more than one Interpublic agency client. She expects the first product from the joint venture to be out in the first quarter of 1995.

Interpublic and Time Warner Interactive will jointly fund the development and marketing of interactive products and will share in any profits.

Interpublic, parent to McCann-Erickson Worldwide, Lintas Worldwide and the Lowe Group, is moving quickly to position itself on the cutting edge of new media. In April, it acquired a stake in multimedia developer InterActive Partners. And its agencies, like most in the business these days, are each formalizing their own interactive strategies.

"Our agencies are independently developing their capabilities in this area, and this is a way to augment those capabilities, to bring to bear the incredible resources Time Warner has already accumulated in this area," said Barry Linsky, Interpublic senior VP-planning and business development.

Although both sides stress that the arrangement is not exclusive, Interpublic clearly believes its agencies' clients will have most-favored advertiser status as a result of the alliance.

"The ongoing nature of this relationship should give a leg up to both parties," Mr. Linsky said. And while Time Warner will continue to do business with dozens of agencies, Ms. Hershey admits, "We are not in any kind of conversations like this with other agencies."

Ms. Hershey's goal is to prove that Time Warner's interactive vision extends far beyond the blue skies of the Orlando trial, that the company is making money today using existing technologies.

"We're developing information and entertainment products to be delivered in any digital format, from location-based to CD-ROM to TV," she said. "We also believe that for different categories of advertisers, this is a huge opportunity to deliver their messages in a different format which we believe will be hugely engaging."

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