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Progress on auto-renewal

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Time Inc. is using the resources of sibling America Online to increase lucrative automatic subscription renewals, and the sometimes controversial tactic of continuous service is changing the magazine business-but slowly.

"Continuous service is growing gradually. ... It is not going to transform this business overnight," says Jeremy Koch, president, Time Consumer Marketing. Mr. Koch refused to give exact auto-renewal figures for any of Time Inc.'s titles. But he did say "the weekly magazines are the furthest ahead."

Automatic-renewal subscriptions typically begin with a phone solicitation and an initial payment by credit card; the continuous-service subscription goes on indefinitely, with automatic billing to the credit card, until the subscriber opts out. Publishers like auto-renewals because they're more cost effective than having to chase after a subscriber every few years and potentially lose the reader.

However, auto-renewal also risks a backlash from some consumers who expect to occasionally be given the choice of renewing.

"About 9% of the whole industry is auto-renewal," says Dan Capell, editor, Capell's Circulation Report. "I don't think that it will be more than 15% in two years."

"It's not our expectation to reach 100%," Mr. Koch says. "It would not be realistic to think that everyone would want automatic renewal."

"How does it affect the publisher? Positively, in most ways," says Mark Stanich, senior VP-chief marketing officer at American Express Publishing Corp. "If you do it correctly, you cut down on the expense of bills and renewal notices. ... it's more cost effective for the publishers and less invasive for consumers. It's a win-win overall."

Mr. Stanich adds that "the benefit increases over time." During the average subscription's lifetime, auto-renewal boosts profitability by about 10% to 15% a year. "That's a pretty big deal," he says.

Another industry executive says his company determined that if all its subscribers could be converted to auto-renewals, it could boost profits by as much as 25%.

AOL Time Warner is especially poised to pursue auto-renewals for Time Inc. Its advantages include a controlling interest in Synapse, a leader in developing the technical aspects of continuous service; a historic emphasis on consumer marketing; its own subscription service; and the ability to use AOL to bring in subscriptions.

IN A DIFFERENT LEAGUE

"Time Inc. is ," says Chip Block, vice chairman of USAPubs, a national marketer of magazine subscriptions. "What works for Time Inc. might not work for others. [AOL Time Warner gives Time Inc.] resources, money, people, promotions-you name it."

The big figures that have been thrown around by AOL Time Warner executives, crediting AOL with generating 100,000 "evergreen" subscriptions a month, were unheard of in Time Inc.'s pre-AOL days.

AmEx Publishing, whose titles include Food & Wine and Travel & Leisure, pioneered continuous service 30 years ago because it was already connected to its own credit card list.

Continuous service is "much more common [than it used to be] for magazines ... It's not unlike other similar products-newspapers, health clubs-where things are automatically billed where the consumer knows it's up to them to end it," Mr. Stanich says.

The Magazine Publishers of America recently distributed an educational package on continuous service to its members. The Federal Trade Commission's claim that continuous service for all types of products is an increasing source of complaints helped spur the MPA, says Rita Cohen, senior VP-legislative and regulatory policy.

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