Mags watch Time Warner ploys

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When Time Warner cut off non-subscribers from free Internet access to its most popular magazine titles last spring, other publishers shrugged.

To some industry observers, it looked like a plot to help reverse AOL's sagging membership numbers after Time Warner decreed only those who paid for a magazine or a monthly America Online subscription could view key titles like People and Entertainment Weekly online.

AOL, long dependent on users with its dial-up connection, lost 846,000 subscribers last quarter. It's is fighting to keep subscribers from signing up with rival broadband services.

But analysts are starting to applaud Time Warner's move as an overall positive business strategy that more magazine publishers may soon follow.

"Certain other magazine publishers will follow in the steps of online magazine Slate, The Wall Street Journal and Time Warner in making sought-after content available online only to actual subscribers," says Jeff Marshall, senior VP at Publicis Groupe's Starcom MediaVest IP, Chicago. "If the magazine has a well-organized strategy, restricting content should ultimately increase the value of ads and editorial material, both on- and offline."

Meredith Corp., Hearst Corp., Hachette Filipacchi Media U.S. and Conde Nast Publications are among major magazine publishers still offering substantial amounts of their editorial content free online to non-subscribers, but industry observers say many magazine publishers are rethinking these policies. Meredith says the free online content it offers on its magazines' Web sites is different from what appears in its magazines.

not good fit

"Most newspapers seem to work well in the online environment. But magazines are a much different animal, and the Web is generally not a good fit for them," says Allen Weiner, research director at online research company GartnerG2, Stamford, Conn., which conducted a survey last month of newspaper and magazine publishers' expectations for online advertising.

Only 27% of all publishers-and 16% of those owning multiple titles-say they foresee any increase in online advertising over the next five years, according to the survey.

"Magazine publishers' attitudes about the Web are going through an evolution right now, and most are rethinking the value of their content balanced against the future of online revenue," Mr. Weiner says.

What makes Time Warner's situation unique is the link to AOL and its 34 million-plus subscribers, and AOL's new aggressiveness in promoting exclusive magazine content to its users. Examples include recent "sneak peeks" at People cover stories and "Only on AOL" stories from Fortune about books that have not yet hit stores.

Time Warner says magazine subscription numbers have remained flat or increased since it "dropped the curtain" on 14 titles earlier this year, and there has been no drop-off in ad revenue. Now, the company is expanding its policy to restrict access to more of the content from titles that appeal to affluent at-work users, such as readers of Fortune and Business 2.0, says John Squires, exec VP at Time Inc. Previously, free online content targeting these affluent executive audiences was kept completely open, he says, in hopes of drawing higher online ad revenues.

"Chasing online ad impressions through the free access model wasn't working," Mr. Squires says. "If we can't connect casual users of online content with an actual audience, it's not a luxury we can live with."

Blocking non-subscribers from online access has also helped to reveal which content is most appealing to consumers online, says Ned Desmond, executive editor of Time Inc.'s interactive operations. Examples include proprietary lists like the Fortune 500, exclusive interviews, certain celebrity and sports news, and recipes, he says.

"Certain content is especially useful to readers on the Web, because they can index and sort it for their own convenience, and we're leveraging those opportunities to boost online ad revenue," Mr. Desmond says.

This month, Time Warner is expected to unveil Food@AOL, an online database that for the first time aggregates recipes and information from many of its food-related titles, including Cooking Light, Southern Living and Sunset. Time Warner executives say they're negotiating a series of online sponsorships with major package-goods advertisers for the food site.

Hearst recently began restricting some of the content in Esquire for the first time, but in general most of its magazine content is available free online, says Jay McGill, VP-director of digital integration. He confirms that the Web helps drive many print subscriptions, and though online ad revenue is "very small," it has been picking up in the fourth quarter.

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