The Biz: Will Time Inc.'s AOL strategy pay?

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Last week Time Inc. embarked, without much fanfare, on the most radical reworking of a magazine company's online offerings since ... well, since Time Inc. submerged all of its brands under the ill-fated Pathfinder umbrella last decade.

This time, the stakes are higher. Time Inc. titles are being enlisted to prop up their ailing online merger partner. On March 30, Web access to the sites for People and Entertainment Weekly was restricted to America Online subscribers, subscribers to the magazines and single-copy buyers who are given a weekly pass to the sites via an access code included in newsstand copies. Twelve more titles will follow over the next two months. In February, according to Nielsen/Net Ratings, People.com tallied 3.7 million unique visitors, and EW.com claimed 4 million.

"It's about becoming an added benefit for AOL users," said Bill Stutzman, Time Inc. Interactive's programming director for entertainment, "and getting compensated for the content we are creating."

The first point makes some sound slightly weary, given the less-than-loving way some Time Inc.-ers view this corporate sibling. "We are in this together, I guess," sighs one Time Inc. executive.

getting paid

They are, but John Squires, Time Inc.'s exec VP overseeing the transition, paints the move in opportunistic terms for the magazine giant. "Our hope is to put ourselves in a position where we get paid for [online] content in the future," either through increased magazine sales, or distribution via AOL or other online sites. (Neither unit knows how many of AOL's 35 million members subscribe to any of the 14 magazines going behind the wall.)

Additionally, Janet Balis, Time Inc. Interactive's director of sales and marketing, said that with the AOL versions of Real Simple and In Style, the companies will create "editorially-driven boutiques" to "build a commerce product" around the magazines' editorial voices.

Teen People will begin restricting access today. SI For Kids, Real Simple and In Style follow on April 21; Sunset on April 22; Time for Kids, Coastal Living, Cooking Light and Southern Accents on April 29; Southern Living on May 7; and Parenting on May 20. A date for Health is not yet set.

Titles will be remunerated via a yearly licensing fee paid by AOL to Time Inc. Ned Desmond, executive editor, Time Inc. Interactive, said the fee "covers a significant share of our expenditures online for those 14 titles," without elaborating. Time Inc. will divide the fee among the magazines involved according to traffic and ad-sales metrics, insiders said.

`Why not?'

One company insider involved with the process said the licensing fee was in the $40 million range. (Mr. Squires had no comment on the fee.) The structure of the deal for the brands' Web sites left them "revenue neutral" on their profit-and-loss statements-which may salve some internal concerns about restricted access. "You want the widest distribution possible,"said the insider. But "considering the online ad market-it's going to be a bad year-why not try this?"

"It's not a very high-risk decision for the magazines," said David Card, an analyst with Jupiter Media Metrix. "Whenever AOL does an aggressive move with a Time Inc. property, the traffic increases pretty dramatically." While Time Inc. sites have benefitted from its AOL alliance so far, especially with subscription marketing, the decision to wall sites off from the Web is a trade-off. "These magazines had to say that by taking guaranteed revenues from AOL, I'm limiting the reach of my online strategy," he said.

The magazine world, meanwhile, watches Time Inc.'s moves carefully, but the top executive at a rivalmagazine company's online unit pooh-poohed the strategy.

"We see it as a bit of retreat," said Sarah Chubb, president of Conde Nast Publications' CondeNet, which runs epicurious.com and style.com. Her company is seeing its second consecutive year of 50% increase in online ad dollars, she said, "So we actually see a lot of opportunity from advertising." Ms. Chubb, however, conceded that CondeNet is not yet profitable.

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