Thursday, November 15, 2007

What a Time Inc. Spin-Off Might Look Like

What a Time Inc. Spin-Off Might Look Like
By Bill Mickey

Time Warner's third quarter numbers were released recently, and while overall revenues rose nine percent over same period 2006-despite revenue declines from AOL-Time Inc.'s revenues were flat. Any gains in earnings were largely attributed to "non-magazine businesses, particularly Synapse," a customer acquisition and management service subsidiary of Time Inc., according to company financials. The numbers form the backdrop of a pending change at the top as COO Jeffrey Bewkes is set to succeed Dick Parsons as Time Warner CEO on January 1 and ongoing speculation about whether the company will spin off one or more of its divisions-namely Time Inc.

In the third quarter, a $25 million gain in advertising revenues came mostly from digital growth from and, which was offset by an actual loss from print magazine revenues. Included in that loss was the closures of LIFE and Teen People, an $8 million loss from subscription revenues and a $1 million loss in "Content" revenue. So, not much top-line success.

Even before it was announced that Bewkes would succeed Parsons, speculation about Time Inc.'s future ran rampant. Now, however, Bewkes' new role with the company is raising new questions.

"Bewkes is not a magazine guy, which I think is very important," says one magazine industry observer. "He's a TV guy. And I think that when you get right down to it, the core properties that Bewkes knows about and cares about are the video and movies, not print. Because even if they invest heavily in developing new digital versions of their magazines, it's going to cost money. Meanwhile the revenue is going to continue to be flat to declining."

Reed Phillips, managing partner at DeSilva + Phillips, stresses that while commenting on Time Inc.'s future is purely conjecture at this point, Bewkes' succession will trigger a top-down examination of the corporate structure. "I do believe that everything is going to be evaluated in Time Warner by Bewkes coming in," says Phillips. "In January the clock will start ticking and there's going to be more scrutiny and more willingness to sell assets that they don't think will be helping the company increase its stock price."

While a looser divestment attitude might come into play, an industry source speculates a spin-off makes the most sense. "If you're looking at it from his point of view, you want to detach Time Inc. from the company so the chance of a spin-off is probably very high. I don't think there's a chance of a sale because I don't think anyone would buy it."

A spin-off could benefit both entities. Time Warner gets to move Time Inc. off the books as an operating unit and Time Inc. becomes a free-standing, public company. "It's an IPO, in effect," says the source.

A public Time Inc. would also be free to make more aggressive moves in the digital arena. "It would have more flexibility to do that kind of thing and also have a chance to raise its own money rather than having to fight the rest of the divisions of Time Warner for the assets," says a source. "A lot of money is being used elsewhere because people within Time Warner look at the magazine group and don't think they should invest money there, it's not worth it."

The source also speculates that a spun-off Time Inc. would likely mean the end of the Ann Moore regime. Her replacement? "I think Bewkes would put in somebody that has free-standing, public company experience. My candidate would be Susan Lyne. She's been in television, she knows Bewkes, and she's been successful with Martha Stewart Omnimedia. She's CEO of a public company. She's got the credentials."


CIRCULATOR: AMI and Source Interlink Close to a Deal?
By Kristina Joukhadar

In an October 25 story in the New York Post, Keith Kelly reported that merger talks were underway between American Media Inc. CEO David Pecker and Ron Burkle of Source Interlink Cos. At the time, the two sides were thought to be close to inking a deal, but neither party would confirm or deny the report.

The Post is reporting today that a price of $1.2 billion has been agreed upon, the only stumbling block being that the banks want Source to put more equity into the deal. David Pecker and Evercore Partners bought American Media in 1999 for $850 million. In 2003 American Media bought health and fitness magazine publisher Weider Publications for $350 million. AMI titles include The National Enquirer, Star Magazine, Globe Magazine, Country Weekly, Shape, Men's Fitness, Muscle & Fitness and others.

Last May, Source acquired Enthusiast Media, which included Primedia's 70 special interest magazines and 90 associated Web sites, for $1.2 billion in cash, sparking concern among circulators about the company owning magazines and controlling the newsstand supply chain simultaneously.

But the Primedia acquisition did not include a distribution source. Now, if the AMI merger goes through, AMI's distribution arm, Distribution Services, Inc., which specializes in in-store magazine merchandising, will be a large part of the deal. Current DSI publishing clients include Bauer, Newsweek, Meredith, Rodale, and Hachette Filipacchi.

The Mailing Conundrum for Publishers

The Mailing Conundrum for Publishers
BY Steven W. Frye

If you publish and mail a magazine, you are already well aware of the impact of the latest postal hikes. The United States Postal Service's (USPS) 2007 price hike significantly affected both Standard and Periodical rates. Initially, the USPS proposed a change that would increase Periodical rates by an estimated 11.4 percent.

The USPS does offer discounts to publishers based on how well the publishers integrate into the USPS's automated systems with presorting, palletization and other factors. However, publishers do not perform these services . . . printers do.

On its Web site,, the USPS clearly states its intention to pass responsibility of automation onto the mailers (our printers). It says, "On July 15, we implemented new Periodicals prices to enhance efficiency, offer more choices and better ensure that all types of Periodicals mail cover its costs. Periodicals mailers have new incentives to use efficient containers and bundles, and co-palletization becomes a permanent offering to encourage more publishers to combine mailings. We also added new prices for the non-advertising portion of a mailing to give mailers of high-editorial-content publications access to lower destination entry rates."

Let's break that statement down into pieces.

"On July 15, we implemented new Periodicals prices to enhance efficiency . . . " The efficiency comes from automation that requires mailers to perform list management services and capture high presort levels prior to the USPS taking possession.

". . . offer more choices . . . " In May, the initial proposal projected that Periodical-class mail would just pass on rate increases; however, in July, the Postal Rate Commission (PRC) introduced a variable rate plan with 55 different prices based on the type of container used, number of entry points and, of course, the level of presort. Many believe this structure only benefits large-run publishers and actually penalizes short runs.

". . . and better ensure that all types of Periodicals mail cover its costs." This explains the rate hike.

"Periodicals mailers have new incentives to use efficient containers and bundles, and co-palletization becomes a permanent offering to encourage more publishers to combine mailings." It's the printers who are able to capture discounts for us by combining different titles together into the same mail stream. The only "incentive" publishers have is to work with a printer who offers these services. The USPS is trying to eliminate sack mail, which is the most time-consuming and costly mail category, by encouraging mailers to supply palletized bundles in delivery sequence-by offering the discounts.

In light of all of these factors, it would be helpful if all printers offered co-mailing services, but most don't.

If you mail magazines nationally from any printer that does not offer co-mailing, the USPS, in essence, has hit you with rates that may be significantly higher than its estimated 11.4 percent. A study by McGraw-Hill (which was cited in a number of news sources earlier this year) estimated that small-run publishers may see postal costs increase by as much as 20 percent to 30 percent.

That's why, this month, a group of publishers, publication printers, mailers and related associations representing small-run publishers and mailers are scheduled to appear before Congress to complain about the inequity of the new structure.

"We also added new prices for the non-advertising portion of a mailing to give mailers of high-editorial-content publications access to lower destination entry rates." The flip side of this statement is that the USPS is increasing costs to publishers who sell more ads.

A More Costly, Cumbersome Process for the Small Mailer

"From our perspective," states Dan Weber, vice president of marketing at Publishers Press, which specializes in short- to mid-run publication printing, "the post office made the calculation and reporting of periodical mail to be at least three times more cumbersome than it was before, making everyone from the list services, postal software creators, printers and especially the USPS mail-verification personnel pull their hair out."

The USPS, he continues, "prepared us that a container charge was coming; however, they didn't tell us that it would vary dependent on where the pallet was going to be entered. Plus, they sprung a 'bundle' charge [on us] and also varied it depending on what type of pallet it was in. This was huge, not so much as an unforeseen price increase, just the complexity of how it was applied, and in our opinion, micro-managing the postal charges and all changes favoring the Time/Hearst/[Gruner+Jahr] large-run publications. . . . We in the lower end (short-run market) have all cried, 'Not fair,' but to no avail. From here, if no major structure changes will be made, we are expecting to receive an annual CPI [Consumer Price Index] increase, regardless of any efficiency gain by the USPS. [I] wish printers and publishers could do this."

Printers or Mailers?
I've been saying for several years now that when we hire a printer, we're really not hiring a printer as much as we are hiring a distributor. In the late '70s and early '80s, postage costs for a subscription-based magazine averaged about 15 percent of the combined manufacturing and distribution costs. By the '90s, it crept up to about 25 percent to 35 percent, usually about equal to the paper cost. Now, postage is the largest expense a publisher has . . . and it is not negotiable.

Remember, with the new rate structure, you are paying the highest possible postal cost if your printer enters all your mail into its local post office and does not offer drop-shipping, palletization or co-mailing. The only way to lower postage costs is to capture discounts, and that requires volume. Only the largest circulated magazines enjoy the quantities needed to hit these saturation levels. For most magazines that have a national circulation of less than 150,000 copies, it is impossible to create many bundles on their own.

Our printers must be efficient mailers if they expect to get and/or keep our business. As publishers, we hire and trust our printers to perform at the optimum level of efficiency with their integration into the postal system.

RR Donnelley, Quebecor World, Quad/Graphics, Brown Printing Company and Fry Communications-all large multiplant operations-have created co-mailing operations. Donnelley and Quebecor both built dedicated distribution facilities where titles from all of their plants are pooled together. Quebecor has a distribution facility in Bolingbrook, Ill., dedicated to its short-run plants and customers, and another in Franklin, Ky., for its long runs.
Publishers Press started pooling titles from its two Kentucky plants in 1997 and established the first USPS-approved co-palletization program for short- to medium-run magazines. It also created a building dedicated to, first, co-palletization and then, in 2006, co-mailing.

"The latest rate case certainly showed a greater value given to achieving carrier-route presort, so there are more incentives than ever to co-mail," points out Mark Schneider, a distribution expert at Quad/Graphics.

Without co-mailing, nationally mailed, small-circulation publications pay the highest postal costs.

What If Your Printer Doesn't Co-Mail?

So, what can you do if your printer does not offer or plan to offer co-mailing services? One option, if your printer is centrally located, is to request that your magazines be delivered to Quebecor World Logistics's (QWL) or RR Donnelley's Illinois facilities and merged with their volume.

QWL has been accepting other customers' mail since June 2007. "The co-mail program at Quebecor World Logistics is running well in the acceptance of publications and catalogs from external printers," says Joel Weber, vice president of sales, QWL. "Due to the extreme flexibility of the program-offering multiple pools per week, fast presort services and two-and-a-half-day pool cycles-it is easy for an external printer to bring product into the co-mail platform and improve delivery time while saving money."
Donnelley Logistics used to only distribute Donnelley mail, but recently it began to accept outside volume. One recent partner is Schumann Printing Company, a single-plant publication printer located in Fall River, Wis. Now, Schumann can offer full co-mailing services to its customers without setting up a dedicated operation of its own. It also immediately tapped Donnelley's postal expertise.

Mechanicsburg, Pa.-based Fry Communications also accepts outside volume.

However, the transition of so much additional volume into these megamailing operations is a bit concerning. Donnelley has had its hands full with its Banta and Perry Judd's acquisitions and its subsequent additional mail volume. In August, its Illinois distribution facility experienced a problem that shut it down for a significant period of time (publisher reports suggest it was shut down for a period of one to two weeks). You can imagine the impact the shutdown would have on the affected publications.

When contacted for a response as to what happened and what safeguards have since been put in place, Walt Zdunek II, Donnelley Logistics, said that Donnelley officially had no comment. However, another representative said that the crash resulted from integrating titles from Banta into Donnelley's co-mail operations. He said that the worst any title experienced was a three-day delay in mailing. However, several customers, who wished to remain anonymous, reported much longer delays as well as significant frustration over Donnelley's "secrecy" about what led to the shutdown, suggesting Donnelley should explain and accept responsibility for whatever led to it "falling flat on its face."

Former Perry Judd's customers also have been grumbling about the less-than-ideal service they've been getting since Donnelley took over. These may be just growing pains from the flood of additional volume; we'll just have to wait and see, as Donnelley did not comment on what new safeguards are being put in place, if any. One publisher, however, said that Donnelley has added a co-mail line to the Illinois facility and has started a new facility in York, Pa., that began operations in September with one line; an additional line is expected to be running by year-end.

If printer consolidation continues, and the "big guys" continue to corner the market on co-mail services, will the industry essentially be at the mercy of whatever quality of service it can get? We'll see. And will the "little guys" continue to pay the highest rates if they are not at one of these mega-mailers? It appears, yes, unless the new outcry gets some attention and momentum.

Another option, if your printer does not offer co-mailing, is to encourage your printer to set up a cooperative venture with other regional printers with whom it can pool its volume. I particularly think the northeastern and southeastern printers, as well as the three Denver publication printers (National Hirschfeld, American Web Inc. and Publication Printers Corp.), should also create regional cooperatives.

For nationally mailed magazine publishers, postal distribution has become a critical factor in printer selection. Analyze postal services closely, as each printer uses different methods of combining, terminology and billing methods.

Some printers have discovered that mailing services can be a new profit center, many times billing for services that may outweigh the actual co-mail advantage. It is not uncommon to see up to four pages of mailing charges on printers' price lists for list management, co-mailing fees, and online and offline addressing and messaging services. It is your responsibility to learn exactly what your printer is doing for you, what the advantages are and what the real costs are.

Some printers seem to be making up processes and prices as they go, often just responding to competitors' rates. It's reminiscent of the time when electronic prepress was first introduced. Eventually prepress evolved into just a couple charges and at a pretty standard industry rate.

Therefore, don't be afraid to challenge your printer on explaining exactly what every billable service is and make sure it proves that it is, indeed, saving you money.

Co-Mailing Standard-Class

Many magazines mail as Standard-Class (S-C), the same as catalogs, which is more expensive than Periodical-Class.

Since the S-C rate changes went into effect in May, some mailers have seen increases in their small-run customers' postal costs, from 20 percent to 40 percent. Cost comparisons between the old and new rates are difficult because the pre-sort categories changed and the rate structure is complicated.

However, the USPS now has made it possible for Standard to be co-mailed with Periodical mail. This means that catalogs, the largest segment of S-C mailers, can co-mail with magazines.

Even though it's now possible to co-mail S-C, most printers do not offer S-C co-mailing services because the software has not been developed yet to actually merge the two. As you can imagine, however, co-mailers have been scrambling to design the needed software so they can offer this service.

According to Glenn Sollenberger, director of postal affairs/distribution, Fry Communications, "We're working with three different Standard co-mail organizations to . . . get our catalog folks in a co-mail pool. We're investigating using such a service until we would have enough volume to install another co-mailer."

Co-Mailing Technology and Capacity

If there is such a high volume of publishers who'd benefit from co-mailing, why don't all printers install co-mailing equipment? The technology and equipment are expensive, and the return, by description, has to be low because the purpose of co-mailing is to lower the USPS's costs. There isn't much margin in that equation. Also, the biggest benefactors are small-run mailers, just the market that, again, doesn't have the volume to readily justify the investment. The large mailers are all expanding their co-mail operations.

According to Schneider, Quad/Graphics has expanded from just offering inline co-mail (which it refers to as Multi-Bind) to also offering a robust offline co-mail program (Multi-Mail) and a Multi-Blend program. Multi-Blend is its process of blending a perfect-bound book into a saddle-stitch binding and mailing line after the trimmer. Quad/Graphics also can co-mail on polywrap machines, which it calls Multi-Wrap. "We have an enormously successful Multi-Wrap," claims Schneider, "allowing us to co-mail nearly 100 percent of a publication's versions, and eliminating the need to run both inline and offline versions."

Joel Weber says QWL has six additional co-mail machines on order, and plans are underway to open an additional co-mailing facility on the East Coast with two 30-pocket machines to complement its co-mail services in Chicago.

The Future of the Short-Run Printer

It appears only the largest publication printers are making the investment in co-mailing, which means the majority of printers that do not offer co-mailing are in danger of losing their mailed volume to these mega-mailers.

What can small-run printers do? Dan Weber suggests they concentrate on the regional, commercial and newspaper-distributed markets and other customers who do not require national mailing. "If they print nationally distributed publications, target runs under 200,000 copies, and rely on the USPS for distribution, they have to either possess co-mail equipment or have a partner fairly close by who can offer it," he says.

"I think we will see future growth of a co-mail cottage industry . . . third parties and printers offering their co-mail services-very similar to what happened after the 1991 destination-entry program for catalogs," adds Schneider. "That drop-ship discount created a revolution in distribution services, and all sorts of third-party logistics companies came about to help small-catalog printing companies."

Dan Weber points out that printers' profit margins have taken it on the chin since 2001; therefore, printers who don't have the volume to co-mail may be forced to subsidize, "which may be the beginning of the end for them," he says. "Personally, I see consolidation of larger, less-spread-out printing/mailing plants versus what has been typical of the past."

Until those things happen, this is clear:

1. The USPS has changed the rate structure, which, in essence, penalizes all short-run mailers.
2. Co-mailing and automation are the only options to capture discounts and lower costs.
3. Most printers do not offer co-mailing services.
4. Most printers are not planning on investing in co-mailing equipment.
5. Only the largest publication printers offer co-mail and are only growing more dominant.

None of these five points are positive for the short- to mid-run markets. With postage increasing 11 percent, 20 percent or more for publishers, the focus on minimizing postage is more critical than ever, and we are at the mercy of our printers to do the best possible job on our behalf.

Speaking of discounts, the USPS is making an effort to cut in half the estimated $2 billion it spends each year in handling undeliverable mail by withholding discounts from publishers who do not maintain list accuracy. This is another cost increase that is not being included in the estimated effects of the new rate structure, and it makes list maintenance even more important than ever.

No matter how you look at it, the USPS did a great disservice to our industry. It has incorrectly assumed we could immediately and efficiently co-mingle publications. Unless the new lobbying effort actually takes root, we will need to continue to find ways to more efficiently mail our magazines . . . or not. With postage being our biggest expense, the USPS is making it more attractive every day for publishers to produce electronic, rather than printed, magazines. PE

Media & Money Conf.: Print Must Do More Online

Media & Money Conf.: Print Must Do More Online
BY Lucia Moses

Ink-on-paper newspapers and magazines still have plenty of life left in them, but they may need to make radical changes to their model to stay relevant in today's multimedia world, panelists said today at a media conference.

Newspapers have plenty of ways to improve their profitability, noted Jill Greenthal, senior managing director, The Blackstone Group, pointing out examples of same-city competing papers that have been exploring ways of sharing distribution and production functions.

"All elements of how they think about the product have to be reinvented, turned over," said Greenthal, speaking on a panel at Media and Money, a two-day conference hosted by Dow Jones & Co. and the Nielsen Co., parent of Mediaweek.

There was little disagreement on the challenges facing print.

Newspapers haven't fully figured out how to leverage their Web sites with advertisers, even if they've come around to seeing the Web as complementary rather than a threat to their print editions, the panelists said. As Gordon Crovitz, publisher of Dow Jones' The Wall Street Journal, quipped, while the Journal's news staff has fully embraced the concept of blogs, "I've yet to see a business case for any of them."

Despite newspapers' efforts to create editions specifically with young people in mind, connecting with younger and other digitally-oriented readers was another worry.

"The industry has not figured out what is the magic bullet for that," Greenthal said. "It really is an issue. People who work for me who are 25, 30 years old do not read the newspaper."

Another panelist, Kent Brownridge, CEO of Alpha Media Group, is particularly aware of that challenge as the publisher of Maxim and Blender, whose sweet spot is men in their 20s. Brownridge acknowledged that his company's biggest growth prospects lie online, not in print.

"We'll get our 4, 5, 10 percent growth by just working like demons in traditional ways," he said. "But the biggest opportunity is to appeal to them through Web properties."

Still, Brownridge also said that the magazine industry is due for a course correction, pointed to inflated magazine circulation and a failure by some to focus on readers' wants.

"There probably are 20 percent too many magazines," he said, "and I think the current market is going to eliminate some of those."

Wednesday, November 14, 2007

BoSacks Speaks Out: On Why?

BoSacks Speaks Out: On Why?
Everybody who reads this newsletter knows that I am very happily, a magazine guy through and through. So, it's not a mystery that I am continually barraged with questions like; "Bo, why do you keep such a strong focus on the newspaper industry?"

I have a dozen reasons why I think it is an important industry to track, not the least of which is my canary in the mine shaft theory. I used to explain this more often to my readership than I do now, and I believe that it has been five years since I have done so. I will now attempt to correct that oversight, because I still deem it an important industry for magazine professionals to track.

Simply put, the newspaper industry has been a forecaster of magazine trends for over 50 years. I believe that the newspaper industry still acts for the magazine industry just like the vulnerable little canaries that coal miners carried into the coal mines in times past. When there was little clean air, the canaries "fainted" first, warning the miners of pending trouble. A similar process could/should be said for newspapers being more sensitive and vulnerable in the publishing world, in these times of economic stress and business model upheaval. It is the newspapers who are "fainting" first, months, perhaps years before the same conditions hit the magazine industry. But make no mistake, it is a very similar mineshaft that we are in. If they are fainting and croaking, we had best know the reasons why?

We all know that many of the old business models have changed. Newspapers and magazines have changed, dramatically. Surely, the advertising community has changed in, if nothing else, the many different and new venues to spend advertising dollars on or in. Not to mention their obsessive search for accountability.

So, yes, I track the newspaper industry pretty closely and only send out a fraction of what I read. But when I send out an article, I do so to inform you of publishing trends and possibilities and new experiments and techniques that may or may not work as we reinvent ourselves and our industry. My bottom line is this, that properly informed we could be on the edge of a new golden age of publishing. All it will take is an open mind and the creativity to adapt to rapidly changing circumstances.

Results! Why, man, I have gotten a lot of results. I know several thousand things that won't work.
Thomas A. Edison (1847 - 1931)


Ventilating the Chinese Wall

By Alan Mutter

"Asking a newsroom to come up with innovative revenue ideas may be the cruelest of ironies," wrote an editor recently tasked with developing new niche and advertorial products for his newspaper.

Ironic? Yes. Cruel? Not necessarily. In fact, a dose of investigative reporting may be just what the industry needs to pull out of the long-running revenue tailspin that threatens to destroy it.

The problem, of course, is that commercial discussions are strictly verboten in most American newsrooms. For sound reasons that contributed over the years to the credibility of modern newspapers, most journalists hold deeply to the principal that the news should be reported without heeding the interests of the advertisers who underwrite their work.

I embraced and upheld the so-called separation of church and state throughout my career in journalism. And I freely admit that I might well oppose crossing the bright line today, if I had not exited the enchanted realm of journalism two decades ago to make my way in the real world of business.

Now that I am on the outside looking in, however, I believe it is time for deeper collaboration than ever between the newsroom and the counting house. While I do not favor razing the Chinese wall that traditionally has separated the two, we have come to the point that it is time to start poking some serious holes in it. The resulting ventilation will do both sides a lot of good.

This urgent and unorthodox suggestion results from my conclusion that the people on the business side of newspapers, whose job this rightfully should have been, have failed for more than a decade to gain a realistic understanding of how their intended customers perceive their print and online products. By "customers," I mean not only readers but also advertisers - and the largest, fastest growing group of all - non-readers.

Instead of evolving their businessses to address the rapid technological, economic, demographic and social changes that are disrupting the way people consume traditional media like newspapers, publishers for the most part have tried to optimize an ancient and outmoded model in myriad self-defeating ways: forcing through unjustifiable ad-rate increases, monkeying with circulation figures, chopping staff, shrinking newspapers and scrimping on customer service.

My favorite stupid publisher trick occurred at a paper that halted deliveries to long-time subscribers because the newly down-sized circulation department fell behind in despositing the payments arriving in the mail. The faithful customers whose service was suspended, incidentally, were paying full boat, not the money-losing $20-a-year promotional price the paper desperately charges for Wednesday-through-Sunday home delivery.

With the declines in circulation, revenues, profits and stock prices in the last few years proving beyond all doubt that chiseling isn't a growth strategy, it's time to try something completely different: building sales. And that's where the newsroom comes in.

Unlike the executives on the business side who got their jobs by being good, but not particularly inventive, at exploiting the monopoly-like advantages enjoyed by most newspapers until the arrival of the Net, journalists don't have to defend the relevance of their role in an increasingly ineffective business model. As such, journalists are the most objective and least personally conflicted people working in publishing companies.

Further, most journalists possess a peculiar DNA that compels them to kick over rocks to see what crawls out. They, and they alone, appear to be the ones most likely to be motivated and equipped to ask such tough questions as what advertisers really think, what readers really want and, most importantly, what newspapers can do to regain the engagement of the advertisers and readers who have forsaken them.

As journalists become involved in creatively identifying new audiences, new products, new markets and new revenue streams, one alternative that should remain off the table, obviously, is trading cash for news coverage. Putting the news columns up for sale would erode the most valuable commodity a newspaper possesses: Its credibility.

The emergency facing the newspaper industry leaves journalists no choice but to broadly redefine their roles and overcome their near-universal reluctance to getting involved in the business of their business.

If they don't act to defend the economic health of the institutions that make their valuable work possible, the institutions themselves may be irreparably damaged or lost forever. I can think of no higher calling for a journalist.

'Time' is a magazine that waits for no man

"Journalism is the art of collecting varying kinds of information (commonly called "news") which a few people possess and of transmitting it to a much larger number of people who are supposed to desire to share it."
Henry R. Luce

'Time' is a magazine that waits for no man

The editor of 'Time' magazine, Richard Stengel, tells Ian Burrell why even his publication can't afford to stand still if it wants to compete in an increasingly hi-tech industry

In the introduction to Nelson Mandela's autobiography Long Walk to Freedom, the former South African president speaks of his deep gratitude to Richard Stengel for his efforts in editing, revising and writing parts of the 630-page opus. "I recall with fondness our early morning walks in Transkei and the many hours of interviews in Johannesburg," says Mr Mandela of the American.

Sitting in the Thames Foyer of the Savoy Hotel, where Noel Coward once performed and Caruso once sang, Stengel, who now edits Time magazine, enthuses over Mandela's newly-unveiled statue in Trafalgar Square. "I'm sure he's tickled by [the statue]. He's a huge Anglophile. He was reading Dickens [when he was young] and it felt contemporary to him. He's a huge cricket and rugby fan. I have a picture of him riding in a carriage with the Queen and he is just beaming."

Stengel has come to London to honour other international figures, the individuals the title considers to have done most in the past year to protect the planet, the "Heroes of the Environment". He was brought back to Time last year in its most senior editorial role and promptly introduced a far-reaching and controversial programme of change, refusing to rest on the innumerable laurels acquired by the 84-year-old title. He shows no deference to the "funny model" that was traditionally used to create the famous weekly publication.

"When Time was originally written - when (Henry) Luce created it - it was a bunch of snarky Ivy League smart alecs in an office in New York re-writing the news for people that lived in the Midwest. There weren't any correspondents. It was done like that for years. As the magazine became more profitable, in the Fifties and Sixties, they started hiring correspondents, but they would file to New York and the same Ivy League smart alecs would rewrite it."

As a long-standing Time journalist who had taken time out from his career at the magazine to write speeches for presidential candidate Bill Bradley and then to run the National Constitution Center, a Philadelphia-based think tank, he says he was able to identify the weaknesses as well as the strengths of this iconic media brand as it comes to terms with the digital era. "As a student of revolutionaries, [I know that] the irony of revolutions is that they tend to come from the inside and one of the reasons I came back ... was that I was familiar with the machinery and the people and yet I was an outsider at the same time."

His re-structuring was painful (rival publications gleefully reported a "bloodbath" as bureaux were closed in Chicago, Atlanta and Los Angeles and dozens of editorial staff were released), but Stengel believes his changes have given Time a more distinctive voice and a greater relevance both in its print and online formats. So, gone is the Monday publication day, gone are the composite articles of multiple contributors, and gone are the New York re-writes that were intended to make pieces from far-flung correspondents more accessible to domestic readers.

"I've encouraged people to write with more voice and have a point of view and the group journalism idea that had characterised Time for so many years is mostly gone," he says. "The old model was a bunch of people filing and one person writing it in New York. We didn't have by-lines. I really think people want a voice, a point of view. I've always found it frustrating that we would have our Pentagon correspondent - who is steeped in military affairs and talks to all the generals [yet] he would have to write this mealy-mouthed 'on the one hand and on the other' [copy] and I would be thinking as a reader 'Jeez, this guy's an expert, tell me what you think about it!'" Though Time has fewer writers, the managing editor compares himself to a successful baseball coach with "the best people at each position", each with a bigger profile. That includes himself, who recently filed an outspoken cover story on the case for American national service.

the switch to Friday publication was driven by the pressure on readers during the week, meaning the magazine could be stale by the time they sat down with it. "Let's get the bread when it's freshly baked and they want to read it," says the managing editor. "The old rhythm was not for the readers but for the journalists. We were backward looking and retrospective."

In the age of the blogger, journalists must look to the future when analysing news. "That original notion of Time was really just a recapitulation of the week's news. To me that notion is pretty much gone in the age of the Internet where what was classically called 'news', whatever the heck that is, has become a commodity. It's what you can add to what people already know, putting it in context, giving it perspective, amplifying it, giving it depth."

He wants Time itself to move away from the idea of being a decentralized title with different covers for different global regions to one that offers international readers an American perspective. "They want to get a sense of what the heck are those guys thinking about," says Stengel. "I do want us to speak more with a single voice and to leverage that voice."

Time is benefiting from a growing interest in foreign affairs among younger generations of Americans. "One of the unintended consequences of 9/11 has been to make Americans, who have traditionally been pretty insular, realise that we are part of the world. Young people are really interested in international news in a way that probably wasn't true a generation ago, and they're interested not just in war and terrorism but in what life is like in different places."

He acknowledges that his competition is not just other news magazines but any entertainment, "a soccer game or the movies or watching television", and he is developing with the philosophy that the online audience might be very different to that which subscribes to the print offering. "You take the DNA for the original Time and then you grow it up in a different Petri dish which is online, and it becomes something new yet still has the integrity of what we've always done. It doesn't bother me if somebody discovers and has never read the magazine."

Nevertheless, Time staff must file for both audiences, with carrying 15-20 new stories a day, as well as breaking news from CNN. "Ten years from now the idea that somebody writes for the magazine and not for the website will be crazy. So you can't drive and listen to the radio at the same time?"

Stengel has cut the rate base (the circulation guaranteed to advertisers) from 4m to 3.25m, which has again been interpreted as a sign that Time is losing influence, though the managing editor claims he is reducing giveaways to give his numbers a greater integrity.

Relaxed and firmly upbeat, Mandela's friend is excited by the big picture. "This is the greatest information revolution in history. There's a kid growing up in Zanzibar who can access every book written before 1500 on the British Museum website - that's a great thing not only for media but for humanity."

The Last Tycoon of Print

The Last Tycoon of Print
By Jon Fine

Jann Wenner sits atop the Rolling Stone empire, all but thumbing his nose at the Web

As Rolling Stone celebrates its 40th with relatively few signs of senescence-on the business side, at least-its founder and impresario Jann Wenner comes into focus, more than ever, as the absolute last of his kind. He will be the last to reap the trappings of moguldom from a relatively small media company-just three magazines, the others are Us Weekly and Men's Journal, with revenue around $375 million. He'll be the last to ride an under-discovered cultural moment to print riches. As he notes, rock music was derided or ignored by the mainstream when he launched Rolling Stone. It's impossible any burgeoning mass movement could be so overlooked today.

Almost certainly, he is the last major print CEO to so blithely disregard the Web for so long. Up until early 2006 the Web page of Us Weekly consisted of a subscription coupon. Today the operations of Rolling Stone's Web site remain in the hands of digital-media company RealNetworks, which nets the magazine around $2 million a year in licensing fees as well as, Wenner says, a share of ad monies. Wenner promises ramped-up Web moves, but he proudly reports "we never lost tons of money chasing down ridiculous online ideas." He remains the kind of sole proprietor who's happier to save money on the Web than make it, and professes contentment with Rolling Stone's Web deal.

That opinion is not widely shared by company executives. But Wenner Media remains a company driven to a remarkable degree by the desires and idiosyncrasies of its 61-year-old founding entrepreneur, who also maintains a very fluid view of the future. Succession planning? "I haven't thought about it all," he says. Pressed further, he concedes the "possibility" of selling the company. "It's not inconceivable," he shrugs. "It's not on the table now."

Another possibility: turning it over to some of his kids. Jann has four, ranging in age from infancy to early twenties. (He and his partner Matt Nye, for whom he left his wife, Jane, expect twins in January.) Divining the mercurial Wenner's whims is never easy. But it is worth noting that a sale by Wenner and his estranged wife-who, along with a trust for their kids, are still the company's only shareholders-would likely trigger substantial capital gains taxes, given the company's massive run-up in value since the two founded it.

Rolling Stone's staying power frankly astounds me. (And not just because the intoxicant-laden tales Wennerites tell about the '80s, some of which surfaced in a front-page Wall Street Journal story, leave me wondering how it made it to 1990.) As a property, it is a very strange beast. It's pitched at young men, but is oddly fixated on boomer icons. Often it turns over its cover, and significant swaths of its pages, to pushing-sixtyish friends-of-Jann like Bruce Springsteen. (In reeling off a list of those interviewed for its third 40th anniversary issue-Rolling Stone has very high self-regard-Wenner refers to the likes of Bono and former President Clinton as "our guys.")

This disjuncture between audience and object, though, isn't hurting company ledgers much. While its primacy to the company's bottom line was usurped by Us Weekly, Rolling Stone still throws off around $25 million in profit on about $120 million in revenues, even after a slight profit dip in recent years. Its staying power is not so much about street cred with readers as it is with advertisers. Big marketers like Cadillac increasingly piggyback on music as a branding vehicle, and Rolling Stone remains the obvious call to make, says one former executive. Plus, top marketing and ad folk are old enough to skew more boomer in sensibility-read: Rolling Stone-friendly-than twentysomething.

A picture of a twentyish Wenner-in his outsider days when his nose was pressed up against the window while the culturati partied-is on display in his spacious, ultra-tidy office. But that Jann is long gone. More telling are the shots of him laughing it up with pals recognizable by one name: Arnold, Bruce, Mick. Today, a chief regret is wishing he'd "spent more time skiing." (For a guy who spends 60 days a year on the slopes, this is saying something.) But then he created this improbable role and celebrity for himself-from, of all things, starting a magazine.

In this, too, he'll be the last.

Monday, November 12, 2007

IBM Predicts Shift to Interactive Advertising

IBM Predicts Shift to Interactive Advertising

A major shift away from traditional advertising to interactive ad formats will occur in the next five years, according a report released by IBM Global Business Services. It's title is "The End of Advertising as We Know it."

The main future growth areas will involve advertising distributed through mobile communications devices and the Internet, followed by ads embedded in video games. Growth in these areas is anticipated to be up to four times faster than that of traditional media used for direct marketing.

Two-thirds of the executives polled expect 20% of ad expenditures in the next three years will shift way from impression-based pricing formats where the actual impact of ads can be tracked -- and priced accordingly.

Internet advertising will increasingly be distributed through online advertising networks and social networking Web sites.

Greater data tracking capabilities will improve the ability to target individual consumers with personalized advertising based more on lifestyle data, than contemporary methods for targeting by Zip codes and at the household level.

IBM's findings are based on surveys of more than 80 advertising executives and analysis of recent trends concerning how consumers have gained more control over how they view, interact with and filter out electronic forms of advertising.

U.S. Online Ad Budgets Up 28% This Year: EMarketer
By Brian Quinton

(Promo XTRA) Spending for online advertising in the United States will wind up being almost 27% higher in 2007 than it was last year, according to new findings from marketing research firm eMarketer.

That compares to a total increase in media ad spending of only 2.1%. And next year's online figure should grow even more.

The forecasts are part of a new study, "U.S. Advertising Spending", which tracks the course of Internet advertising in this country and relates it to total ad spending. The report predicts that marketers will spend $21.4 billion on Internet advertising in 2007 and may spend $27.5 billion on the Web in 2008. By 2011, eMarketer expects U.S. online ad spending to hit $42 billion.
Those dollar figures will still represent a small proportion of total ad spend, however. Marketers will only direct 7.4% of their budgets to the online sphere in 2007, and next year's $27.5 billion prediction will still represent only 10% of total U.S. ad spending. EMarketer foresees online advertising reaching 13% of total ad spend by 2011.

The report also finds that growing numbers of marketers are funding those Internet ad budgets with cash shifted from traditional media spends in TV, radio, newspapers and magazines. The top 100 national advertisers (as listed by Advertising Age) spent a total of $230 million less on those old-school media in 2006 than they had in 2005 and increased their Internet ad spending by an aggregate $558 million in the same period, eMarketer found.

According to eMarketer, paid search marketing will make up the bulk of that online ad spending (about 40%) through 2011. Display ads such as static banners will account for almost 22% of spending this year but drop a bit to 19.5% by 2011. But spending on rich media ads or online ads incorporating video will grow from 8.2% of U.S. online spending this year to more than 13% in 2011, the report said.

Spending on other forms of online advertising (classifieds, lead generation, e-mail marketing and sponsorships) will either hold steady or decline slightly over the next four years, according to eMarketer.

The firm is still crunching the numbers on social network advertising, but predicted that U.S. marketers will spend $900 million to advertise on those networks in 2007 and $2.5 billion to do so in 2011.

Downturns in the financial sector will dampen online ad growth in 2007 and 2008, eMarketer predicted. But reduced Internet spending by mortgage companies will be offset by other advertisers' interest in buying up the low-cost display inventory they've traditionally favored.

Sunday, November 11, 2007

Wenner Media Denies Ignoring Internet

Wenner Media Denies Ignoring Internet
Memo Pad: Norm Grills Jann Pick Any One . . . She's Still There
By - Irin Carmon

NORM GRILLS JANN: Forty years as a magazine editor and publisher seemed to have hardly taken their toll on Jann Wenner's energy - or his bite - at least judging from a lunch interview Thursday with Carlyle Group senior adviser Norm Pearlstine organized by ASME. Pearlstine, in explaining why he was skipping Wenner's biographical details, wryly recalled sitting through years of ASME lunches "watching Time Inc. not get awards" as Wenner made trips to the podium. He then said Wenner had been "pretty cavalier" about the Internet, asking, "Are you going to continue to ignore it?" Wenner denied the characterization, saying he preferred to wait for widespread high-speed access and let bigger companies figure out how to develop on the Web. After all, he said, "Time Inc. lost billions on it." (Pearlstine was editor in chief of Time Inc. during the problematic Time Warner-AOL merger.)

Wenner did say Rolling Stone was looking at implementing social networking to facilitate music fans seeing live music. (A spokesman for the company later told WWD that Men's Journal's site will also be growing, probably by next fall.)

What about the risk of becoming "my father's magazine," as Pearlstine described the threat of the digital age? Wenner pointed out the digital music revolution had also helped young people find the music that inspired his magazine. "Who was just telling me that Rolling Stone led to them reconnecting with their kid?" Wenner said, looking out at the audience. Portfolio publisher David Carey tentatively raised a hand. "Maybe I'm deluding myself," Wenner concluded, "but the richness of the field is as great as it's ever been."

In justifying what Pearlstine called the "pessimistic tone" of Rolling Stone lately on topics like President Bush and global warming, Wenner said, "The only person I know who is optimistic is Bill Gates . . . If you have $50 billion, of course you're optimistic." "At what market cap do you become optimistic?" Pearlstine wondered. "Not at my market cap!" said Wenner.

He pointed out he would "absolutely entertain buying more magazines if they were the right kind of scale, and if we could leverage it with our advertising," though he said his launch days were likely past.

ASME president and Glamour editor in chief Cindi Leive had introduced Pearlstine by saying he could "buy all of our magazines before we even get back from lunch." When Pearlstine said he only wished they were for sale, Leive replied, "Good to know that matters." Later, Pearlstine asked Wenner whether he would sell the company before, say, a Democratic president raises the capital gains tax. "My motivation has never been the money," said Wenner, adding his "is one of the greatest jobs anyone could ever have. And I'm not so sure I'd be a good employee." ("Really?" Pearlstine interjected sarcastically.) "I'm happy to work for someone smarter than me . . ." Wenner began, then stopped. "Now I'm going to get myself into trouble."

There were less careful moments. Speaking about the pool of young talent: he didn't see an "Internet brain drain" because young people apparently face the choice between working for either "Salon or Slate, or for a magazine with a major and meaningful audience." (Incidentally, Slate editor Jacob Weisberg is an ASME board member.) When asked what magazines he read: "Since Norm left Time Inc., none of those," and said that though the newsweeklies are sent to him, they don't do it for him. "I wish them the best," he said. "I know they're trying harder." He did praise Vanity Fair and The New Yorker. Earlier he had told WWD that he wants to frame a letter David Remnick wrote him praising material he found in Rolling Stone's newly released digital archive. - Irin Carmon