MEDIA FORUM: How does Time Inc buying IPC affect advertisers? - Is everyone a winner after Time Inc's purchase of IPC? What are the pros and cons of the deal for the advertisers? Alasdair Reid investigates

The trouble with behemoths such as AOL Time Warner is that the

larger they get, the hungrier they become. You could make analogies with

a shark that has to keep moving forward or die but this beast makes a

shark look like a stickleback. Steve Case, the chairman of this

corporate giant, has to keep delivering growth or he'll be removed by

his shareholders - and in a mature market such as media and advertising

the only opportunities for growth are by acquisition.

This would be fairly straightforward if the company wasn't already so

large in its home market that each time it makes a move, the competition

authorities start running round having panic attacks.

AOL Time Warner has to look abroad. That's why Case stated in a recent

interview that, ten years from now, 50 per cent of the group's revenues

would come from outside the US. At the moment that figure is around the

20 per cent mark.

At first sight this seems like a wildly aggressive empire-building

strategy, but in the bigger picture it's probably more to do with the

remorseless logic of his position. Case really has no choice. He has to

look at just about every opportunity that comes his way. Especially big

consumer magazine companies owned by venture capital outfits desperate

to get out of a market that is heading toward the low point in its

economic cycle. Companies, in fact, such as IPC - which AOL Time Warner

bought for £1.15 billion last week.

So the monster lumbers on, but can we safely ignore most of the

background noise - all the talk about content and synergies and

convergence? Or are there real lessons here about how the media world

will work in the future?

Michael Pepe, the president and chief executive officer of Time Inc,

will now be managing the IPC division. He says: "IPC can help Time Inc

in the UK given its size. Consider launching In Style within our smaller

local publishing operation versus doing it with the talent, resources

and infrastructure of IPC. The same resources can be made available to

Time, Fortune or Wallpaper."

He adds: "Time Inc, an experienced direct marketer of magazines, can

help IPC generate more subscriptions. IPC can teach us about the

newsstand business. AOL can help IPC strengthen its websites, providing

tech support like hosting and generating traffic more efficiently. IPC

and AOL can also cross promote each other's brands, generating higher

sales for each."

Do we buy that? Simon Wallis, a media analyst at WestLB Panmure, is more

than willing to keep an open mind: "The whole AOL Time Warner merger was

done on the basis of synergies between AOL and the traditional media


One of the first areas they tried to drive that in was magazines -

offering subscriptions for magazines within AOL. Time has apparently

taken hundreds of thousands of subscriptions that way."

Whether they'd have got those subscriptions anyway if Time wasn't linked

to AOL is a moot point. But the numbers seem impressive. You can always

argue that cross-promotional momentum inevitably builds when you have a

whole portfolio of properties. For instance, although AOL's core

internet service has been growing steadily (it has more than one million

customers in the UK and more than 4.5 million across continental

Europe), just think how many more customers it can hope to tempt through

the astute use of its new IPC properties.

Wallis also points out that there are potential synergies on the cost

side. He says: "For publishers to learn about this independently takes a

lot of upfront costs and this is an area where AOL's expertise could

prove valuable. If you look at the websites of the US magazines these

days, for instance, they're very good. The US market is sceptical about

the degree of revenue synergy you can derive from this but you can see

why AOL Time Warner wants to roll out the strategy across Europe."

Another theory put forward is that Time Inc needs a bigger stepping

stone close to continental Europe - though it's hard to believe that

King's Reach Tower is positively seething with expertise on such

matters. Nicholas Coleridge, the managing director at Conde Nast, would

certainly number himself among the sceptics. The general view, he

maintains, is that convergence has not really worked at AOL Time


He says: "If the present IPC management stays in place there will be

little difference except the ownership. And if they are wise they will

certainly keep Sly Bailey. But if they bring in US executives it will

take them a long time to figure out a company as large and diverse as


Coleridge adds: "I think that IPC in its Cinven phase made pretty

energetic attempts to diversify into other markets, with titles such as

Later and Nova, but the reality is that sometimes they work and

sometimes they don't. The general view is that AOL Time Warner is a

sprawling media conglomerate where some executives find it difficult to

concentrate on anything for more than ten seconds."

Dan Reaume, the international media director of OMD, doesn't agree with

that view. He comments: "Internally, from a business cost point of view,

it can make savings in producing advertising across the portfolio -

advertising and promotional costs can be halved. The cross-promotional

opportunities are there and I do buy the argument about synergies in

terms of content across various media."

Reaume concludes that there don't appear to be any downsides for the IPC

sales department. He states: "There could be a real positive from an

advertising sales point of view in that it could sell packages."

Steve King, Zenith Media's chief executive of Europe, the Middle East

and Africa, tends to agree. He argues that AOL Time Warner is an

extremely smart company and led by some of the most inspired management


He states: "I'd agree that, like a lot of international media owners, it

has struggled to deliver the concrete benefits but I think the AOL

merger was visionary."

The US giant is different from most media companies, he adds: "Only a

quarter of revenue comes from advertising, which makes it a very robust

operation. I don't know much about the relative heath of IPC but it is a

well-established UK media company and AOL Time Warner's claims of being

able to leverage scale and efficiencies are more believable. The only

slight doubt is that it is a very US-focused company and that makes this

a big challenge because IPC is geographically more remote."