Time-AmEx pact a 'win-win deal.' - American Express Publishing

Folio: The Magazine for Magazine Management, Feb 1, 1993 by Lorne Manly

Time Inc. and American Express Publishing have been negotiating so long that the announcement December 23 that Time Inc. will manage AmEx's main lifestyle magazines was almost anticlimactic. But the tortuous year-and-a-half road to signing this letter of intent was worth the slog for both companies: The agreement is getting rave reviews in the investment and media communities.

The plans call for Time Inc. to manage Travel & Leisure and Food & Wine, and custom publications like Your Company (for AmEx small-business customers), Departures, (for AmEx Platinum cardmembers), and SkyGuide (an airline flight guide for cardmembers). Atlanta, D and L.A. Style are not included in the deal. Operating responsibility falls to Time Inc. Ventures, which will be subject to the oversight of an advisory board consisting of Time Inc. and AmEx executives.

In addition to receiving an annual fee, Time Inc. will get a cut of the profits as the bottom line improves. That fee - and conditions governing Time Inc.'s access to the AmEx database - will be hammered out in the next few months. A deal is expected to be completed in the first quarter of 1993, says a Time Inc. spokesman.

Kudos for all

"It's a win-win deal," says Chris Dixon, media analyst at PaineWebber, noting that Time Inc. can amortize its costs over a broader revenue base, while AmEx has found a way to gracefully bow out of the publishing business without selling its valuable franchises.

Time also fulfills a long-standing ambition to break into the travel category at minimal cost. Travel ads aren't a major category for any of Time Inc.'s magazines, except for Sunset, its Western lifestyle title. "Having T&L, and to a lesser extent, Food & Wine, is a way to get new business without cannibalizing existing business, as well as get travel advertisers to go into other packages," says one source close to Time Inc.

And all this comes with a virtual no-risk guarantee. According to sources close to the deal, if AmEx decides to sell the titles, Time Inc. gets first crack at them. If AmEx sells to another company, Time Inc. receives a cut of the proceeds.

If past experience is any barometer, though, the agreement could still falter. Time Inc.'s record of joint ventures is a mixed one. Its investment in Hippocrates and Parenting gave the publishers the marketing clout and sophistication they needed to compete, while Time Inc. avoided exposure to huge monetary losses (as with TV Cable Week). The company later bought the successful magazines outright.

Time Inc.'s partnership with Lang Communications' Working Woman and Working Mother, however, has soured. As first envisioned, Lang's sale of a 50 percent stake in Working Woman was a prelude to establishing a presence in the women's service field. Although the partners bought McCall's and Working Mother in 1986 for about $40 million, Time Inc. got cold feet after realizing how cutthroat pricing was in the field. McCall's was sold to The New York Times Co. for about $85 million, and the venture has stagnated as the two remaining titles struggle.

Chairman Dale Lang has been saying he is close to buying out Time Inc.'s share for more than a year, with no results. But an end is in sight, thanks to a sunset clause scheduled to take effect this month. Each side has the option to buy out the other, with Time Inc. getting first choice.

However, the new agreement appears to be a better fit, especially if Time Inc. obtains a fair amount of access to AmEx's estimated 25-million-name database. Time Warner already boasts an estimated 53 million names in its database, and that combination will intrigue advertisers.

"The ability to target markets selectively is becoming increasingly important to advertisers," says PaineWebber's Dixon, "and those magazine companies that can come up with innovative programs that work will garner the premium advertising rates."

The deal is likely to spur future joint ventures, building on the few current agreements, media observers say, noting Hearst Magazines and Dow Jones & Co.'s partnership in SmartMoney. Also, Mariah Publishing and Welsh Publishing are attempting to launch OutsideKids, and Rodale Press has hooked up with medical publisher Heartwoods, Inc., to reach doctors with its health and fitness magazine, Triad.