Thursday, February 14, 2013

Time Warner & Meredith - Match made in 1997?

I had an interesting breakfast recently with someone from one of the largest magazine publishers in the world and naturally we spent most of our time talking about digital.  This company had begun to see really interesting data come back on the behavior of their digital subscribers and as the usage data grew larger and larger it was clearly showing that subscriber behavior is not what we thought.  Funny how real data undermines our long held assumptions which are often based on 'experience' or 'intuition'.  We all know now that the digital world can give us a view into the behavior and motivations of consumers in a way that print never could.  In the print world many media companies had no direct relationship with the consumer but as more and more media companies - magazines a prime example - reach customers directly these publishers begin to gain the insight they never had before.  Some of that insight can be unsettling.

Over the past 20 years media has consolidated and one of the factors in that consolidation (among many) was audience consolidation.  The idea that a publisher or broadcaster could aggregate an audience by pulling together sets of publications or media brands across related segments and then cross sell their audience.  This strategy was based on the not unintelligent idea that audiences could be segmented into groups and these groups would be defined by their mutual interests and therefore might purchase or subscribe to a variety of publications based on these interests.  A lot of media companies have been rolled up motivated by this assumption.

What made my breakfast interesting that day was that their data showed that their subscribers did not 'cross pollinate' even-though the publisher held multiple titles in the same genre and many titles that one could assume would appeal to the same subscriber across genres.  Think of trying to tie Men'sHealth, Road&Track and FastCompany as an offer to a current subscriber of one of these titles and it apparently fails emphatically.  (By way way, I made that grouping up for illustrative purposes).   This example of data analysis - and the ability to really capture key behavior analysis - suggests that we know little about the motivations and interests of our consumers and that the assumptions we may have built our business on could be completely errant.

The combination of Time Warner and Meredith could be seen in two ways:  Time Warner is doubling down on the aggregation model or they understand that the underpinnings of their aggregation strategy for the past 20 years wasn't what they assumed.  I have no idea but, if it is the latter then they will realize as digital becomes a far greater part of their delivery they can't take for granted that the aggregation of their customer base is going to be a significant driver of their top line.   In fact they might find that annual subscriptions across the board decline as subscribers pass these up for single copy purchases which was another of the interesting trends publishers are seeing in the digital world: single copy sales are a growth business.  Per copy sales might be good but rate base is better.

From the NYTimes Media Decoder:
Time Warner is in talks with the Meredith Corporation to spin off much of Time Inc., the country’s largest magazine empire and the foundation on which the $49 billion media conglomerate was built, Amy Chozick and Michael J. de la Merced write. The deal would move the bulk of Time Inc.’s magazines, including titles like People, InStyle and Real Simple, into a separate, publicly traded company that would include Meredith publications like Better Homes and Gardens and Ladies’ Home Journal. The new company would borrow money to pay a one-time dividend of about $1.75 billion to Time Warner, making the transaction resemble a sale. Time Warner would continue to control the newsmagazines Time, Sports Illustrated, Fortune and the magazine Money. The deal is one of several options under consideration to reduce Time Warner’s troubled publishing unit.

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