Divide & Conquer? AOL Time Warner Book Group Falls To PiecesBy Edward Cone Print
The media giant's publishing arm broke all its books into thousands of digital assets. But was it too late to win over the rest of the company?
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New ways to boost revenue are at a premium in the $6.4 billion trade-book publishing industry, where sales fell 2.6% in 2001. So interactive come-ons like "Look inside this book" are significant because they lead to increased sales, says Alice Leung, national online account manager at AOL Time Warner Book Group. "It drives sales more than just a plain text document," she says.
That's why the publisher, currently being shopped around for possible sale by its debt-strapped corporate parent, is trying to make online shopping more like a visit to a bookstore. Now, if you want to lounge around with a latte and an unpurchased copy, you can do so in your bathrobe.
To Leung, in fact, Four Blind Mice is not just a book any more. Instead, Four Blind Mice, like other titles from the $320-million-a-year Book Group, gets sliced and diced into three dozen types of useful and reusable digital components.
You thought the jacket was just supposed to protect against dust and grime? Now, the jacket copy and cover images, along with the table of contents, sample chapters, audio clips and the entire text of the book, become assets themselves within a digital management system that can help boost sales in stores and on Web sites.
Creating digital assets is expected to drive more than additional sales of a book. In the long run, each book's components can be reused to create new products like serialized chapters, or even combined with elements of movies, TV programs or music albums to build wholly new products.
Combining assets and creating new products and services is exactly what then-AOL chief executive Steve Case had in mind three years ago when he pushed a $147 billion mega-merger with Time Warner. Synergy was the overused catchphrase of the day, with managers from Internet service AOL and entertainment giant Time Warner saying they would lead a convergence of communications, entertainment and information. Movies, books, magazines and online services all would be integratedand promotedtogether.
That grand idea hasn't exactly panned out, so far. AOL Time Warner last month reported the largest yearly net loss in U.S. corporate history$98.7 billion, including a $45.5 billion write-down in AOL's asset value. AOL's advertising revenue also has plunged, leading to a 39.5% reduction in 2002 earnings before interest, taxes, depreciation and amortization on relatively flat revenue. The lack of promised synergies is a big reason Case last month stepped down as chairman.
The supposed synergies may never play out if AOL Time Warner devolves into its component parts. And if the sale of the Book Group is not the beginning of a major dismantling of the dot-com era's flagship merger, it will be ironic; the publisher has been the leader in showing the diverse units of AOL Time Warner how to deploy digital-asset management (DAM) systems. "We were kind of the guinea pigs," says Phil Madans, the Book Group's director of publishing information.
At this point, though, the Book Group is not much further along than other divisions, such as HBO. The effort to create the kind of integrated marketing and product campaigns Case and other company executives talked about in 2000 started with the Book Group and has since progressed on several fronts:
- The Book Group's digital-asset management system is used by more than 350 people, including the sales force, marketing staff and publicists. It supports sales reps who use high-speed connections to get material for presentations and marketers who have access to past and present promotional materials. And it can make copies available in foreign markets where international rights are negotiated.
- Movie studio Warner Brothers signed on with software vendor North Plains Systems of Toronto in September 2002 to manage advertising and publicity assets for its international film and TV businesses, consumer products and home video. Reusing digital assets around the world should provide significant savings in distribution.
- HBO announced in November that it would expand its use of the same digital-asset management software used by the Book Group. The premium cable channel began using the software to manage assets for its promotional and advertising campaigns. Now it is adding audio clips from hit shows.
"AOL Time Warner is doing this a piece at a time while keeping in mind the bigger picture, so no one group is isolated," says Madans.
The flagship America Online service itself is counting on shared assets most heavily. Its new head, Jonathan Miller, plans to charge additional fees for premium content. That strategy, announced in December, will require extensive sharing of assets with the publishing and cable operations of the company.
Eventually, AOL Time Warner divisions should be able to create new products by mixing and matching digital assets from its various units. For instance, an editor at AOL with access to clips from, say, HBO's The Sopranos, and the upcoming Warner Brothers film Terminator 3, might produce a weekly highlight reel of the best in current entertainment, create a photo gallery from Sports Illustrated, or make a five-minute multimedia information pack on Warner Music acts from Kid Rock to Cher. In the end, digital asset management will foster new types of revenue-producing products that today cannot be conceived.
To make sure the future happens, a special Media Asset Management subcommittee of the companywide CIO Council meets regularly to discuss a cross-divisional strategy on digital assets. Book Group CIO Larry Feldman and his lieutenants, Madans and Paul Gore, the Book Group's executive director for advanced technology, are on the subcommittee. The Book Group and HBO have made presentations to the Media Asset Management group on lessons learned in building their systems, and also discuss topics like metadata directly with other operating units.
Even if no new products resultand no matter who ends up owning the Book Groupthe first and clearest payback from digital asset management comes in such fundamentals as time savings and shipping costs.
Leung, for instance, used to spend two weeks each December distributing cover images of new books to major customers like Amazon and Barnes&Noble.com, and to big distributors such as Ingram and Bowker. "Sending covers out would take over my life and become overwhelming," she says. "I couldn't even return my messages when customers called during those two weeks."
This year, it took her three days to distribute more than 250 covers for 2003 releases from the Warner Books and Little, Brown imprints. Working from her desktop on the 4th floor of the Sports Illustrated building in New York's Rockefeller Center, she has access to a digital vault containing the contents of more than 6,000 booksstored as some 33,000 assets. Where she used to scan covers into her computer and store them in files on her hard drive, she now just retrieves them from her browser.
"It's a streamliner that lets us work at a faster pace, and drop the nitpicky things we had to do," Leung says.
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