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Books Look to Find Niche At AOL Time Warner
Steven M. Zeitchik -- 1/17/00
Mammoth merger creates strange bedfellows

One week after America Online and Time Warner announced their intention to merge, officials at Time Warner Trade Publishing said it was too early to gauge the effects on the book division, but remained optimistic about distribution opportunities with the country's largest Internet service provider.

"It's not like we're sitting down and meeting with them [AOL] this week," Greg Voynow, v-p online business development for TWTP, told PW. But he did say that he hopes myriad partnerships will develop. "The thing that immediately comes to mind is that there are matches everywhere. As a broad consumer publisher we publish content in every AOL distribution channel."

Indeed, both companies in the merger have stressed the importance of content. In the past, Warner Books has aggressively pursued such opportunities. For example, Time magazine published a lengthy excerpt of Bill Gates's most recent book, published by Warner, although, as one high-ranking official said, "There's synergy in theory and synergy in practice."

Observers also said that direct sales, particularly through electronic publishing, becomes a more tantalizing possibility with the merger. Until the deal, Amazon.com had held the distinction as the book industry company with the largest number of e-mail addresses (about 12 million); AOL TW has approximately 20 million.

While the specific effects of the merger on Warner's book-publishing operation remain to be seen, the deal has created a dizzying number of bedfellows and partnerships in the book business.

The most prominent entanglement involves the new company and Bertelsmann. The owner of the largest trade book publisher in America also owns 50% stakes in AOL Europe and AOL Australia, as well as .7% share in AOL Inc. Experts believe that the stake in AOL Inc. will be whittled down in the coming months; shares in AOL Europe and AOL Australia will remain, according to Bertelsmann. At press time, Bertelsmann CEO Thomas Middlehoff retained his spot on the AOL board, despite several press reports to the contrary.

"The AP took it a little bit too far," a company spokesperson told PW. "He said he's looking into it and will talk about that with [AOL TW chairman] Steve Case. He said it would probably make sense [to leave], but there is no decision yet." Middlehoff was among the people who approved the merger.

Bertelsmann is also connected to AOL via Barnesandnoble.com. The e-retailer, in which the German company has a 40% stake, paid $40 million to AOL in 1997 to become the exclusive bookseller on AOL's proprietary services. And finally, the two companies are joined via the merger between Time Warner's Book-of-the-Month Club and Bertelsmann's Doubleday Direct. According to observers, the addition of AOL's database of e-mail addresses becomes a major asset for the clubs, which are looking to gain a foothold with online consumers.

Other AOL Time Warner connections include IDG Books, which under contract to create the AOL Press imprint, and Hoover's, in which Warner Books owns 3.5 million shares. (Warner Books president Lawrence Kirshbaum sits on the board of Hoover's.) Amazon also has a relationship with AOL--it paid $19 million for rights to exclusivity on AOL. com, as opposed to the proprietary service.

In another wrinkle, one of TW's distribution clients is Microsoft Press.
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