Time Life Unit Sold to Private Investing Group
January, 6 2004
Washington Post, 01.06.04
Time Warner Inc. has sold its Time Life Inc. direct-marketing division to a group of private investors as the media giant continues to shed companies to pay down debt.
The Alexandria-based firm, known over the years as the home of chirpy book-selling Time Life operators who were always standing by to take your call, was no longer within the core business plan of Time Inc., which publishes more than 150 magazines, the company said.
New York's ZelnickMedia Corp., headed by Strauss Zelnick -- a former BMG Entertainment and 20th Century Fox executive -- sealed the deal for Time Life on Dec. 31 for an undisclosed amount of cash. Time Warner will be paid a royalty on Time Life sales for the next 20 years but retains no control over the company, which will be run by Direct Holdings Worldwide, Zelnick's holding company. Ripplewood Holdings LLC also is an investor in the purchase, which was announced yesterday.
Zelnick holds stakes in several companies, including Lillian Vernon Corp., a catalogue marketer that sells gifts and household items. Although Time Life sells different products -- mainly music, videos and DVDs -- the two businesses should mesh nicely, said Zelnick partner James Friedlich.
"We are music and media guys," Friedlich said in an interview yesterday. "Time Life is direct marketing meets media. They are the largest music compilation company in the world."
Time Life began phasing out book sales in 2002 and cut them altogether last year, finding them too unprofitable. The well-known and respected Time Life book family -- on topics ranging from world history to food to home repair -- were expensive to produce, requiring teams of free-lance writers. The music compilations, by contrast -- "Fabulous '50s," "Classic Country" and so forth -- are relatively inexpensive to make and return a much higher profit.
The products are chiefly marketed via television commercials and infomercials featuring former stars such as Davy Jones of the Monkees. Time Life's annual advertising budget nears $100 million.
Time Life booked $350 million in revenue last year and returned a loss, said Steven Janas, who will remain Time Life's president, saying he expects the company to return to profitability this year. Time Life hit revenue highs of more than $500 million in the late '80s and early '90s, but the high cost of producing books ate into profit.
Under the new ownership, Time Life will consider resurrecting the book line, if it can be done in a thriftier fashion, and will begin selling video games and educational software, Friedlich and Janas said. Janas said he was happy about the purchase, which came about from a May 2003 cold call made to Zelnick from Time Warner chief executive Richard D. Parsons.
Parsons knew Zelnick owned Lillian Vernon and wondered if he would be interested in owning Time Life, another direct-marketer. Negotiations simmered over the summer as Time Warner turned its attention to unloading Warner Bros. music and began in earnest in September, Friedlich said.
"We felt a little like the black sheep in the [Time] family," Janas said in an interview. Time Life has about 130 employees in its Duke Street offices in Alexandria and about 225 worldwide, Janas said. This figure does not include employees at distribution and sales centers around the world who may be the subject of layoffs as Zelnick combines back-office functions with Lillian Vernon, Friedlich said.
Because the typical Time Life customer is over 35, an age group less likely to download music over the Internet, Time Life's music business has not been significantly hurt by Internet music piracy, Janas said. Also, recent efforts against telemarketers do not apply to Time Life, because the company typically calls only former customers, which are exempted from do-not-call lists, Janas said.