Time Warner Inc.’s 32-Page Ad Insert Bugs a Media Critic

Executives of Time Warner Inc. described it as one of the largest magazine-advertising campaigns ever--a 32-page insert that will reach about 80 million readers of Time, Life, People, Fortune and Entertainment Weekly this week.

But one prominent media critic called it a prime example of intra-company back-scratching that is “anti-competitive” and smacks of “self-dealing” by the giant media concern.

The advertising insert in question was placed in the five Time Warner publications this week by Time Warner’s movie subsidiary, Warner Bros., to commemorate the 50th birthday of Bugs Bunny. In addition to “advertorial” copy about the wisecracking cartoon rabbit, the insert carries ads promoting various Warner movies, company divisions and products licensed by Warner Bros.

A Time Warner spokesman said this week that the company’s movie division “paid fair market value” to the company’s magazine division to run the ad supplement. He would not specify a price, but sources inside and outside the company estimated that such a promotion would go for about $10 million.

However, Ben H. Bagdikian, the former dean of the journalism school at UC Berkeley, said the supplement highlights a larger issue involving concentration of ownership in the media. “The media that reach the largest audiences are becoming dominated by a handful of corporations who can exploit their size and power with the kind of self-dealing that these Time Warner ads represent,” he said.

Ownership of Warner Bros. and the magazines gives Time Warner a built-in cost advantage, Bagdikian said, that permits the company to squeeze out small competitors. “Presumably, even if Warner pays the going ad rate, Time Inc. will make a certain profit in which Warner will participate,” he said. “It’s all going to end up in the same bank anyway.”

Sandy Reisenbach, Warner Bros.’ executive vice president of marketing, said Warner began talking with Time about running the ads long before Time Inc. and Warner Communications announced that they were merging early last year. The supplement was inspired by a similar promotion that Walt Disney Co. ran in Time Inc. publications a year ago to promote the 60th year of Mickey Mouse, Reisenbach said.

Everett Dennis, executive director of the Gannett Center for Media Studies, said the Time Warner ad supplement would have inspired congressional antitrust hearings 20 years ago. But he said media ownership is considerably more diverse now than two decades ago and the ads appear to raise no issues involving anti-competitive practices.

“This is exactly the kind of competitive advantage that Time and Warner hoped to achieve by merging,” he said. “They are simply maximizing their opportunities. There is nothing fundamentally wrong with it.”

Dennis added that cross promotion within media firms is common. The Wall Street Journal runs ads for subsidiaries owned by its parent firm, Dow Jones & Co., and the Washington Post runs ads for Newsweek, which are both owned by Washington Post Co.