Time Warner is spinning off Time Inc., turning the 90-year-old publisher of Time, People and Sports Illustrated into a separate, publicly held company worth as much as $3.2 billion.
“A complete spin-off of Time Inc. provides strategic clarity for Time Warner Inc., enabling us to focus entirely on our television networks and film and TV production businesses,” said CEO Jeff Bewkes. “Time Inc. will also benefit from the flexibility and focus of being a stand-alone public company and will now be able to attract a more natural stockholder base.”[more]
The decision to spin off Time Inc., which operates 21 U.S. magazines and more than 25 websites—sector follows talks with Meredith Corp. that did not pan out, despite the lure of some powerhouse brands and franchises, such as Sports Illustrated’s annual swimsuit issue. But running those flagship magazines is expensive, and didn’t fit with Meredith’s brand or holdings.
Meredith’s interest was in beefing up its holdings a women’s magazine publisher, combining its National Media Group which includes Ladies’ Home Journal and Better Homes and Gardens with Time Inc.’s Lifestyle and Style & Entertainment brands, People and InStyle. Time Warner planned to keep Time, Fortune, Money and Sports Illustrated.
”We respect Time Warner’s decision and certainly remain open to continuing a dialogue on how our companies might work together,” said Stephen M. Lacy, Meredith’s chairman and chief executive.
Time Inc., founded by Henry Luce and Briton Hadden in 1922, was the cornerstone of a media empire that eventually acquired Warner Communications in 1989 to become Time Warner. As the largest U.S. magazine publisher, Time Inc. wrestled with the shift from print to digital—where ad rates are considerably less—and falling subscription revenues from lower domestic and international newsstand sales, all of which resulted in a 7 percent decline in revenue last year.
However, the “spin-off” is a move that the company has mastered. In fact, Time Inc.’s departure will mark the third major corporate break-up since Bewkes took over in 2008. In 2009, Time Warner Cable became independent and was shortly followed by the untethering of AOL, ending the disastrous union that was AOL Time Warner. “As we saw with the prior spin-offs of Time Warner Cable and AOL, we expect the separation will create additional value for our stockholders,” said Bewkes. Following the announcement yesterday, Time Warner shares climbed 1.41 percent in after-hours trading.
“The Time Inc. spin-off is just the latest indication of how rapidly the media landscape is changing,” noted Time of its parent’s—and sector’s—woes.
Rupert Murdoch’s News Corp. is separating into two independent companies, The New York Times Co. is selling The Boston Globe and Comcast recently purchased the remaining stake of NBCUniversal from General Electric. The magazine industry has seen an 8.2 percent drop in ads in 2012 alone, adding up to a crippling 39 percent since 2006, according to the Publishers Information Bureau. Time Inc.’s most recent losses subsequently resulted in the company’s announcement of a 6 percent reduction in staff, about 500 jobs.
The departure from Time Warner isn’t the only transition on the horizon for Time Inc., as CEO Laura Lang has announced that she will resign from her post. In her resignation memo to staff, Lang wrote: “The planned spin-off has also made me reflect on what is the best path for me and the company going forward. After considerable thought, I have decided that taking the company through a transition to the public markets is not where my passion lies.”
Industry insiders speculate on the irony that Lang, a former digital ad exec who joined Time Inc. from Digitas, couldn’t figure out how to navigate digital and advertising for Time Warner’s magazines and digital brands.
AOL chairman and CEO Tim Armstrong said, “I am a massive believer in brands,” and “the Time Inc. brand portfolio is very valuable overall.” However Armstrong isn’t volunteering AOL for rescue efforts, pointing out that Time Inc. is more valuable than AOL. “For us to do a transaction would be challenging…It’s hard to do.”
One thing is for sure; if whoever signs up to run Time Inc. tears a page out of Bewkes’ playbook, the new company should be in pretty good shape. As Slate points out, “In five years under Chief Executive Jeff Bewkes, the owner of Warner Brothers, HBO and People magazine has delivered investors a 70 percent return, keeping pace with its wheeling and dealing media rivals.”