Media Fortune Fame & Folly

What (or who) is the future for Time Inc?

Everybody is watching Time Inc. The world’s most famous magazine publisher, which created the original newsweekly in 1923, is defined by iconic brands – Fortune, Life, Sports Illustrated, People, Entertainment Weekly, Money, InStyle, and Time itself. Throughout the twentieth century, it set the pace for magazine, newspaper and even TV journalism all over the world. Its distinctive ‘Timestyle’ – which has largely survived the 91 years since launch – featured short, sharp sentences, short-ish stories and the use of descriptive epithets (e.g. gentle-spirited or pot-bellied). It never allowed an individual simply to have walked rather than dashed, ambled, or shuffled. People rarely

Time magazine: always a pace-setter
Time magazine: always a pace-setter

talked, but they barked, snapped or gushed. The design of today’s Time magazine is also reminiscent of founder Henry Luce’s first issue which sold-out 9,000 copies in 1923. But, even in digital times, the content is slightly less of a challenge for Luce’s heirs than the publisher’s distinctive corporate lifestyle.

Time’s overseas bureau chiefs traditionally entertained like ambassadors, photographers hired helicopters, and correspondents chartered aircraft to get their stories. In 1965, Life magazine’s special issue on the funeral of the UK’s heroic wartime Prime Minister Sir Winston Churchill saw the company fit-out an aircraft as a flying editorial office, where 40 staffers processed photographs, researched facts and wrote copy on the flight back from London.

Time Inc was one of a kind.

Before television became the primary information and entertainment medium in the 1970s, Luce’s magazines group was simply the dominant media force in America.

Media commentator Michael Wolff says: “The cover of Time was once, hands down, the single most influential piece of media in the world. Fortune magazine was the businessman’s bible. Sports Illustrated was ESPN. And, when Life (more powerful in its day than television ever was) started to decline in the early 1970s, it was replaced by People, which went on to become the most profitable magazine in the world…Time and Life had an extraordinary monopoly on the nation’s attention. Nothing like this had ever been; nothing like it will ever be again.”

Posh journalism

The world’s largest publisher was propelled by high-quality journalism, corporate charisma, and Ivy League posh-ness. Everybody wanted to be at Time’s dinner for its 100 People of Influence, and to know (or be) the magazine’s Person of the Year. The company had it all: bags of authority, political influence – and sky-high profits. Characteristically, its headquarters for this past 55 years has been the majestic 48-storey Time-Life building on New York’s Rockefeller Plaza. It’s a building and a style straight from Mad Men.

The term ‘church and state’ was coined for Time’s insistence that editorial content be beyond the influence of business managers or advertisers. Ironically, Henry Luce and his partner Briton Hadden had originally decided to alternate annually their own respective roles as editor and business manager.

The company’s large-circulation influential weeklies – with their primarily male readerships – contrasted with the highly-fragmented women’s monthly magazine market populated by Hearst and Conde Nast. Only decades later would the two worlds collide in the post-digital scramble for magazine survival.

Today, Time Inc publishes 23 magazines in the US (where it is the largest magazine group) and 60 magazines in the UK, where it is No.2. Its media connect with more than 200m people every month in print and digital.

$50m launch loss in five months
$50m launch loss in just five months

But, now, it’s all in the blender. And this is not just another horror story about traditional media being tortured by digital kids: the decline started a decade before the internet. This is the story of six extraordinary deals in 30 years which have shaped and shaken Time Inc:

1983: A $50m launch fiasco: Sixteen years after the death of Henry Luce, the company’s almost flawess record for successful magazine launches collapsed in a heap with an admission from the CEO: “It is now clear that our business plans for the magazine will not work.” That was one way to own up for the failure of  TV-Cable Week which was closed after just 25 weekly issues.

The badly-researched and wildly optimistic plan was to overhaul the formidable TV Guide (then the world’s biggest-selling magazine, five years before its $3bn purchase by Rupert Murdoch almost bankrupted his News Corp). TV-Cable Week succeeded in losing $50m in just five months, probably the most expensive magazine launch ever. In retrospect, it looks like the life-changing Ceaușescu moment when the powerful, hubristic leader over-reached itself. The ultimate corporate humiliation came from the pages of an insider’s best-selling book on the saga, entitled: “The Fanciest Dive: What happened when the media empire of Time-Life leaped without looking into the age of high tech”.

1985: Splashing the cash: Time Inc bounced back with the acquisition of Southern Progress, the Alabama-based publisher of Southern Living, a magazine launched 20 years before from the lifestyle pages of the company’s 100-year-old Progressive Farmer. It had 2million subscriptions and was among the top 15 US magazines in advertising revenue. The $500m price was a record for a publishing company – some 12 times EBITDA profit. But it took Time Inc into the Hearst and Conde Nast world of food, home interest and lifestyle magazines, with a 25% margin business (double its own at the time) – and, significantly, beyond most of those in the ivory towers of Rockefeller Plaza.

1990: A deal for the next century”: Next came the merger of Time Inc and Warner Communications, which was really nothing of the sort. It

Ross: enriched by the 'merger'
Ross: enriched by a scandalous ‘merger’

started with talks about a no-debt merger and ended up being a $14.9bn purchase by Time Inc which left the colourful Warner boss Steve Ross in charge. The Hollywood-Manhattan marriage spotlighted Ross, a street smart New Yorker who had made his first fortune operating funeral parlours and car parks. He was accused of insider trading and of helping to ramp up the price paid by Time Inc – by encouraging hostile bidding from Paramount.

Whatever the truth, Ross personally made more than $200m from the “merger” in addition to several times that in what was said to the largest-ever share option grant. He even managed to sneak an amazing “golden coffin” contract that committed the company to pay to his dependants the $8m life insurance proceeds and all his salary and benefits, including bonuses based on past performance, for three years after he died.

One account of the audacious ‘merger’ called it “the only acquisition in business history in which the little fish swallowed the big fish, making the ‘little fish’ (Ross) more than $200m in the process”. But, then, Time’s executives did pretty well too from a deal in which, it is said, they eventually gave in on every negotiating point and accepted a series of conditions that punished their shareholders – and enriched themselves.

The greatest shareholder punishment was the $11.5bn of debt with which Time Warner was landed – almost five times what it would have been if the original merger plans had gone through. But nobody was counting and Time’s bosses talked the talk: “We see this as an opportunity for an American company to get competitive. This is not a transaction done for the purposes of 1989, or even the 1990s. It is for us to be positioned for the next century.” That was a real hostage to fortune for a ‘merger’ that was actually born more from the fear of takeover by a Murdoch or Maxwell than from a deliberate strategy. Fear of a different kind also drove Time Warner’s ultimate mega-deal 10 years later.

2000: “Biggest mistake in corporate history”: The height of the first dotcom boom was when the forecast chaos of the so-called millennium bug had failed to materialise. They were (the first) crazy times when traditional businesses were blinded by bright, warp-speed companies which were unprofitable but had large audiences and investor fan clubs. The Time Inc people who – a decade earlier – had been scared into selling themselves short, were now in charge at Time Warner. And fear again drove them to “merge”, this time with America Online (AOL), whose president fooled them: “All you need to do is put a catalyst to [Time Warner], and in a short period, you can alter the growth rate. The growth rate will be like an internet company.” Done.

Big deal. Big mistake
AOL: Biggest deal. Biggest blunder

The vision actually seemed clear enough: by merging with AOL, Time Warner could reach deep into the homes of tens of millions of new customers. And AOL could use Time Warner’s high-speed cable lines to sell to its own subscribers TW’s magazines, books, music, and movies. But that was where the commonsense ended: the deal was even more one-sided than the 1990 “merger”.

Time Warner shareholders got 45% of the combined business, AOL got 55%. Steve Case’s over-hyped internet business had effectively acquired Time Warner, even though the latter had most of the assets and revenue. The whole deal was said to be valued at $350bn. But not for long. It quickly collapsed as AOL’s growth and profitability stalled, causing AOL Time Warner to report 2002 write-down losses of $99bn – then the largest corporate loss ever. The total value of AOL shares subsequently went from $226bn to about $20bn. By the time the business was sold-off ignominiously by Time Warner in 2009, it was worth just $6bn.

The deal was described later by the current Time Warner chief Jeff Bewkes as “the biggest mistake in corporate history”, which was a refined version of his earlier invective at an internal meeting when (as a not-too-senior executive) he dared to describe the deal as “bullshit”.

Ted Turner, the visionary founder of CNN which had been acquired by Time Warner in 1996, had even more reason to be angry: “The Time Warner-AOL merger should pass into history like the Vietnam War and the Iraq and Afghanistan wars. It’s one of the biggest disasters that have occurred to our country. I lost 80% of my worth and subsequently lost my job…I lost about $8bn.”

2001: A billion pound plunge in the UK: The AOL deal was watched keenly in the UK where the largest magazines group, the private equity-owned IPC Media, had briefly flirted with the idea of a 2000 ‘merger’ with Future Plc. The shooting-star tech magazine group briefly enjoyed an internet rating after its 1999 IPO – before crashing to earth for the first time. IPC itself had been milked for profits, first by Reed Elsevier and then by Cinven private equity which paid £860m for it in 1998. That had seemed a high price but Cinven did even better. One year after its “merger” with AOL, Time Warner bought IPC for £1.15bn.

The Time-IPC combination was considered to be a pretty smart move – but not by everyone. Some Time insiders remembered back to 1998 when (jointly with Kerry Packer’s ACP Magazines of Australia) they had considered paying 25% less for what had been a more-profitable IPC. But, in keeping with Time’s glorious history of deal-making, nobody was worried about the price: it was all about the deal.

Other sceptics reflected on the distinctive Time Inc ‘core’ portfolio and how it had become America’s largest media group by publishing distinctive weeklies, and by flying high above the hyper-competitive and fragmenting markets for women’s lifestyle and specialist magazines. But that had been changed by the purchase of Southern Progress under CEO Don Logan who quickly took charge at Time Inc and decided on rapid expansion. That had led, inexorably, to the acquisition six years later of IPC’s then 100 magazines.

Along the way, the company paid $475m (close to 19 times earnings) for 21 magazines of all shapes and sizes from the US-based Times Mirror. Logan was on full throttle and Time Inc was seemingly measuring its potential by the proliferation of its niche magazine portfolio. It was also moving further away from the mass-market focus of its parent company.

Joe Ripp: dependable veteran to lead the revolution
Joe Ripp: dependable Time Inc veteran or media revolutionary?

2014: Time Warner gets rid: 2013 was a hell of a year at Time Inc. First, came the lay-off of 6% (500) of its employees. Then, there were abortive “merger” talks with Meredith (publisher of Better Homes & Gardens, Family Circle and Ladies Home Journal), personally initiated by Time Warner’s CEO Jeffrey Bewkes. He notionally valued Time Inc at up to $2bn but was prepared to ease the path considerably by accepting payment in shares instead of cash.

Ironically, the under-performing UK business was an attraction for Meredith which was, though, less keen to take on Time, Sports Illustrated, Fortune, and Money. That should have been a warning light for talks which also seemed to ignore the obvious cultural differences between New York-based Time, and Meredith from Des Moines, Iowa. Time had built its reputation as a weekly magazine specialist while Meredith had stayed close to women’s “service” monthlies. In the event, few were surprised at the failure of the talks, which finally foundered on Meredith’s insistence on not taking over the non-women’s magazines.

The well-publicised fiasco left staff reeling. One said: “Morale is terrible. There’s a lot of anger at Bewkes over the way he mishandled Time Inc.” But the Time Warner CEO didn’t lose any sleep over the failed talks. His speedy riposte was to announce that Time Inc would be floated on the New York stock exchange – and with a new CEO to replace Laura Lang after just 15 months, which was 10 months longer than her predecessor: “A complete spin-off of Time Inc provides strategic clarity for Time Warner, enabling us to focus entirely on our television networks and film and TV production businesses, and improves our growth profile,” said Bewkes as his failure to find a new CEO forced him to keep delaying the IPO.

Getting rid

He was in a hurry and not even pretending there was much in it for Time Inc. But then he started trying. In an email to staff, Bewkes said: “I started my career at a Time Inc.-owned company, and its future is very important to me personally as well as for our shareholders. We’ve worked hard with Joe Ripp and his team to create a financial structure that will allow them to thrive as an independent company, and I have every expectation that will happen.”

The fact that he was referring to his career start at the highly successful HBO (once part of Time Inc but which was to stay with Time Warner) told staff all they needed to know. He couldn’t wait to get rid of Time Inc.

Established companies spend months and years plotting IPOs, ensuring they have proven executive teams, robust strategies and credible plans for long-term profit growth. They tend not to look as though they are in a hurry to sell. And few go to market while publicly admitting they have plenty of rationalising still to do. But Time Inc did not have the choice.

Bewkes: in a rush to ditch Time Inc
Jeff Bewkes: man in a hurry

By July 2013, the company had its new CEO. After months of failing to persuade a series of young-ish industry high-fliers, Bewkes picked a former Time Warner, Time Inc and AOL chief financial officer, who had previously spent almost 20 years with the group. The 62-year-old Joe Ripp became the third CEO of Time Inc in under two years.

The team then rushed into the IPO process with little ceremony – and a weighty $1.3bn of debt. Quite a contrast to Rupert Murdoch’s News Corp spin-off, which had been sweetened with $2bn of net cash.

This was an IPO with a difference alright. One analyst said: “Every stock needs a dream, something to buy into, but what is the dream here? What this company needs is new ideas, and I haven’t heard any coming out so far. They are highly leveraged, and leverage can be a good thing if you are growing, but that hasn’t been that story here.”

As recently as 2006, Time Inc. was producing about $1bn in earnings, a figure that will this year be down to less than half that. Revenue has declined consistently for almost 6 years, which has tried the patience both of investors and Time Warner’s chief executive.

So in June, 24 years after its merger with Warner, Time Inc once again became an independent company. It was never going to be a great start and, sure enough, the share price fell initially. It gave the world’s most famous publisher a market capitalisation of $2.5bn. As if to highlight the rush to IPO, Time Inc marked its first six months of independence with two profit warnings as the decline of print revenues continued to outpace the growth of digital. Despite an improving share price since then, Joe Ripp knows Time is in a race against time.

Once a pioneer

But it should not have been like this. Those disastrous ‘merger’ deals derailed a mighty media company that was once so far ahead of its peers. In addition to its best-selling weekly magazines, Time Inc produced widely-broadcast radio news and documentaries in the 1920s, created the phenomenal Time-Life books-music-video direct marketing business in the 1960s, launched the hugely successful HBO in the 1970s, and the ground-breaking Pathfinder web portal back in 1994. It was unquestionably a broad-thinking multimedia organisation almost before anyone else.

People: 40-year-old magazine that makes 50% of Time Inc profit
People: 40-year-old magazine that makes almost 50% of Time Inc profit

Thirty years of corporate shenanigans – and a patchwork of five CEOs in 13 years –  have left the company trying to re-create its former versatility and strength in what are , to say the least, pretty unpromising circumstances. Bewkes’ assertion that the spin-off would enable Time Inc  to concentrate on print while Time Warner stuck to its film, cable and TV quickly became ironic, when Ripp announced the company’s promising new hub, The Daily Cut as a video destination, pulling in content from various magazine brands.

It has also backed 120 Sports, a mobile-first video start-up. People Now, a new entertainment show, and The Chat, from Fortune are important new online ‘TV’ products. Having been stripped by Time Warner of its video and film resources (and also of Time Inc-style ‘new’ media like the highly-profitable CNN Money, award-winning gossip site TMZ, and the sports-mad Bleacher Report), Time Inc is fighting hard to get back to where it might have been if not for the 1990 merger.

But the company’s future will now depend on it becoming much more manageable. The best of its brands and content really could become rich digital properties if they focus on the primary opportunities. One irony is that CNN and Time magazine, for example, were able to do so little together when they shared the same ownership. But it is partnerships and collaborations that can now most readily help maximise the digital potential.

There is, though, the little problem of the company’s traditional culture. The affable Joe Ripp brought a fresh inside-outside perspective to the task. As the former vice chairman of AOL, he had seen both the possibilities and perils of digital businesses, and his time as a print executive convinced him that Time Inc’s complete separation of editorial and sales were an expensive anachronism. Soon after arriving, he proposed that editors report to publishers instead of the editor in chief.

Gawker then leaked an internal company spreadsheet ranking Sports Illustrated writers in part on how much content they produce that is “beneficial to advertiser relationship.” Critics erupted: “Henry Luce must be spinning in his grave.” The document was disowned but not denied.

Veteran partners

Ripp recruited a former colleague to help him dismantle the old church-and-state barriers. Enter 72-year-old veteran Norman Pearlstine who in younger days, successively as editor of Time and editor-in-chief of Time Inc, was once the most fervent defender of the company’s editorial traditions. Now, as chief content officer, he has been responsible for baking ‘native’ advertising into the Time and Fortune web sites, for permitting advertising and sponsorship messages on the covers of Time and Sports Illustrated (yes), and for smoothing the switch of editors’ reporting lines. That rankled with Martha Nelson, the company’s celebrated editor in chief who had turned People magazine into a behemoth and had launched InStyle. She quit and insiders realised that, 20 years previously, Pearlstine himself would have walked out with her. It’s all a bit Gorbachev.

Pearlstein: From church to state
Pearlstine: From church to state

The real trouble is that Time Inc needs to adjust to the new world where staffing levels and operating costs must be as low as they reasonably can be – and not as high as could once be afforded.

That is the task also of daily newspapers across the planet whose profitability could be enhanced – even sustained – if only they bite the bullet. If only.

Like those dailies – many of which have attacked staffing and costs in sporadic waves, so as not to scare away the talent or readers – Time Inc is fighting to get digital revenue growth at least to match the decline in print.

Meanwhile, the company is scything through costs, now with its latest 25% reduction target. The delicacy of the task is illustrated by the fact that even People – on whom the whole profitability of Time Inc depends – shed a dozen jobs in June. But it gets more dramatic, with discussions about converting Time magazine to a bi-weekly (yes). The managing editor protested and was reportedly able to delay a decision, telling her bosses: “If you want to save money, you can start with my salary.” They haven’t yet taken up her offer.

The episode seems to confirm what many have long believed – that the famous newsweekly is no longer profitable, despite its 3m circulation and continuing prestige in the US and across the world.

The latest Time Inc profit warning shows how it tough it is for the company as a whole, which generated 2013 revenue of $3.4bn. It is now forecasting $3.3bn for 2014 with operating profit of $495m, but margins will be down down from 19% to 15%.

It is a familiar story. The hype about the growth in digital audiences (now larger than in print, Time Inc crowed this month) doesn’t really change much for a company that is 50% dependent on advertising, mostly print. In the way of these things, though, the whole company is greater than the sum of its parts: People magazine alone, accounting for some 20% of revenues, makes almost 50% of all Time Inc profit. But, then, the would-be profits of a raft of legendary magazines are locked up with historically high costs.

Every component part of the strategic upheaval at Time Inc just looks so BIG. It plans to save a whopping $50m per year when it exits its 2m sq ft Rockefeller Square office block and moves downtown. But that will be on the expiry of its lease in 2017 – and involves the spending of no less than $125m to facilitate it. And, meanwhile, the company is quietly trying to squeeze cash from the business without scaring the horses. It has this year

Getting out of Rockefeller Plaza - in 2017
Leaving Rockefeller Plaza will save Time Inc $50m a year

sold the California-based Sunset magazine’s seven-acre Menlo Park campus and Southern Living’s similarly-inspirational property in Alabama. There have been some tougher choices, though. It had to raise $60m by selling the No.2 magazine group in Mexico at a time when most American media businesses are seeking to expand Hispanic operations with their fast-growing southern neighbours.

You can imagine how the disposal of the idyllic birthplaces of local landmark businesses with test kitchens and demonstration gardens rocked morale among the staff who have developed magazines that, even now, have higher profit margins than many of their New York cousins. But that is one of the central points about Time Inc. You have the core Henry Luce properties and, then, the other US magazines with which they share little in common except print and paper. And then come the wide range of UK magazines, acquired 13 years ago when they were almost three times as profitable as now.

Time Inc UK (formerly known as IPC Media) was, for many years, almost a monopoly of British magazines as a result of a series of deals in the 1970s that spread its business across almost every sector, large and small. But, although it continues to publish many of the country’s strongest (and oldest) magazines, profits have been decimated as revenues have drained from once high-growth sectors like celebrity weeklies, women’s monthlies, and men’s magazines – and from hard copy advertising.

Time Warner’s parental response, during a miserable decade, was to reject digital investment plans and to push for cost savings and price increases in a vain bid to hold profits – and hope for an exit.

In January, IPC laid-off 8% of its staff. Like its US parent, the London-based company has a small number of brands together generating more profit than the whole business. Almost hidden among the bulging UK portfolio is its most profitable magazine – the 1million-selling weekly What’s on TV which may account for up to 40% of total profits. It is circulation market-leader of the TV listings sector which – against all digital odds – continues to sell almost 4m weekly copies and remains a rich seam of UK magazine profits for Immediate, Bauer and Time Inc.

But the company also has a wide range of strong brands including Woman & Home (competing for the grey women’s market in competition with Hearst’s Good Housekeeping), a strong clutch of boating, homes,  food and country sports titles, and the UK edition of Marie Claire.

Rich: smart UK boss with a poison pill
Marcus Rich:  new UK boss

Time Inc UK is, however, best known for the weekly and monthly women’s “service” magazines which now weigh it down. Although brands like Country Life, Decanter, NME, Wallpaper, Yachting World, and Horse & Hound have real resonance, the company’s 60 separate magazine teams underline the scale of the challenge for a business which currently accounts for just 12% of Time Inc’s worldwide revenue. US investors believe Time Inc’s total value would be enhanced rather than diminished by the disposal (for a relatively modest price) of the London business.

That – and the fact that the sprawling former IPC portfolio is so dissimilar to Time Inc in the US – is the reason why private equity firms and would-be investors had been trying to prise it loose in the months before IPO. The frenzy was halted by the appointment of CEO Marcus Rich (ex EMAP and the Daily Mail) and by the decision to change the company’s name to Time Inc UK. That was enough to quieten the speculation, initially sparked by long-term CEO Sylvia Auton who had reportedly tried to persuade Time Warner to spin-off its magazines.

Auton, who was formerly responsible also for Time Inc’s Alabama-based lifestyle magazines, once joked that her greatest achievement had been the soaring value of the UK company’s landmark headquarters she had commissioned alongside the River Thames. It certainly may be worth more than the magazine business it houses. Today, the building (valued at £175m in June 2014) is holding the UK company together. That is one way to view its £75m employee pension fund deficit (now being paid off in £11m annual instalments) which is secured by a mortgage on the building.  It’s a sort of poison pill that silenced speculation about how Time Inc might break-up its UK portfolio to unlock additional profit. But things may change.

Analysts are all over the break-up arithmetic every time they are reminded that: Time Inc is dependent on advertising, that digital revenue is not yet growing fast enough to compensate for the decline in print, and that corporate debt is almost three times the profit. You can’t find investors who think a magazine-centric group is a great long-term bet but they are patiently watching Time Inc’s emerging digital strategy.

This month, it announced a partnership with IFTTT (If This, Then That), the online service that allows users to send a tweet or email when, for example,  a website is updated or if the weather shows it’s going to rain. Five of Time Inc’s titles — Entertainment Weekly, InStyle, People, Sports Illustrated and Time — now have channels on IFTTT. Time Inc is using its own OneBot social trending tool, so

Time's UK headquarters may be worth more than its varied portfolio
Time’s UK diverse portfolio may be worth less than its London headquarters

IFTTT users will receive links to trending stories. They can receive weekly email digests and stories can be pushed to social media, or to apps like Pocket for reading later.

Although the digital future cannot be developed solely from legacy businesses in Time Inc or anywhere else, this latest move is another sign that the most famous magazine group of all is beginning to get into its stride.

Time Inc’s medium-term agenda should look something like this:

  1. Downsize magazine teams: look to future staffing, multi-skills and shared-content – not the past of self-contained, over-sized teams
  2. Digitalise magazine brands: Time Inc’s mostly ho-hum magazine web sites have got to become distinctive, good-enough-to-stand-alone and strong on mobile-social-video. People magazine’s 72m monthly uniques highlight a high-performing (and fast-growing) web site, but it is virtually alone.
  3. Establish new digital services from existing content and/or from multiple brands. Be involved in new-wave news a la BuzzFeed, Vice, Gawker, Quartz et al. Time, Fortune and Sports Illustrated have got to be there.
  4. Develop stand-alone technologies : OneBot, which pulls in the most socially trafficked content in its portfolio by brand and by topic, is a start.
  5. Build a network of technology partners for collaboration, JVs, learning and /or eventual acquisition. Funding is tight for Time Inc but Hearst’s quick-footed venture capital activity in digital media is worthy of imitation, perhaps with ‘in kind’ deals on content, brands, databases, and cross-promotion. Time Inc could become a very attractive partner for digital start-ups – without needing to invest much cash.

The key to all these strategies is to:

  • Separate digital from print wherever possible. Keep print teams focused on maximising current profits and slowing slowing the rate of decline, while using “new” expertise to concentrate single-mindedly on new revenues. However determined the management, changing the culture of Time Inc’s print business will take time but digital expansion cannot wait.
  • Keep central management lean. Resist the temptation to build heavyweight central operations simply in order to ‘right-size’ magazine teams.
  • Build partnerships with digital natives. Make friends with the future.
Southern Living: for sale?
Southern Living: for sale soon?

Cutting right through this strategy is Time Inc’s need to reduce the portfolio, in order to: pay down debt; increase profitability; and make the business more manageable.  Then there’s Joe Ripp’s smart plans to ramp up events activity, starting with a two-day Sports Illustrated Festival in Nashville in February, linked to its celebrated Swimsuit issue.

Sell-offs on the way

For a company whose profitability is so clearly constrained by historic costs and structures, the CEO did not need to say that there will divestments in 2015. That’s a certainty. And he will be agonising over some of the possible options from a long list:

  • The regional magazines Southern Living, Coastal Living and Sunset could be sold to Meredith.
  • Time’s UK business could be much more profitable if slimmed down. Major divestment in London could trigger large payments, not least to pay-off the pension deficit. But, although this debt is secured by the fancy London headquarters, a move to less expensive offices really might be the best of all worlds. Several groups including Bauer, Hearst and Immediate would be keen to buy chunks of the UK portfolio. But divestment of the entire London-based business – to private equity or to a cashed-up Richard Desmond – seems at least possible in 2015.
  • Entertainment Weekly could attract Guggenheim Partners, the investment firm which owns Hollywood Reporter and Billboard, or Penske Media Corp (Variety and Deadline).
  • Sports Illustrated could be sold to ESPN or Fox Sports or Hearst
  • Fortune and Money could be sold to Bloomberg or the Wall Street Journal (News Corp)
  • InStyle (said to be making $30m profit) could be sold to Hearst or Conde Nast.
  • The company may just be considering how to sell Time magazine itself. It is now clear that the cost base of the world’s most famous magazine is an obstacle to profitability, so they will be tempted by offers, whether solicited or not.
  • The ultimate deal (and, therefore, the one that that might never happen) would involve People magazine. The largest and most profitable magazine in the US has a circulation of some 3.5million and $750m in revenue. It could become an attractive private equity-backed business with plenty of TV and digital growth potential – and could immediately clear Time Inc’s debt. But selling People is the last thing Joe Ripp and his team would ever want to do.

Of course, the process of review may anyway trigger a bid for the whole company, perhaps from Rupert Murdoch’s News Corp, or even from Meredith which may revive its plans for a ‘merger’. The cash-rich, privately-owned Hearst would also be expected to be involved in any kind of merger, disposal or break-up of Time Inc.

A nice buy for Bloomberg?
A nice buy for Bloomberg?

In that sense, Joe Ripp is in a race to convince investors that there is a value-creating alternative to sell-off or break-up. Early profit warnings, discussion about Time magazine viability, and reference to the dazzling profitability of People, have got investors thinking. The CEO knows that the 20% share price growth since May’s IPO is as likely to reflect a ‘bid premium’ as support for his transformation plan. The company has as many sceptics as fans on the New York stock exchange. Investor anxiety may have sparked the latest management reorganisation just six months after the IPO. Earlier this month, Time Inc announced the departure of Todd Larsen, an Executive Vice President who, together with Evelyn Webster, had been managing the magazine portfolio.

Larsen, who joined Time Inc three years ago from the Wall Street Journal, had been responsible for the most important brands including: People, Time, Entertainment Weekly, InStyle and Sports Illustrated. Webster was responsible mainly for the US monthly magazines, and for the UK. But the rumour mill was buzzing in February when InStyle was transferred to her. Ripp then made clear to investors that he was disappointed with print advertising revenue across Larsen’s titles, whose third quarter decreases led the company to downgrade its 2014 forecast. So he made the change.

Now, Webster has responsibility for all Time Inc brands in the US except for People and Entertainment Weekly, which will be managed by a to-be-recruited president reporting to Ripp. But even the people at headhunter Egon Zehnder have been wondering whether their assignment to search for the new People president will soon be interrupted by M&A activity – or another management change.

Rise of the Brit

For now, though, consider the rise and rise of Evelyn Ann Webster. She became CEO of company’s UK business in 2008, moved to the US just two years later, and is now Joe Ripp’s deputy in all but name. But she has given up the UK business. The company she knows best now reports to CFO Jeffrey Bairstow, who is now responsible, with Marcus Rich, for what is expected to be a radical new plan for the London business. It may be expected to reflect a re-thinking of the long-time policy of Webster and her retired mentor Sylvia Auton.

Evelyn Webster, at 45, is the youngest member of Time Inc’s senior management and could earn the right to succeed Joe Ripp within the next few years. It’s a meteoric

Evelyn Webster: the rising star
Evelyn Webster: the rising star

rise for the energetic Yorkshire-born Brit who joined the former IPC Media 22 years ago as a graduate trainee with a marketing degree from a minor university.

Her big step-up sent excited investors scurrying for scarce information about Time Inc’s rising star. But the woman most likely to succeed has given few interviews (and even fewer personal insights), despite having played an increasingly influential and innovative role in UK magazines over the past 15 years.

Current and former colleagues say Evelyn (never Eve) Webster:

  • Is open-minded, candid, a very good communicator with a lot of humility. She has a great sense of humour
  • Is a focused, straight-talker who does not avoid difficult conversations
  • Is very strategic and creative at coming up with solutions to strategic problems
  • Gets the big picture but keeps ever-so-close to the detail
  • Works hard and acts more quickly than most executives. She gets things done
  • Demands high standards, pushes hard to get what she wants. Not interested in excuses
  • Inspires great trust and loyalty and is loyal in return
  • Does not play tricky games and has no time for company politics
  • Keeps her private life private, but likes a drink with the team and is not afraid to ‘let her hair down’. She has a fun side
  • Runs marathons, does yoga, loves cats, and volunteers

American colleagues got an early taste of Webster’s self-deprecating humour during a ‘town hall’ meeting when she was holding a Starbucks coffee cup marked  ‘Janet’. “Oh, that’s my porn name” she laughed, as her new team realised there was more to her than a legendary work-rate.

This composite picture  – coupled with her experience of managing magazines with UK-style lower costs and staffing – makes clear why Joe Ripp has been so impressed: “She has done a terrific job managing our fashion, luxury and lifestyle brands and I have every confidence she will help us maximize our opportunities as we align the portfolio around ‘One Time Inc’.” He also gushed with praise for Webster’s management of last year’s American Express Publishing acquisition.

Now, though, it’s the huge three-way test: For Ripp, Time Inc, and for Evelyn Webster. Keep watching.

UPDATE: 8 August 2015:  Time Inc advertising revenue fell 9% to $420m, while circulation revenue fell 2% to $254m in the second quarter of the year. However, the company recorded a net profit of $24m (compared with a net loss $32m),  pushed by a 10% cost saving in editorial and production.

UPDATE: 13 July 2016: Evelyn Webster leaves in new Time Inc reorganisation (from Talking New Media)

A little over six months into the year that was supposed to show revenue growth, Time Inc. has announced another reorganization. Alan Murray, editor of Fortune, will succeed Norman Pearlstine as the company’s Chief Content Officer, but rather than being part of the senior executive team, Murray will report to Rich Battista, President, Entertainment & Sports Group and Video.

Battista’s counterpart, Evelyn Webster, will be leaving the company at the end of August. Webster came to Time Inc. through the UK side of the business that is unaffected by these moves (though there are rumors that if Time Inc. doesn’t make its numbers it is possible that they will divest Time Inc. UK). “Evelyn has been a vital member of the Time Inc. team for more than two decades,” CEO Joe Ripp said in a memo to staff. “At Time Inc. UK, she rose through the organization to become CEO. More recently, she led business operations for 20 US brands that reached more than 100 million consumers. We thank Evelyn for her many contributions throughout her years of service to Time Inc.”

Pearlstine will not be leaving the company completely, remaining on board as vice chairman, focusing on international growth opportunities for Time Inc.’s brands. Ripp earlier this year promised revenue growth this year of 1-5%.  (

UPDATE 13 Sept 2016: Joe Ripp hands over the reins of Time Inc (from Advertising Age)

Time Inc has named Rich Battista CEO, succeeding the chief executive of three years, Joe Ripp.
The unexpected move represents a quick rise for Mr. Battista, who joined Time Inc. in April 2015 as exec VP at Time Inc. and president of People and Entertainment Weekly, was promoted to president-entertainment and sports group and video in January and became president-brands in July, with all U.S. publications reporting into him. Mr. Ripp will continue as executive chairman of Time Inc.’s board of directors.“I am deeply grateful to have had the opportunity to lead this tremendous company for the past three years, and I am excited about its future,” Mr. Ripp said in a statement. “We have made real progress in the transformation into a multimedia, multi-platform enterprise. As we look to the next phase of our strategy, Rich is the right choice to execute our plans and deliver shareholder value.” (

UPDATE 16 May 2017 (Bloomberg)

“Lots of companies struggled to adapt to the Internet. This one failed” By Joe Nocera

Walter Isaacson, the former managing editor of Time magazine,  proudly noted in 2013 that Time Inc. was early to the Internet. He pointed out that even before the Netscape browser became available in the fall of 1994, back when Time Inc. was the country’s most profitable magazine publisher, it was cutting  deals with AOL and other “portals” to get its magazines’ content online. Twenty-three years later, Time Inc. is in deep trouble. A public company since 2014, when it was spun off by its longtime parent, Time Warner Inc., Time’s market cap is a puny $1.3 billion, half the value of what President Donald Trump loves to call the “failing” New York Times. Its anemic stock price recently dropped $5, to below $13 a share, after it made clear that it would not be putting itself up for sale.

Its first quarter earnings, released last week, were dismal: Advertising revenue was down 8 percent and subscription revenue sank 13 percent to a paltry $140 million. (Remember, this was a company long known for circulation prowess.) It reported a quarterly operating loss of $26 million, compared to a $3 million loss in 2016. More…. (Bloomberg)

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