UPDATE: I want to clarify the situation with Time Warner‘s stock — which is doing better today than my comment below indicates. Although the current price is down from the close on Friday, it’s up if you adjust that number to take out the value of Time Inc. That’s a fair thing to do for an apples-to-apples comparison, and it shows Time Warner shares up about 1% in morning trading.
PREVIOUS, 7:53 AM: Investors gave Time Inc a rude welcome this morning as the legendary magazine operation became a publicly traded company, but didn’t reward Time Warner as it officially became an all movie and TV power. Time Inc shares on the New York Stock Exchange are down 5.5% in early trading from the prices being paid on Friday for the stock on a “when issued” basis. Time Warner is down 3.3%, and touched a 52-week low of $68.15. The entertainment giant’s investors received one share of Time for every eight shares they own in Time Warner.
The magazine publishing company has been at its famous 48-story Rockefeller Center locale since 1959, long before Time Inc merged with Warner Communications to become Time Warner. But it will become an independent company again on June 6, when Time Warner spins it off — and late next year will head to more economical office space at Brookfield Place (formerly known as the World Financial Center) in lower Manhattan, near the former site of the World Trade Center. The company looked at options in New York and New Jersey. But Brookfield Place’s planned $250M renovation — adding lots of upscale restaurants and shopping — plus “the incentive package we received from Governor Andrew Cuomo and Empire State Development drove our decision to stay in New York City,” CEO Joe Ripp says. Time Inc has a long term lease at 225 Liberty Street to occupy six floors and 700,000 square feet of office space. “We have ambitious plans for a modern, open workspace that will be designed to foster a greater sense of community and collaboration across the company, and it will deliver significant cost savings,” Ripp says.
Time Warner investors as of May 23 will receive one share of Time Inc for every eight that they own in the entertainment giant, the company says in an SEC filing. The new stock will trade under the ticker symbol TIME on the New York Stock Exchange. “As an independent, publicly-traded company, we believe we can more effectively focus on our objectives and satisfy the strategic needs of our business,” Time CEO Joe Ripp says in a statement to his new investors. The company expects to initially have 715,000 stockholders owning 110.3M shares of TIME. It has 23 print magazines in the U.S. including People, Sports Illustrated, Time, and Fortune, as well as more than 45 websites.
Corporate governance watchdogs probably won’t like the fact that CEO Joseph Ripp will also be chairman of the 10-member board after Time Warner spins off its publishing unit. After all, the directors are supposed to hold the CEO accountable. But at least the Time Inc board doesn’t have any apparent shrinking violets or corporate novices. Time Warner CEO Jeff Bewkes says the group has “a wealth of experience in publishing, electronic media, advertising, consumer-facing businesses, and technology that is vital for Time Inc’s future.” In addition to Ripp, the board will consist of: Interpublic Group former CEO David Bell, National Geographic Society former CEO John Fahey, Gartner Inc former CEO Manuel Fernandez, Tribune Co former CEO Dennis FitzSimons, Kraft Foods former co-CEO Betsy Holden, USA Networks founder Kay Koplovitz, former IBM SVP J. Randall MacDonald, former Cravath, Swaine & Moore partner Ronald Rolfe, and former Sony CEO Howard Stringer.
In this week’s podcast, Deadline’s Executive Editor David Lieberman and host David Bloom examine whether Facebook paid too much with its $19 billion purchase of messaging service WhatsApp, ponder whether anyone should pay for the maker of blockbuster mobile game Candy Crush Saga now that it’s filed for an IPO, consider the impact of the FCC’s replacement net-neutrality rules and look at the real motivations behind the clamor for Google Fiber.
Will this provide another incentive to cut the pay TV cord? The new venture, called 120 Sports, vows to offer Internet users a lineup of two-minute segments with “timely, interactive narratives of the stories around sports, including game footage, analysis, conversation and social commentary.” The goal it to make it relevant for live sports, not just to serve as a collection of highlights. It’ll be free, but a premium product will be offered next year. MLB Advanced Media will provide the technology muscle and is a partner in the venture along with Time Inc — the publisher of Sports Illustrated — and the NHL, NBA, NASCAR and leading collegiate conferences. Another partner, Chicago-based digital media company Silver Chalice, will handle business operations with help from Sports Illustrated, and produce the programming from a production facility on the Harpo Studios campus. Other partners will be named later. Time Inc points to 120 Sports as the kind of forward-looking initiative it can build as the magazine company prepares to stand on its own following the spinoff from Time Warner to take place by mid-year.
CEO Joe Ripp doesn’t say in his memo to staffers today how many people will be affected by his effort to, as he put it, “right-size the organization” — although the total is expected to be in the hundreds. The job cuts are at least partly designed to make the company more attractive to Wall Street when Time Warner spins off its publishing arm, expected by mid-year. Its success “will depend on how investors view the momentum we are generating at the new Time Inc,” he says. That requires “some substantive and sometimes painful changes to the way we operate and approach our business.” Employees will learn “as early as today” who’s getting the ax. He unveiled plans to restructure the organization, ditching its three brand operating clusters. EVP and longtime Time Inc vet David Geithner – who’s former Treasury Secretary Tim Geithner’s brother, and runs the Style & Entertainment Group — will be out. Former Dow Jones exec Todd Larsen will take charge of the company’s most famous titles including People, Entertainment Weekly, Time, Sports Illustrated and Fortune. Evelyn Webster, currently president of the Lifestyle group, will continue to manage publications including Cooking Light, InStyle, and Real Simple. Ed Kelley, who ran American Express Publishing before Time Inc bought it last year, also is leaving.
Be sure you read Time Inc‘s financial documents if you’re tempted to buy the company’s stock next year when Time Warner spins it off. The initial SEC filing today shows that it’s a fixer-upper. The No. 1 magazine company– whose 23 U.S. titles include Time, Fortune, Entertainment Weekly, People, and Sports Illustrated — says that its long term strategies “have not met management’s original expectations” and are being changed. But the publisher “had several recent changes in executive leadership” that have been “disruptive to our business” and may make it “more difficult to attract and retain the key employees we need to meet our strategic objectives.” Joseph Ripp became CEO in September, replacing Laura Lang. Ripp is still examining operations; once he’s finished he’ll “be better positioned to articulate areas of strategic emphasis for our business.” Lawyers believe the spin off should be tax-free. But if the IRS disagrees then Time Inc “could be required to indemnify Time Warner for the resulting taxes and related expenses” which “could materially adversely affect our financial condition.” The preliminary filing leaves blank details about the initial value of the shares. But the document shows that in the first nine months of this year Time Inc’s net income at $135M was flat vs the same period last year while revenues fell 3.3% to $2.39B. The company vows to make make its operations more efficient as it explores opportunities to develop “more immersive tablet editions, …
No financial terms on the deal, but it should help Time Inc appeal to luxury advertisers early next year after Time Warner spins off its magazine unit. American Express Publishing reaches 36M consumers with titles including Travel + Leisure, Food & Wine, Departures, Executive Travel and Black Ink. Time Inc CEO Joe Ripp told staffers in a memo today that he’s “excited about the possibilities for expanding these world-class brands, along with the rest of our portfolio, as we prepare to become an independent company.” Time says that it will continue to send Departures, Black Ink and Executive Travel to high-end AmEx card owners who receive the magazines as a benefit. For the last 20 years Time Inc has provided management services to AmEx Publishing.
NEW YORK (August 12, 2013) — Today, TIME launched Red Border Films, a new documentary film unit to be hosted on an interactive digital site on Time.com. Red Border Films will feature deeply reported original films by award-winning filmmakers, TIME journalists and photojournalists and will produce at least one short documentary per month and two expanded projects a year. These cinematic films will vary in length and will be presented along with interactive features at time.com/redborder, where users will be able to watch video, explore in-depth information about the filmmakers and their subjects and view photo galleries and other multimedia elements around each project.
CEO Jeff Bewkes says that Joseph Ripp, who’ll become Time Inc’s CEO next month, needs some time to establish himself at the publishing company. “Having someone of Joe’s caliber in place is a key element” in the spin off, Bewkes told analysts in a conference call to discuss Q2 earnings. The brief delay, from the goal to complete the spin off this year, “will give Joe some time to refine” the business plan. Ripp was a long-time exec at Time Inc and Time Warner before he left the company in 2004. Time Warner disclosed this morning that the publishing operation’s financials continued to slip in Q2. With cost cutting, operating income increased 28% to $124M, but revenues fell 3% to $833M. The company’s report attributes that to a 5% drop in ad revenues and 7% decline in subscription revenues.
Daily Beast co-founder Edward Felsenthal is becoming managing editor of the Time website despite lots of uncertainty as Time Inc spins off from Time Warner. The news was first released via Twitter. Felsenthal replaces Time.com managing editor Cathy Sharick who took a buyout as part of a recent 6% company-wide layoff.
Wall Street’s divided on the question this morning, with Time Warner shares up just 1.3% following the announcement last night that it will convert the publishing unit into a separate company by year end. Make no mistake: Investors like the news, which will enable them to just bet on Time Warner’s thriving TV and movie businesses. Jettisoning the declining magazines is “the final leg of a multi-year divestiture story that should leave [Time Warner] with an improved asset mix and growth profile,” Barclays Equity Research’s Anthony DiClemente says. But some say that the announcement is a bit of a yawn because CEO Jeff Bewkes waited too long. “In this case, freedom is just another word for nothing left to lose,” Nomura Equity Research’s Michael Nathanson says, channeling his inner Kris Kristofferson. “Today’s spin could have happened 5 or 10 years ago” and won’t make a difference now because “Time Inc is so small and its prospects so uncertain.” Yet Janney Capital Markets’ Tony Wible calls the announcement “ideally timed, as there is still some uncertainty around how the move to digital will affect the publishing business.” Shares Time Warner investors will receive in an independent Time Inc could become attractive if the publishing company can cut costs and establish itself as a digital power. Perhaps the loudest applause for the announcement comes from Susquehanna Financial Group’s Vasily Karasyov. Time Warner shares, up 53.7% over the last …
Time Warner’s talks with Meredith Corp about combining their magazines in a separate company collapsed today. But here’s Plan B for the media giant: It will spin off its publishing arm into an independent, publicly traded entity, likely by year end. Until recently, Time Warner execs scoffed when asked whether they’d consider mimicking News Corp, which is spinning off its newspaper assets. Now, though, Time Warner CEO Jeff Bewkes says the idea provides “strategic clarity” that will enable his company to “focus entirely on our television networks and film and TV production businesses.”
Will the company once known as AOL Time Warner soon become known just as Warner Communications? Probably not. But that’s one of the questions some people are playfully asking following Fortune’s disclosure that its parent company is talking with Meredith about a deal to unload most of its magazines with the prominent exceptions of Time, Sports Illustrated, and Fortune. UBS Investment Research’s John Janedis likes the idea: He figures that the operation — without the three famous titles — could go for as much as $2.9B. If Time Warner wants to delight investors, it could use that to repurchase as many as 50M shares. In any case, a sale of the declining business would improve Time Warner’s earnings prospects “potentially allowing for further re-rating of the multiple” of profits that many use to determine what a stock is worth, Janedis says. But a deal, if it happens, probably won’t be so simple. Meredith only has a market value of $1.7B, which likely makes it too small to borrow the cash needed to buy the Time Inc magazines outright. That’s why some company watchers believe Time Warner and Meredith probably would their pool their women’s magazines into a new company and figure out a formula to distribute shares in it to their stockholders.
UPDATE, 1:41 PM: Meredith, the publisher of Family Circle and the Ladies’ Home Journal, is the company that’s negotiating to buy Time Inc magazines, Fortune now says citing “two people familiar with the matter.” Meredith shares, which had been down about 3.5% in mid-day trading, rebounded after the report to close at $37.98, -0.1%. Time Warner closed +0.7% to $52.85, a 52-week high.
PREVIOUS, 10:24 AM: This is one story that you can be sure the editors of Time Inc‘s Fortune nailed down before posting today. The magazine says that its parent company “has begun discussions to separate itself” from the publishing operation, which generated $3.4B in revenue last year, citing “three people familiar with the matter.” It adds that there’s at least one “serious buyer” who will be in today to discuss a possible deal. Fortune notes, though, that negotiations are “still in a formative stage and may never come to fruition.” Yet the magazine says that in one scenario being considered Time Warner would hang on to Time, Sports Illustrated, and Fortune and sell most or all of its other publications including People, InStyle, and Real Simple. Investors have long wondered whether Time Warner would jettison publishing, which was once considered the heart and soul of the company but — like many print media providers — has struggled in the digital era. CEO Jeff Bewkes told CNBC recently that “we will keep investigating” what to do with publishing. Previously he and other execs scoffed when asked …
The layoffs in the 8,000-person workforce will “come from all areas of Time Inc. across our locations – both domestic and international,” the magazine publishing unit’s CEO Laura Lang told staffers in a memo. No word yet on which publications will be hit hardest. The move had been anticipated, and takes place one week before Time Warner unveils its Q4 earnings and talks with Wall Street analysts. “With the significant and ongoing changes in our industry, we must continue to transform our company into one that is leaner, more nimble and more innately multi-platform,” Lang says. “To make this change, we need to operate as smartly and efficiently as possible to create room for critical investments and new initiatives. These reductions are part of this important transformation process.” In the first nine months of 2012 operating profits in the magazine unit fell 38.2% to $220M on revenues of $2.47B, -6.2%. Time Warner CEO Jeff Bewkes told an investment gathering last month that the decline in the publishing unit’s revenues “seems to be continuing.”
The company that publishes Entertainment Weekly and People magazine — as well as Time, Fortune, and Sports Illustrated — is said to be preparing to lay off as many as 700 people as it grapples with declining ad sales and subscriptions. The cuts, out of a staff of nearly 8,000, will take place this quarter and come from all corners of the business, my colleague Jill Goldsmith at Variety reports. It shouldn’t be a complete surprise. Time Warner CEO Jeff Bewkes told an investment gathering last month that the decline in the publishing unit’s revenues “seems to be continuing.” And Time Inc CEO Laura Lang told staffers this week in a memo, disclosed by the New York Post, that the business “remains challenged” which means there’ll be no pay raises for 2013 and that “we must continue to aggressively manage costs.” Time Warner will report year-end results for 2012 on February 6. UBS Investment Research analyst John Janedis expects the publishing unit to report cash flow of $457M for the year, -21.2% vs 2011, on revenues of $3.46B, -4.5%.