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Media Decoder: Time Warner Announces Spinoff of Magazines

March 7, 2013 by Leave a Comment

Correction Appended

Time Warner’s magazines include Sports Illustrated and People.Mario Tama/Getty Images Time Warner’s magazines include Sports Illustrated and People.

9:14 p.m. | Updated What do you do with a group of celebrated magazines that no one seems to want?

Time Warner found its answer on Wednesday. It announced it would spin off its Time Inc. magazine unit into a separate, publicly traded company, a move that will allow the media conglomerate to focus entirely on its cable television and film businesses.

The announcement came hours after Time Warner and Meredith Corporation ended negotiations on a proposal that would have joined in a separate company many Time Inc. titles with magazines published by Meredith.

Laura Lang, the chief executive of Time Inc. who started the job just over a year ago, said she would depart once the spinoff of the magazine division was complete.

The deal with Meredith fell apart in part because of Time Warner’s concern over the fate of four of Time Inc.’s famous but struggling magazines — Time, Sports Illustrated, Fortune and Money, according to three people with knowledge of the negotiations who could not publicly discuss private conversations. At one point Meredith expressed some interest in the news and sports magazines, but Meredith decided not to pursue them because such a deal would have diluted its controlling family’s shares in the new company, another person with knowledge of the negotiations said. If Time Warner retained those four titles, the economics of a full spinoff proved more appealing, this person said.

Time Inc. is the nation’s largest magazine publisher, and the revelation last month that it was in talks to sell off many of its titles was viewed as another clear sign that the industry was buckling under intense financial pressures. The breakdown in talks threw into sharp relief how once-glamorous magazines like Time and Sports Illustrated have become troubled assets, with Time Warner wanting to shed them and Meredith not wanting them.

Time Inc., suffering from industrywide declines, has consistently lagged in Time Warner’s quarterly earnings. In the three months that ended Dec. 31, revenue at Time Inc. fell 7 percent to $967 million. In the same period, revenue at the company’s cable television channels, including TNT, TBS and HBO, grew 5 percent to $3.67 billion.

In a statement late Wednesday, Jeffrey L. Bewkes, chairman and chief executive of Time Warner, said a complete spinoff would provide clarity for the company as it concentrated on its high-growth businesses, primarily in cable television.

Jeffrey L. Bewkes, chairman and chief executive of Time Warner, said a spinoff would provide clarity for the company.Brian Snyder/Reuters Jeffrey L. Bewkes, chairman and chief executive of Time Warner, said a spinoff would provide clarity for the company.

“After a thorough review of options, we believe that a separation will better position both Time Warner and Time Inc.,” Mr. Bewkes said. “Time Inc. will also benefit from the flexibility and focus of being a stand-alone company,” he added.

Meredith’s prevailing interest in a deal had been to put together what would have essentially been a women’s magazine publisher. The new entity would have combined its National Media Group, which includes stalwarts like Ladies’ Home Journal and Better Homes and Gardens, with Time Inc.’s Lifestyle and Style Entertainment brands, which include People and InStyle.

Meredith executives had wavered in their interest in Time, Fortune, Money and Sports Illustrated, the people with knowledge of the negotiations said. Time Warner originally planned to keep them, citing news-gathering synergies with the company’s CNN channel, but that thinking changed. Time Warner executives walked away from the deal, believing they would be better off spinning off all of Time Inc.’s magazines without Meredith.

”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.

The new company would have borrowed money to pay a one-time dividend of around $1.75 billion back to Time Warner.

Another sticking point in the negotiations was over which company would have ownership of Time Inc.’s London-based property, IPC Media, which publishes a mix of general-interest and upmarket titles like InStyle, Country Life and Decanter. IPC also includes an advertising business and a news trade and sales distribution company called Marketforce.

Founded by Edwin Thomas Meredith in 1902 with the publication of Successful Farming magazine, Meredith, based in Des Moines, Iowa, has always been a folksy, domestic company with strong Midwestern roots. Acquiring Time Inc.’s international business would have made for an odd pairing.

Time Inc. would be only the latest asset Time Warner has shed as it has evolved into a cable television and movie production company. Once a corporate giant, in recent years Time Warner has divested itself of AOL, Time Warner Cable, the Warner Music Group and the Time Warner Book Group.

Publishing divisions have been financial drags on other media companies as well. This summer, News Corporation is expected to complete a split of its publishing assets, including The Wall Street Journal, The New York Post and HarperCollins, into a separate, publicly traded company. The cable channels FX and Fox News and the 20th Century studios will remain in a company called Fox Group.

Ms. Lang, the former chief executive of Digitas, a digital advertising firm, took over at Time Inc. at a tumultuous time. The company had a nine-month leadership vacuum after the departure of its previous chief executive, Jack Griffin, a former Meredith executive who clashed with the culture of Time Inc.

Shortly after she was hired Ms. Lang brought on Bain Company, a Boston consulting firm, to help her turn the company around. She moved quickly to strike a deal that made all of its magazines available via Apple’s newsstand. But her efforts were not enough to stem the industrywide declines in subscription and advertising revenue.

Revenue at Time Inc. has declined by around 30 percent over the past five years. Last month, Time Inc. said it would lay off 6 percent of its 8,000 employees, which will cost Time Warner $60 million in restructuring.

Christine Haughney and Michael J. de la Merced contributed reporting.

Correction: March 7, 2013

An earlier version of this article misstated the name of Meredith’s founder. He was Edwin Thomas Meredith, not Edwin Thomas.

Article source: http://mediadecoder.blogs.nytimes.com/2013/03/06/fate-of-four-time-inc-magazines-are-an-issue-in-talks-with-meredith/?partner=rss&emc=rss

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Advertising: Delish Magazine, Sold Only at Walmart, Performs Remarkably Well

February 25, 2013 by Leave a Comment

Instead, the magazine, Delish, did well enough with its first issue in November, according to its publisher, Hearst Magazines, that it is being expanded this year to quarterly frequency. It will publish issues dated February, May, August and November.

Delish’s performance was cited as a high point of last year in an annual review by Hearst Magazines’s parent company, the Hearst Corporation. David Carey, president of Hearst Magazines, mentioned Delish twice in a letter to employees outlining plans for 2013.

As the name signals, Delish is a food magazine: the print version of a Web site, Delish.com, that Hearst operates with the MSN unit of Microsoft. (If some readers hear an echo, that is because PGOA Media, owned by Bain Capital Ventures, publishes a magazine about food called Relish, which is distributed with newspapers.)

The food category is doing better than many others in publishing as marketers of packaged foods seek to reach budget-conscious consumers who are eating at home rather than dining out. Examples include Food Network Magazine, recently introduced by Hearst as a joint venture with Scripps Networks Interactive, and Dash, a newspaper-distributed magazine and Web site in the Parade Publications division of Advance Publications.

The Meredith Corporation, which competes in the food category with magazines like Family Circle and Ladies’ Home Journal, has started a food Web site, Recipe.com; acquired a second, Allrecipes.com; and bought two food magazines, EatingWell and Every Day With Rachael Ray.

In addition to being part of a trend, there may be another reason Delish is in demand: it is free to any Walmart shopper who buys one of six Hearst magazines — Country Living; Good Housekeeping; House Beautiful; O, the Oprah Magazine; Redbook; or Woman’s Day — at the regular single-copy price. Delish accompanies each magazine in a plastic wrapper festooned with the words “Free!” and “For Walmart shoppers!”

Sales of the November issues of the six magazines with Delish piggybacked rose an average of 22 percent, said Michael A. Clinton, president for marketing and publishing director at Hearst Magazines in New York.

“It’s part of a larger Hearst strategy we call pop-up edit,” Mr. Clinton said, using the industry shorthand for editorial content. “Across our portfolio, we’re looking for different ways to inject value for the reader.” Other examples he gave included sections of Food Network Magazine devoted to children, men and travel, and a 40-page supplement to the April issue of Cosmopolitan that will be devoted to “Lean In,” a new book by Sheryl Sandberg, chief operating officer at Facebook.

The first issue of Delish was 48 pages, and the second was 32 pages. Subsequent issues will be 48 to 60 pages, Mr. Clinton said. The first two issues carried advertising pages from more than two dozen blue-chip marketers, including Campbell Soup, Del Monte, Johnson Johnson, Kellogg, Kraft, McCormick, Nestlé, Procter Gamble, J. M. Smucker and Unilever.

Ads for Delish are being sold separately from ads for the six other magazines, said Carol E. Campbell, group strategic director for digital at Hearst Magazines. A typical ad page in Delish costs $18,000, she said, compared with $150,000 in Woman’s Day. About 510,000 copies of each issue of Delish are being printed; by comparison, the rate base, or circulation guaranteed to advertisers, for Woman’s Day is 3.25 million.

Walmart makes sense as a home for Delish, Ms. Campbell said, not only because it is America’s largest seller of magazines but also because Walmart shoppers visit Delish.com more than the national average.

Also, said Elizabeth Shepard, general manager for food and home and digital media at Hearst Magazines, “Walmart has been one of the most active advertisers on Delish.com,” both before and since the introduction of the print version.

Playing off the industry term “added value,” for something extra offered to consumers or advertisers, Ms. Shepard, who is also executive director and editor in chief of Delish, called the magazine “valuable value.”

There is a precedent for a magazine that can be found solely in Walmart stores. Since 2004, the Time Inc. division of Time Warner has published All You, which covers food, fashion, crafts, home decorating and so-called smart shopping, or deal-hunting. All You began with a rate base of 500,000, which, after 10 increases in eight years, now stands at 1.5 million. With a cover price of $2.99, it sells the most single copies of any monthly magazine at Walmart.

“I’m really proud of what All You has pioneered and accomplished” in reaching “mainstream American women,” said Suzanne Quint, publisher at All You in New York.

“Back in 2004, people weren’t dying to talk to a value-conscious shopper who shops at Walmart,” she said. “It’s a whole different world today.”

As Delish enters Walmart, All You is expanding beyond it. Starting with the June issue, Ms. Quint said, All You plans to “test distribution across several retailers” in addition to Walmart, which “will continue to be an important outlet for us.” (All You is also available by subscription.)

The concept of magazines available only at a single retailer dates to at least 1931, when Woman’s Day began as a menu sheet at supermarkets owned by the Great Atlantic and Pacific Tea Company.

Article source: http://www.nytimes.com/2013/02/25/business/media/delish-magazine-sold-only-at-walmart-performs-remarkably-well.html?partner=rss&emc=rss

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Media Decoder Blog: The Breakfast Meeting: Time Warner Considers Shedding Some Magazines and Panera Appeals to Consumers’ Decency

February 14, 2013 by Leave a Comment

Time Warner is in talks with the Meredith Corporation to spin off much of Time Inc., the country’s largest magazine empire and the foundation on which the $49 billion media conglomerate was built, Amy Chozick and Michael J. de la Merced write. The deal would move the bulk of Time Inc.’s magazines, including titles like People, InStyle and Real Simple, into a separate, publicly traded company that would include Meredith publications like Better Homes and Gardens and Ladies’ Home Journal. The new company would borrow money to pay a one-time dividend of about $1.75 billion to Time Warner, making the transaction resemble a sale. Time Warner would continue to control the newsmagazines Time, Sports Illustrated, Fortune and the magazine Money. The deal is one of several options under consideration to reduce Time Warner’s troubled publishing unit.

Many analysts have wondered how a company like Meredith, with a market value of $1.6 billion, could afford to buy a business as big as Time Warner’s non-news magazines, given that Time Warner’s publishing arm reported $3.4 billion in revenue last year. The agreement is possible because what’s being discussed is not really a sale but the formation of a joint venture, Andrew Ross Sorkin and Michael J. de la Merced explain in DealBook. The result would be a publicly traded assemblage of Time Warner titles, like People, and Meredith publications, like Better Homes and Gardens. Shareholders of both conglomerates would be given shares in the new venture. While important details are still being discussed, it appears that Time Warner shareholders would hold about two-thirds of the new company and Meredith shareholders would get the remainder.

Pro-social or purpose-based marketing — persuading consumers that a company operates in a socially responsible manner that appeals to their values, behavior and beliefs — is a growing trend on Madison Avenue. More shoppers say that what a company stands for makes a difference in what they buy, and advertisers have been quick to act on the idea, Stuart Elliott writes. An ad campaign with an estimated $70 million budget to be introduced on Monday by the Panera Bread Bakery restaurant chain is a case in point. The commercials, based on the slogan “Live consciously. Eat deliciously,” will focus on Panera’s positive policies, like donating unsold baked goods, operating donation-based restaurants and working with organizations like Feeding America. The risk of such an approach is that if consumers find a company’s practices at odds with their stated values there could be a backlash.

Mekado Murphy interviews Eugene Gearty, the sound engineer who worked on Ang Lee’s “Life of Pi,” the allegorical tale of a boy trapped on a lifeboat with a tiger. The film has been nominated for 11 Oscars, two of which are related to sound. Water sounds were of the utmost importance and a particularly challenging sequence involved a school of flying fish landing in Pi’s life raft, Mr. Gearty said.

Mr. Gearty was involved with sounds, but David Magee, the scriptwriter for “Life of Pi,” almost wrote a film that was largely silent, Melena Ryzik writes. Mr. Lee wanted to shoot the entire middle section in silence, but Mr. Magee disagreed. “You would talk to an animal — it’s a natural thing,” he said.

The Knight Foundation said on Twitter that it was a mistake to pay Jonah Lehrer $20,000 to speak at a lunch they held on Tuesday, Julie Moos writes on Poynter’s MediaWire. “Controversial speakers should have platforms,” the foundation wrote in a statement, “but Knight Foundation should not have put itself into a position tantamount to rewarding people who have violated the basic tenets of journalism.”

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/14/the-breakfast-meeting-time-warner-considers-shedding-some-magazines-and-panera-appeals-to-consumers-decency/?partner=rss&emc=rss

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