But another executive was drawing a crowd of his own: Richard Stengel, Time Magazine’s managing editor. Throughout the evening, well-wishers made their way through the crowd to Mr. Stengel, among them Suze Orman, who told him how great she thought it was that Time Inc. was separating from its parent company, Time Warner, and striking out on its own.
The encouragement seemed heartfelt, but also framed by the timing and the setting. Only days before, Time Warner announced that it was spinning off its struggling magazine division, after failing to reach a deal to sell many of Time Inc.’s magazines to the Meredith Corporation. And the high-wattage party, with Mr. Stengel as one of the hosts, seemed like just the kind of lavish expense that Time Inc. might have to leave behind as it confronts the steep financial challenges buffeting the magazine industry.
The new magazine company is expected to start with $500 million to $1 billion in debt, in contrast to the publishing company that the News Corporation will spin off this summer, which will have no debt. Circulation and advertising revenue at Time Inc. have suffered sharp declines.
In the three months that ended Dec. 31, revenue fell 7 percent, to $967 million, while revenue at Time Warner’s cable channels has soared. After the split occurs, Time Inc. will no longer have the lucrative film and television assets to prop it up.
“It’s sort of put up or shut up time,” Mr. Stengel acknowledged. “I think great, let’s really test that hypothesis that people will pay for great content and great journalism. We can now invest our own capital.”
Time Inc. executives hope that they can build a company that can pour its profits into helping its magazines transition into the digital age, rather than hand them back to the parent company. They also hope that their new independent structure will let them restore the journalistic vision created by the founder, Henry Luce.
Analysts tracking the magazine industry point out that even though Time Inc.’s profits have declined in recent years, the newly created company will remain by far the biggest player in the business. On its own, Time Inc. generates one-quarter of the revenue produced by the nation’s top 50 magazines, according to data tracked by John Harrington, a magazine industry consultant.
He said that Time owned four of the nation’s top 10 revenue-generating magazines — People, Sports Illustrated, Time and InStyle. Together they produce $3.1 billion of the $6.379 billion generated by the nation’s top 10 grossing magazines, he estimated. People alone brings in $1.4 billion.
“Time Inc. as a whole is still the biggest force in magazine publishing,” Mr. Harrington said. “They’re an attractive group of magazines.”
The announcement of the spinoff last week at least provided some clarity to nervous Time Inc. employees. On Jan. 30, Time Inc. said it would lay off 6 percent of its global work force, about 500 employees. Two weeks later, Time Warner announced it was in talks with Meredith, leaving those who had kept their jobs to nervously await word of the fate of their magazine, and whether they might have to relocate to Meredith’s headquarters in Iowa.
Several current and former Time Inc. employees spoke about the unease at the magazines, requesting anonymity so they could publicly discuss private conversations. “This is for the most part a really nice place to work and people are happy to know that it will stay intact,” said a current Time Inc. executive. “The layoffs were really hard. The uncertainty on the heels of the layoffs made it particularly painful. Some people were really nervous about this Meredith idea.”
A former company executive who is still in touch with many employees said, “Morale dipped dramatically when the layoffs occurred just a couple of months ago. No merit increases were given. Bonuses were extremely low. Then rumors spread Meredith was going to purchase the magazines and morale dipped. Generally people are really pleased that Time Inc. is going to be given the opportunity to survive on its own.”
Some employees blame Time Warner’s chairman and chief executive, Jeffrey L. Bewkes, for the problems at Time Inc., saying his priorities lay elsewhere.
Amy Chozick contributed reporting.
Article source: http://www.nytimes.com/2013/03/14/business/media/spinoff-of-time-inc-rattles-employees.html?partner=rss&emc=rss