Time: Has Their Time Run Out?

Time, an iconic magazine publisher, faces enormous headwinds that will overwhelm the business unless action is taken.

Digital technology has been transformative, greatly improving productivity and opening up new business opportunities for many industries. Some sectors, however, have faced serious consequences due to the digital revolution, and perhaps no industry has been harder hit than print. One company in particular, Time Inc. (“Time”), the largest magazine publisher in America, with popular titles including TIME, PEOPLE, and Sports Illustrated, has suffered severely. The company’s stock price has declined from $23 in 2014, when spun-off from Time Warner, to only $13 today, a decline of approximately 45% [1]. Although the company has made valiant efforts to maintain its legacy business model while venturing into the digital world, unfortunately the tide against the industry is too strong and Time must do more if they are to succeed.

Industry Context

To put Time’s struggles into a larger context, it is important to recognize some of the primary challenges Time faces as a result of the rise of digital:

  • Free Competition – There is much more competition in the digital space than print, with consumers able to easily access a variety of free and timely sources [2]. For example, while Sports Illustrated (“SI”) is the category leader in print, ESPN, Yahoo Sports, Deadspin, and many other sports sites receive more online daily visits than SI.com [3, 4].
  • Alternative Media – In addition to competition from traditional news sites, magazines must also fight for consumer attention against new forms of media that provide consumers with alternative, easier means to access information. For example, consumers can monitor social media sites such as Facebook, watch the news on high-definition televisions, or listen to their favorite podcasts.

Resulting Impact

As a result of the challenging macro environment, enormous pressure has been put on the magazine industry, which can be seen through both declines in circulation and advertising spend:

  • Decline of Physical Circulation – US magazine circulation has declined at an average rate of 3% per year from 2009 to 2014 [5].
  • Exhibit 1: US Magazine Industry Circulation (MM)
    pic1
  • Shift in Media Spend Toward Digital – The share of print industry revenue as a percentage of total advertising spend has declined from 21% in 2012 to only 14% in 2016, and is expected to decline to 11% by 2020 as digital continues to take share [6].
  • Exhibit 2: US Total Media Ad Spend (% Total)
    pic-2

Company Initiatives

In an attempt to combat these challenges, Time has implemented various initiatives to protect its existing business and more rapidly enter the digital world:

  • Rationalize Cost Base – Shortly after spinning out from Time Warner, Time announced it was laying off 500 employees, outsourcing the IT department, and moving the company’s headquarters to a lower rent location [7]. While none of these moves were popular, they were necessary to right-size the company’s costs.
  • Internal Digital Transformation – Time has significantly increased digital efforts, including a goal of increasing website posts per week from only 150 to nearly 1,000 [7]. This online emphasis is evident in their financial results, with digital comprising 20% of Time’s total advertising revenue in 2015, as compared to only 14% in 2012 [1].
  • External Digital Investments – In addition to focusing on improving their own internal websites, Time is also making strategic technology investments. One notable example is that of Next Issue Media, a joint venture between Time and other magazine publishers, that attempts to create a digital “Netflix for magazines.” The service requires users to pay a monthly fee in exchange for unlimited digital access to a wide variety of magazines, hoping to replicate the success of many new-age media darlings [8].
  • Exhibit 3: Time Advertising Revenue Mix ($MM)
    pic3

Recommended Action

Unfortunately, Time’s efforts, while admirable, are not enough. Clearly shareholders are dissatisfied, as demonstrated by the decline in the share price, and the secular headwinds facing the industry are substantial. One strategy often employed in low-growth industries, such as print, is that of consolidation. In fact, much of the print industry has already merged, particularly the newspaper segment, with the Gannett / Journal Media transaction representing the most prominent recent example [9]. In this acquisition, significant synergies were achieved by eliminating redundant corporate functions, expanding the audience footprint, and centralizing technology systems [10].

A similar solution may be possible for Time, as it was reported that the company previously held talks with another old-school media stalwart, Meredith, a leading publisher of magazines for women [11]. Though it may be sad to see an iconic business with a storied history go out on a low note, this is perhaps the best way to maximize shareholder value and survive against the extraordinary challenge that digital creates.

(Word Count: 763)

 

Endnotes:

  1. “TIME.” CapitalIQ. N.p., n.d. Web. 15 Nov. 2016. <https://www.capitaliq.com/CIQDotNet/Financial/Segments.aspx?CompanyId=639301>.
  2. Desjardins, Jeff. “The Times They Are A-Changin'” Visual Capitalist. N.p., 04 Nov. 2016. Web. 15 Nov. 2016. <http://www.visualcapitalist.com/chart-new-york-times/>.
  3. Cromwell, Bill. “Circulation Woes Slam Nearly All Titles.” Media Life Magazine. Media Life, 18 Feb. 2015. Web. 15 Nov. 2016. <http://www.medialifemagazine.com/circulation-woes-hit-nearly-all-titles/>.
  4. “The Top 500 Sites on the Web.” Top Sites by Category: Sports. Alexa, n.d. Web. 15 Nov. 2016. <http://www.alexa.com/topsites/category;1/Sports>.
  5. “Homepage | MPA.” MPA. Magazine Publishers Association, 2014. Web. 17 Nov. 2016. <http://www.magazine.org/>.
  6. “EMarketer Numbers.” Total Media Ad Spend Share. EMarketer, 2016. Web. 17 Nov. 2016. <http://dashboard-na1.emarketer.com/numbers/dist/index.html#>.
  7. Flamm, Matthew. “Joe Ripp Wants Everyone to Believe Time Inc. Is a Media Company for the 21st Century. Not Everyone Is Buying It.” Crain’s New York Business. N.p., 01 Nov. 2015. Web. 15 Nov. 2016. <http://www.crainsnewyork.com/article/20151101/ENTERTAINMENT/ 311019991/joe-ripp-wants-everyone-to-believe-time-inc-is-a-media-company>.
  8. Bercovici, Jeff. “Next Issue Media, AKA Netflix For Magazines, Hits Windows 8, Targets 1 Million User Mark.” Forbes. Forbes Magazine, 6 Mar. 2013. Web. 15 Nov. 2016. <http://www.forbes.com/sites/jeffbercovici/2013/03/06/next-issue-media-aka-netflix-for-magazines-hits-windows-8-targets-1-million-user-mark/#56e994006569>.
  9. “Behind the Recent Surge in Newspaper Deals.” MediaLife Magazine. MediaLife, 28 Apr. 2016. Web. 15 Nov. 2016. <http://www.medialifemagazine.com/behind-recent-surge-newspaper-deals/>.
  10. Edmonds, Rick. “What Gannett Gets by Getting Bigger and Why Newspaper Consolidation Will Continue.” Poynter. N.p., 08 Oct. 2015. Web. 15 Nov. 2016. <http://www.poynter.org/2015/what-gannett-gets-by-getting-bigger-and-why-newspaper-consolidation-will-continue/376203/>.
  11. Gillette, Felix. “Why the Time-Meredith Deal Never Made Sense.” com. Bloomberg, 7 Mar. 2013. Web. 15 Nov. 2016. <http://www.bloomberg.com/news/articles/ 2013-03-07/why-the-time-meredith-deal-never-made-sense>.

Photo & Exhibit Credits:

  • Cover Photo: “TIME | Current & Breaking News | National & World Updates.”Time. Time, n.d. Web. 15 Nov. 2016. <http://time.com/>.
  • Exhibit 1: “Homepage | MPA.” MPA. Magazine Publishers Association, 2014. Web. 17 Nov. 2016. <http://www.magazine.org/>.
  • Exhibit 2: “EMarketer Numbers.” Total Media Ad Spend Share. EMarketer, 2016. Web. 17 Nov. 2016. <http://dashboard-na1.emarketer.com/numbers/dist/index.html#>.
  • Exhibit 3: “TIME.” CapitalIQ. N.p., n.d. Web. 15 Nov. 2016. <https://www.capitaliq.com/CIQDotNet/Financial/Segments.aspx?CompanyId=639301>.

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2 thoughts on “Time: Has Their Time Run Out?

  1. AT – Thanks for the post. I completely agree that the financial outlook for Time is challenging. Media executives have long argued that consumers will continue to ascribe value to the curated, well-researched articles that print media publishers offer (e.g., Time, WSJ, NYT). Based on this line of argument, the problem that print media companies faced was primarily distribution. Thus, most media companies have focused primarily on broadening their distribution channels (e.g., mobile, social, web) to facilitate the purchase and consumption of their unique, valuable content. Companies have done this by putting up digital barriers to ensure that non-subscribers can’t access their valuable content.

    I worry that media companies are avoiding addressing the real risk that their business faces: content commoditization. Today, the proliferation of free content online means consumers (especially Millennials) can find the information they want without paying to subscribe to a magazine or newspaper. Time is now competing against free alternatives such as Yahoo, ESPN, and Facebook. If media companies like Time fail to break down their walls and embrace the competition, they risk losing relevance with consumers. In June 2015, for example, Reuters announced that it would start offering news content free-of-charge to other digital news aggregators, the first time that Reuters has done this in its 160-year history. Given Time’s fear of risking its attractive monthly subscription revenue stream, however, I worry that Time is relegating itself to a future as a “melting ice cube.” While consolidation may lead to cost savings in the short-run, if Time wants to be a viable business 50 years from now, Time needs to challenge the conventions of its core content distribution and subscription model by making content more freely available.

  2. Traditional print media is undergoing some serious growing pains as it shifts to digital. Whereas in the past, distribution was a source of competitive advantage, now one can make the argument that content generation is really the area where you need to focus to win. I had the opportunity to speak with management from Wicked Local, the organization that owns a majority of local daily (and non-daily) newspapers in Massachusetts, and an interesting piece of their strategy revolves around moving to a digital platform where they not only distribute news articles through online/mobile, but also try to engage and connect with subscribers through various forms of customer engagement and communications. One challenge of moving to digital is “quality” – as more and more media outlets begin to publish news and articles online, it seems as though the quality of journalism has declined. I think for Time that has a solid readership and reputable content, finding ways to engage users through digital is a growth area where they can protect their place in the media industry.

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