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NewYorkBusiness.com - Powered by Crain's New York Business: "Clock ticking for Time Inc.

Publisher races to bring titles into e-age, restart growth

By Matthew Flamm
Published on May 29, 2006

After three rounds of job cuts and a critical personnel change at its flagship magazine, Time Inc. stands poised to enter a brave new world of swimsuit shoots that appear on cell phones and advertising that bleeds seamlessly across print and electronic formats.
The changes are part of the company's long-awaited response to the surge in digital media that has magazine executives everywhere reaching for their Maalox.
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With its chief executive, Ann Moore, under pressure to return the company to growth, the No. 1 magazine publisher is attempting to outrun the new media avalanche and transform its world-famous titles into brands that can be consumed in whatever fashion readers like.
The transition can't happen fast enough. Profits for the Time Warner division plummeted in the first quarter, and namesake title Time is in danger of becoming obsolete. The question among some industry observers is whether the storied publisher waited too long before starting down the digital path.
'This is the first year [Time Inc.] has finally gotten that there are too many things changing at the same time, and that [the situation] isn't going back to the way it was,' says Peter Kreisky, chairman of Kreisky Media Consultancy.

Extending its brands

Executives at Time Inc. insist that the company is ready to extend its brands into the digital sphere and provide readers and marketers with a range of choices. A new corporate sales and marketing division is working to create advertising packages that will cut across titles and formats, including including podcasts and cell phones.

"We're going to deliver audiences through many brands at one time," says Robin Domeniconi, president of the new division. "Our job is to leverage our brands however the consumer wants them."

The company has little choice but to change. Time Inc. has been hit by a combination of forces since Ms. Moore took the reins in 2002 from Don Logan, who is famous for presiding over 41 consecutive quarters of profit growth.

The publisher's signature male-oriented titles Sports Illustrated, Fortune and Time suffered double-digit declines in advertising pages last year, as mainstay categories, particularly automotive, cut back on spending or shifted dollars to the Internet.

Business magazines such as Fortune and Money fell out of favor, while the growth of cable television and the Internet raised questions about newsweeklies. This year, advertising at Sports Illustrated has stabilized, and Time's ad pages grew 5% through April. Still, management is rethinking Time's mission, naming Richard Stengel the latest top editor of the newsmagazine.

Women's titles Real Simple, In Style and People have largely kept Time Inc. aloft.

Last year, with their help--and a boost from the book group--earnings for Time Warner's publishing division rose 5% to $1.3 billion, off revenue that increased 5% to $5.8 billion. For the first quarter of this year, revenue for the publishing division was flat at $1.1 billion, with earnings off 12% to $116 million. Revenue was not counted from the book group, which was sold.

"You have to become a content company," says Mark Edmiston, managing director of AdMedia Partners Inc., a mergers and acquisitions firm. "You can't make money anymore selling ad pages and giving away circulation."

Time Inc. has already had some successes with its new model.

CNNMoney.com, which combines content from four business titles, has become the third-largest business portal, up from eighth place, since launching in January.

Sports Illustrated's Web site, SI.com, has rolled out video downloads for iPods and mobile phones. So far this year, its ad revenue is up 100%.

Keeping promises is key

Industry insiders say that it remains to be seen how well the rest of Time Inc. can deliver on its promises to market brands, as opposed to magazines, especially when people are worried about their future.

The recent rounds of layoffs were notable for targeting the business side, including high-level publishing executives. Last week, Ms. Moore offered tepid reassurance to anxious staffers, writing in a companywide memo, "We do hope the majority of eliminations is behind us."

Says a former executive who recently left the company, "Employees are yessing the key executives to death for fear of losing their jobs."

Observers also point out that Time Inc. has a tradition of fiefdoms and decentralized operations, which make it harder to get different parts of the company to work together.

"They have not been good at [cross-media, cross-title programs]," says Roberta Garfinkle, director of print strategy at TargetCast, a media planning agency. "We're looking forward to hearing how they can make it better."