Monday, August 27, 2007

Digitally challenged Time Inc. past prime?

Digitally challenged Time Inc. past prime?
By Matthew Flamm

Time Magazine continues to lose ad pages despite its radical re-engineering of five months ago, and Fortune, Money and Business 2.0 have suffered double-digit advertising slides in the first half. But the decline of some of Time Inc.'s core print properties is an old story at the company.

A more troubling issue is that even with traffic increasing at key Web sites and an all-hands-on-deck approach to reinventing itself as a multiplatform content company, ad revenue at the No. 1 magazine publisher grew only 1% in the second quarter. For a business under pressure, that's not good enough.

Time Inc. Chief Executive Ann Moore has staked her legacy on transforming the enterprise into a 21st century publisher and making it the profit machine that it was when she took the reins five years ago.

But Time Inc. got a late start out of the digital gate. Ms. Moore's critics complain that she wasted resources launching the ill-fated Life newspaper supplement and the low-margin women's title All You when she should have been focused on the Web.

Her defenders argue that she was hamstrung by parent company Time Warner's decision to give AOL control of Time Inc.'s Web sites, a relationship that has been unwinding for the past two years.

Either way, the publisher is still paying the price.

"Time Inc. has yet to find a central digital strategy for itself," says Alan Schanzer, managing partner of digital media planning firm MEC: interaction.

He says that missed the chance to own the entertainment news category. It ranks second in unique visitors after gossip upstart TMZ. He adds that faces competition from myriad other news and information sites. And combines four different business magazine brands--Fortune, Money, Fortune Small Business and Business 2.0--which, he argues, have little to do with each other.

Ms. Moore declined to be interviewed, but a Time Inc. spokeswoman responds that is growing rapidly, that owns its category in terms of viewer engagement, and that CNNMoney. com's related brands amass a huge audience. That site's net revenue is up 68% this year. is another success, adding 18% to the bottom line this year at the Sports Illustrated brand. Traffic across all of the publisher's U.S. Web sites now averages 20 million unique visitors a month.

"That's more than our five nearest competitors in magazine publishing combined," a spokeswoman writes in an e-mail.

An upswing
Time Inc. executives also argue that the most recent quarter shows a turnaround. Though revenue was flat at $1.3 billion, operating income before depreciation and amortization grew 12% to $302 million--the first quarter of double-digit growth since 2005--with help from lower restructuring charges. Digital ad revenue, for the second quarter in a row, has more than made up for the decline in print ad revenue. "We're growing again," says a spokeswoman.

Some observers are impressed with Time Inc.'s progress. "Time Inc. has been as aggressive as any company--or more aggressive--at stabilizing print brands and diversifying in digital," says Reed Phillips, a managing partner at investment banking firm DeSilva & Phillips.

Others maintain that the publisher hasn't been aggressive enough. Unlike most of its privately held competitors, Time Inc. faces pressure from analysts and investors. Some of them say it is neither a strategic fit within Time Warner nor a growth business, and should be sold off.

Speculation about Time Inc.'s future has been fueled lately by talk of succession plans at Time Warner. Analysts consider heir apparent Chief Operating Officer Jeffrey Bewkes more open to spinning off divisions than Chief Executive Richard Parsons, whose contract expires next May. That assessment has sparked rumblings about Ms. Moore, whose contract runs through 2009.

She has been unequivocal about staying to its end and has talked about planning for a successor.

Insiders believe that Mr. Bewkes will need to deal with problems at AOL before he gets to Time Inc., Time Warner's smallest division.

A Time Warner spokesman voices support for the division. "Time Inc. is making good progress," he says.

But it doesn't bode well for the publisher that Ms. Moore's tenure has been marked by an up-and-down quarterly performance, in contrast to that of her predecessor, Don Logan. Under Mr. Logan, the company posted 41 consecutive quarters of profit growth.

The roaring '90s
Mr. Logan had the advantages of a booming ad market, big-ticket acquisitions--and Ms. Moore. As president of People from 1993 to 2001, she consolidated the title's hold on popular culture and created juggernaut franchises Real Simple and InStyle.

Critics say that her accomplishments on the digital side have been too little, too late. "Management is simply not getting the job done fast enough," insists Pali Research media analyst Richard Greenfield in an e-mail.

In the rapidly changing media landscape, the mighty Time Inc. may have to get used to looming less large.

"Are they at the point where they're a must-buy?" asks David Smith, chief executive of media- buying firm Mediasmith Inc., which places clients' ads with and "No. But they're folks we've got to give serious consideration to, and, for them, that's huge progress."

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