Framing the Scene: Print Advertising in Secular Decline
The U.S. magazine publishing industry is in steep secular decline given the proliferation of mobile devices and rising consumption of digital media.
For Time Inc. (TIME), which was spun off from Time Warner in 2014, this trend is particularly disconcerting given for most of its history, TIME has been focused on publishing a robust portfolio of traditional print-based magazines, and has amassed the largest such portfolio of popular brands in the U.S. (e.g., People, Sports Illustrated, InStyle, TIME, Entertainment Weekly, Essence, and Fortune, among others). In 2015, its U.S. print audience approached nearly 100 million viewers and its print advertising revenue share surpassed 25%. Though we have always been told that being the industry behemoth provides benefits of scale, a quick look at deteriorating newspaper businesses is quite sobering.
Source: Stephens Inc. Research, 6.23.2016, Page 8
Despite enjoying double digit growth in digital advertising, TIME has yet to be able offset heavy losses on the print side. In 2015, TIME’s print advertising revenue declined $153 million, only to be offset by $33 million growth in digital advertising revenue. TIME has for some time mentioned it expects to reach an inflection point in 2016, with growth in digital advertising expected to offset declines in print, although disappointing Q3 results present risk to turning the corner.
TIME Must Adapt and Transform Its Business Model and Organizational Strategy
When Joe Ripp took the reins of TIME as CEO post the spin-off in 2014 (since replaced by Rich Battista), he made it clear that TIME would no longer be associated as a magazine company, but as a full-fledged media company. TIME deployed a robust digital transformation strategy, including redesigning the organizational structure and enhancing its business model in a number of key ways.
From an organizational perspective, TIME has attempted to redesign positions to suit an increasingly digital world, including:
- Forming new digital roles – President of Digital and Chief Content Officer
- Reorganizing Product, Editorial and Advertising Sales teams – Teams to work across all brands with a focus on digital and away from print vs. dedicated teams within brands
TIME has also implemented key enhancements to its business model including:
- Providing greater value to advertisers – Recently acquired people-based adtech company Viant for $87mm to better understand its users and hopefully leverage Viant’s owned MySpace assets (failed social network millennials were addicted to in high school). Goal is to improve targeting and customization on digital formats, including via native solutions (as shown below)
- Increasing diversity of pay offerings – Offering digital-only subscriptions and single-copy digital issues of magazines via digital stores (e.g., the App Store), as well as bundling print subscriptions with cross-device digital subscriptions
- Increasing social media presence – Creating branded pages, investing in content and forging key partnerships (e.g., Facebook) to further engage viewers, particularly on mobile devices, with a goal of fostering loyal followers to convert into sales
- Diversifying revenue streams – Pursuing Time Inc. video programming and distribution, live events and conferences, as well as building out adjacencies including Sports Illustrated Play, a digital registration platform for youth and amateur sports
- Acquiring digital companies – If you can’t build it, BUY IT! In addition to Viant, TIME has recently been aggressively acquiring companies targeting millennial audiences
What More Can Be Done?
In a world in which consumers are constantly on their mobile devices sharing stories, photos, blogs, and Tweets, TIME should be further capitalizing on a user generated content (UGC) strategy. Research from Crowdtap and Ipsos states that millennials trust UGC 50% more than other media as UGC comes across more authentic. An effective UGC strategy could serve to enhance brand awareness and loyalty, as well as increase lead generation data and sales.
As a first step, TIME needs to more thoroughly understand and track how millennials are interacting with its brands and content. The next step would be to develop more effective mechanisms to convince consumers to engage and share on social platforms, including leveraging what’s popular in the media, spurring viral activity (e.g., ALS Challenge), providing incentives for engagement (e.g., having consumers rate each other’s posts to be featured), among many other strategies.
TIME shareholders, employees and consumers certainly should! As the largest publisher with over 100 brands and 7,200 employees, TIME must innovate and drive digital adoption or risk being a legacy brand from the past.
 Stephens Inc. Research, 6.23.2016, Page 8
 Morgan Stanley Research, 11.4.2016, page 7
 Stephens Inc. Research, 6.23.2016, Page 12