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% . 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.
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 . 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.
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 .
- Exhibit 1: US Magazine Industry Circulation (MM)
- 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 .
- Exhibit 2: US Total Media Ad Spend (% Total)
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 . 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 . 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 .
- 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 .
- Exhibit 3: Time Advertising Revenue Mix ($MM)
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 . In this acquisition, significant synergies were achieved by eliminating redundant corporate functions, expanding the audience footprint, and centralizing technology systems .
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 . 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.
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- “TIME.” CapitalIQ. N.p., n.d. Web. 15 Nov. 2016. <https://www.capitaliq.com/CIQDotNet/Financial/Segments.aspx?CompanyId=639301>.
- 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/>.
- 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/>.
- “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>.
- “Homepage | MPA.” MPA. Magazine Publishers Association, 2014. Web. 17 Nov. 2016. <http://www.magazine.org/>.
- “EMarketer Numbers.” Total Media Ad Spend Share. EMarketer, 2016. Web. 17 Nov. 2016. <http://dashboard-na1.emarketer.com/numbers/dist/index.html#>.
- 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>.
- 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>.
- “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/>.
- 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/>.
- 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>.