Corporate names these days have become increasingly misleading. Time Warner, for example, seems like a bogus appellation, since all of its Time properties have been spun off as of this week into a new publication entity — one with a challenging future. Meanwhile, News Corp. should be renamed “stuck-with-the-news corp” because Rupert Murdoch has flipped all of his profitable TV and film units into 21st Century Fox, leaving his newspapers and books to wallow in print hell.
These financial maneuverings make strategic sense from the standpoint of the moguls and their number crunchers. Why should HBO and Warners be burdened with the fading fortunes of Time and Fortune? And why should stockholders who revel in the surprise success of Fox’s “The Fault in Our Stars” have to be reminded that Rupert’s favorite toy, the New York Post, loses $50 million a year?
The catch, of course, is this: Can these newly created all-print entities hold their own in the financial marketplace? Further, is it either socially or financially responsible to ghetto-ize the print media?
The circumstances at each company are radically different, if at the same time much the same. Magazines by and large are losing the attention of their readers. Operating profits at Time alone have plunged 41% since 2011. Newsstand sales of People have dropped by almost one half in thepast five years.
Still, talk to Time’s top executives and they’ll tell you all of their magazines are basically profitable — if not as profitable as in former years. In short, the businesses are sound, but the climate is threatening. “The basic issue in the magazine business is how fast will the iceberg melt?” says one top Time executive.
Last week, I wandered through the venerable Time building, a 1950s structure that embodied the grandeur of founder Henry Luce’s vision. In bygone days, the egos of Time editors and executives were such that they had their secretaries book appointments, even when they were seeing one another — drop-ins were verboten. Everyone, even midlevel editors, went home in limos.
Today’s Time CEO, Joe Ripp, is a tough-mind-ed financial guru (once vice chairman of AOL). He and editorial content chief Norman Pearlstine, a revered former editor, face a tough mandate: They must severely cut costs and find new
revenue streams in video, digital and other emerging ad sources. As a free-standing company, they could also acquire a new entity — but not one that might compete with other Warner units, such as HBO, which carved out $1.8 billion in profits last year. Yet cable TV would normally be an outgrowth for a magazine company.
All this must be accomplished under close scrutiny. Time magazine was criticized last week for selling advertising on its cover for the first time — a Verizon ad so small it was difficult to spot without a magnifying glass.
The new Time starts life with $1.3 billion in debt, a stark contrast to Murdoch’s print playthings, for which the mogul effectively provided a $2 billion cash cushion a year ago. Given his deliciously anachronistic passion for newspapers, Murdoch may even acquire new holdings — the News Corp. portfolio includes such properties as Nantucket Today and the Sunday Tasmanian, as well as the HarperCollins Publishing Co. and newly acquired Harlequin.
Murdoch’s BSkyB and SkyEurope dealings could bring him an acquisitions kitty of as much as $9 billion to play with, and the track record of the 82-year-old mogul suggests that he will not stand around counting it.