According to the Form 10 filing, Time is ‘the largest magazine publisher in the United States based on both readership and print advertising revenues and the largest magazine publisher in the U.K. based on print newsstand revenues.’ Some of its more popular brands include its namesake Time, People and Sports Illustrated, but despite their popularity, the company’s revenue and margins have been dropping. The response has been to cut costs (and employees) and those types of moves are expected to continue in the future. In addition to further ‘headcount reduction’, there are possibly big savings (~$50m per year) beginning in 2017 by reducing its real estate footprint after its NYC HQ lease expires that year. Although the company is still profitable, substantial risk remains as the entire industry continues transforming. It certainly doesn’t help that as part of the transaction, Time is expected to raise about $1.4b in debt with the proceeds being sent over to Time Warner. For additional information on the spin, check out all of our earlier coverage of the topic.
The spin is part of a growing industry trend of media companies dropping their print assets. News Corp (NWSA) was set free last year and Tribune’s (TRBAA) publishing unit is expected to be spun off later this year. It will be interesting to see how these companies adapt to the changing and challenging operating environment. Although the risks are numerous and quite significant, many ‘hated’ companies have done well in the past so it’s worth watching how it plays out.
Disclosure: Author is long shares of TWX.