Time Inc.'s self-imposed strategic transformation has begun as it considers selling assets, including some of its magazines and its U.K. division, to cut costs and streamline operations, reports Media Post. This news isn't surprising though. Time Inc., the publisher of Time, People, Life, Cooking Light and Sports Illustrated, has been struggling for some time. This spring, after exploring its options, the publisher publicly stated it was not for sale and would pursue its own strategic vision instead. In June, Time Inc. cut 300 jobs as part of the restructuring, blaming ‘public speculation' for revenue declines.
Then last month, when Time Inc. (NYSE: TIME) posted its second quarter financials, the company revealed a 10 percent drop in total revenue and said it would do a thorough review of its business as it undergoes a ‘strategic transformation program' to include cost reductions, increased margins, reviewing its asset portfolio, and consider new revenue streams.
President and CEO Rich Battista outlined the company's plans on August 8 in a press release:
‘On our last earnings call, we outlined aggressive actions-building on what we had accomplished to date-to reduce costs, expand margins, rationalize our portfolio and extend our brands into new growth revenue streams. We've been moving with speed and, most significantly, we are announcing today, a strategic transformation program based on a thorough review of Time Inc.'s business,' Battista said.
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‘Through this review, we have greater confidence in our path to accelerate the optimization of costs and revenue growth drivers. We have already targeted more than $400 million of run-rate cost savings, with the majority of initiatives expected to be implemented over the course of the next 18 months. We plan to use a portion of these savings to invest in our future in key growth areas including native and branded content, video, data and targeting, paid products and services, and brand extensions,' Battista added. ‘With this program, we expect to realize significant cost savings and reinvest in our future, and we see a path to a minimum range of $500 million to $600 million of Adjusted OIBDA within the next three to four years.'
In a September 25 8-K filing with the Securities and Exchange Commission, Time Inc. outlined cost reengineering and revenue opportunities. Among the expected changes, the majority of which the publisher said it expects to implement in the next 18 months, are consolidating and centralizing circulation and editorial operations, reviewing its pricing, and continuing to expand offerings such as its bookazines. The company said it will use a portion of the money saved to invest in growth areas including native and branded content, data and targeting, paid products and services, and brand extensions.
In the 8-K filing, Time Inc. outlined some of the assets it is considering for potential divestiture, including Time Inc. UK, Time Customer Service, a majority stake in Essence, Sunset, Coastal Living and Golf. These assets represent approximately $488 million in total, or 17 percent, of total revenue for the 12 months ended June 30, 2017. The company it has not entered into any definitive agreements for the sale of these assets thus far, and ‘sales processes' are at different stages.
Like so many other publishers, Time Inc. is having trouble finding a long-term, sustainable business model that replaces lost print advertising and circulation revenue. In the second quarter, for example, the company lost $81 million in advertising and circulation revenue. The loss was partly curbed by $6 million in revenue from marketing and support services, but the publisher can't continue to sustain such losses.
The company reported an operating loss for the second quarter of $38 million which, it says, is due primarily to goodwill impairment and restructuring and severance charges. Time Inc. needs to make major changes and quickly to avoid significant losses for the balance of the year. Since the third quarter is almost over, Time is not likely to see any significant improvements to its bottom line until the fourth quarter, and then only if it sells some of its assets and/or does some serious cost cutting.