In June 2014, Time Warner completed the spin-off of subsidiary Time Inc. In a statement by Time Warner Chairman and CEO Jeff Bewkes, the spin-off was done so Time Warner could focus on being the “world’s leading video content company.” According to Digiday, Time Inc. was in a world of hurt at the time of the spin-off, with $1.3 billion in debt and revenues down to $370 million from a high of $1 billion in 2006.

2^nd Quarter 2015 Financials

A little over a year later, Time Inc. has made some dramatic changes and there are some bright spots, but it’s still hurting. Second quarter earnings for 2015 showed revenue of $773 million, down 6%, or $47 million year over year, but still significantly higher than Q1 2015 revenue of $680 million.

Though revenues were down in most categories, digital advertising increased by $3 million year over year. Operating income has also improved for Time Inc. Operating income for Q2 was $61 million, compared to a $21 million loss, an $82 million swing, for the same period last year. Net income was $24 million, compared to a $32 million loss, a $56 million difference, this time last year.

Other revenue highlights from the second quarter 2015 earnings report for Time Inc. include:

• The exchange rate difference between the U.S. dollar and the British pound adversely impacted total revenue by $10 million.
• Digital advertising revenue reflects strong growth in video and programmatic sales.
• Time Inc. served 108.3 million multiplatform unique visitors during June 2015, a 32% increase since June 2014.
• Revenue costs (production and editorial) decreased by $33 million, or 10%. Production costs were reduced by $15 million, due in part to lower page volume and favorable paper and printing prices. Editorial costs decreased by $18 million, or 16%.
• Selling, general and administrative expenses were down by $22 million, or 6%.
• Restructuring and severance costs totaled $12 million in Q2 2015 and $55 million in Q2 2014. The costs savings came from a reduction in staff and consolidation of real estate.

In the press release announcing the second quarter results, Time Inc. Chairman and CEO Joe Ripp said, “Over a full year has passed since our spin-off from Time Warner. As an independent public company, Time Inc. is renewing the organization’s creativity, entrepreneurship and innovation. We are extending our brands and content assets wherever audiences wish to experience them.”

“We remain confident in our plan to fundamentally reengineer the business and reposition our company for its return to growth. 2015 continues to be a pivotal year as we launch a portfolio of growth initiatives and invest to develop new revenue streams including through key acquisitions, and continue our disciplined capital allocation strategy.”

What’s next?

More change. In May, Time Inc. announced that Entertainment Weekly would be the first of its properties to put up a metered paywall. According to a May 29 press release, Time Inc. said the goal is to gain greater insight into the digital preferences of its online audiences and to grow revenue. Subscribers would continue to get unlimited access to content, while visitors would get a certain number of free articles based on whether they were a registered or nonregistered user.

“Deepening our relationships with digital audiences who value our premium content is of paramount importance to us,” said Time Inc. Chairman and CEO Joe Ripp. “It enables us to better identify and understand the changing needs of our audiences and provide greater value by introducing targeted products and services.”

Additional Time Inc. brands will be restricted by paywalls in the near future, but the pricing and offerings will be designed based on its audience’s unique needs.

“Our paid content strategies need to be flexible and able to adjust to the rapidly evolving needs and expectations of our consumers,” said Time Inc. Executive Vice President of Consumer Marketing and Revenue Lynne Biggar. “We have a comprehensive testing strategy and look forward to learning with our consumers.”

In addition to becoming a leaner company by reducing staff, part of Time Inc.’s new strategy is to win over younger audience by launching digital-only sites like The Snug and Mimi, reports Digiday. Overhead expenses for a digital brand are less expensive than for a brand that is both physical and digital, so Time Inc. can leverage its growing digital audience while growing revenue with lower costs.

Insider Take:

Though change has been slow, Time Inc. is showing signs of recovery. Though total advertising revenue and circulation are down, digital advertising is growing, and the company is reporting operating and net income for 2015 instead of the losses at the end of the second quarter in 2014.

The media company is leveraging its growing digital popularity to learn more about each of its 90+ brands’ audiences. As it does, Time Inc. will construct paywalls and tailor subscription packages to address the needs of those audiences. This type of testing, tweaking and slow growth is smart and will help Time Inc. grow deliberately, building on its strengths while shedding practices and properties that no longer work.

Financially speaking, Time Inc. seems to be moving in the right direction. The key to its success will be continuing in that direction, but also addressing its audiences’ needs by providing them with unique, quality content and by being open and transparent with upcoming changes. EW.com is a good example of this. Time Inc. made an advance public announcement about the metered paywall, explaining how the metered paywall would work.

If Time Inc. continues to monitor its financials while also providing subscribers with unique value, Time Inc. could crawl out from Time Warner’s shadow sooner rather than later. And, of course, we’ll keep you posted on pending changes and updated financials. Stay tuned!

Dana Neuts is a Reporter-Contributor for Subscription Insider.