A Fifth of Time Inc.'s Ad Revenue Now Comes From Digital

But Ad and Circ Revenue Fall as Publisher Reports a 'Bumpy' Turnaround

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Time Inc., the nation's largest magazine publisher, now generates 20% of its ad revenue through digital sales, the company said today.

The company sold $73 million worth of digital ads in the first quarter, up 1% over the quarter a year earlier, Time Inc. executives told Wall Street investors as it reported its most recent results. The increase would be 20% if you exclude digital ad sales in the first quarter of 2014 from CNNMoney.com, which until last June was home to the digital content for Time Inc.'s Fortune and Money magazines, and Grupo Editorial Expansión, a group of Mexican magazines that Time Inc. sold last June.

These digital numbers are important measures of Time Inc.'s effort to transform from a print publisher to a media company with digital at its core. Digital ad sales had not grown for the two years before a new executive team took over in 2013, Time Inc. CEO Joe Ripp said during an earnings call.

But the company -- which publishes iconic titles like People, Time and Sports Illustrated -- still derives the majority of its ad revenue from print. And that revenue is in a state of decline. In the first quarter, print ad revenue fell 12% from the prior year to $280 million. Excluding the sale of Grupo and the effect of a strong U.S. dollar relative to the British pound -- Time Inc. owns a number of magazines in the U.K. -- print ads were still off 10%.

Time Inc.'s U.S. titles saw a drop in advertising from the food and beauty categories, the company said. That was partially offset by strong sales to pharmaceutical marketers.

Overall ad revenue fell 9% to $353 million. Taking out the impact of the CNNMoney.com separation, the Grupo Editorial Expansión sale and the strong U.S. dollar, ad sales dropped 5% compared with the prior year.

Circulation revenue sank 7% to $250 million. Excluding currency issues and the sale of Grupo, the decline was 5%.

Total revenue fell 9% to $680 million. Excluding special items, revenue fell 5%.

"We're in a turnaround and turnarounds are bumpy," Mr. Ripp said.

Part of that turnaround includes moving the company from its pricey midtown Manhattan headquarters to office space in lower Manhattan. The new space has an open-floor plan -- a popular trend among companies -- which will lead to "closer collaboration between creative and business sides of the organization," Mr. Ripp said. He didn't elaborate further on that statement, but Time Inc. executives have pushed to reduce the boundaries between editorial teams and the business sides.

Operating income for the quarter was $5 million, an improvement over the $120 million operating loss a year earlier, aided partly by lower restructuring and severance costs. The company reported an overall net loss of $9 million, a smaller loss than $74 million in the quarter last year.

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