Time Inc. girds for cutbacks as ad sales slide

By Published on .

Red ink at Time Warner and weak ad-sales performances at key titles are combining to put pressure on Time Inc.-setting the stage for cutbacks and shakeups at the nation's largest magazine publisher.

"Time Inc. remains the clear magazine- industry leader, but the advertising picture has weakened since the first quarter," Don Logan, chairman of the media and communications group, said during an analysts' call last week. "This trend has continued into the third quarter."

Within days of those remarks, Time Inc. corporate-communications executive Peter Costiglio announced that he would leave the company next month after 17 years, and reports surfaced that Editor in Chief Norman Pearlstine, 62, would retire this fall, more than a year before his contract expires. He is expected to be succeeded by Editorial Director John Huey, 52.

Those moves came hard on the heels of a corporate shakeup initiated in late July by Time Inc. Chairman-CEO Ann Moore, who put new business-side management in place over many of her key magazines. She is expected to demand tougher cost controls from those managers.

"It is an ongoing process to look at the size and scale of your staff," Time Inc. spokeswoman Dawn Bridges said, although she cautioned against the expectation of major belt-tightening. "It isn't just cost-cutting. It's about figuring out ways to grow revenue. There's not going to be some Black Friday after Labor Day."


Still, Mr. Logan is known as a bottom-line manager, and last week he said the tougher ad outlook would not excuse a profit drop. "We continue to expect Time Inc. to grow profits this year," he told analysts.

Time Warner last week finally eased the pain of its merger with AOL by reaching a $2.4 billion settlement with shareholders over improperly reported ad revenue. But the agreement, announced with second-quarter earnings, placed Time Warner in the red for the first quarter in almost three years, increasing pressure to perform across the company.

Time Inc. reported second-quarter revenue of $1.5 billion, a 4% gain over the same quarter last year. The division contributed nearly 14% of Time Warner's total second-quarter revenue of $10.7 billion.

Time Inc. is keenly watched in the magazine business for indications of shifts in the print market. Mr. Logan said package-goods, beauty, fashion and import-auto ad spending are strong, but domestic auto, insurance and corporate advertising declined.

Time Inc. monthlies such as In Style, Real Simple and Southern Living are performing better than Sports Illustrated, Time and Fortune, but unfortunately for Time Inc., the weaker titles are some of the biggest and most profitable.

Ad pages at In Style rose 7.8% during the first half compared with the first half of '04, according to the Publishers Information Bureau. But Sports Illustrated saw a 16.5% drop in first-half pages, while Time was down 18.4%.

Among other Time Warner units, AOL's revenue fell 4% to $2.1 billion; cable revenue grew 11% to $2.4 billion; filmed entertainment fell 15% to $2.6 billion; and the TV networks saw revenue rise 5% to $2.5 billion.

In this article:
Most Popular