They’re two completely different companies, but as Time Inc. and VNU look for ways to reinvent themselves in the digital media age their sell and cut strategies are similar.
Both companies made the news this week, VNU for its plans to shed some 4,000 jobs and the sale of its Business Media Europe group to European private-equity firm, 3i, and Time for its plans to cut 27 jobs this week in its consumer marketing division, bringing the total number of jobs its cut over past 13 months to almost 600. Meanwhile, Time continues to look for a buyer for 18 publications belonging to its Time4Media and Parenting Groups.
Mark Edmiston, managing director for AdMedia Partners, says Time, like many strategics, is being forced to cut costs and spin-off non-core assets as it tries to reposition itself for the Internet-heavy new media model. “Consumer magazines, in the past, had built up a business model that was based on inexpensive subscriptions and lots of advertising,” he said. “The Internet has changed that and it’s sucking money out of traditional media outlets and not just magazines, but also newspapers and television.”
Different media outlets are responding in slightly different ways. Meredith Corp., for example, is building up its marketing and custom publishing holdings in an effort to give advertisers broader range of choices, Edmiston said. And other companies, like Time Inc., are finding success by moving some publications like Teen People entirely online, spinning off others and cutting costs through staff reductions, he said.
VNU, which was purchased by a consortium of private equity firms in the late spring for $9.7 billion, is going through a similar transition and has recently formed dual corporate headquarters in New York and Haarlem, Netherlands; hired new CEOs – corporate CEO David Calhoun, a former GE executive, and VNU Business Media Robert Krakoff; sold-off assets; and eliminated jobs.
Reed Phillips, partner of DeSilva & Phillips, says the VNU changes are similar to the movement afoot at Time Inc. “You have someone from the outside coming in, in this case someone from GE, who says we can run this business more efficiently,” he said. “I think directionally they’re moving where they need to go. But I think the proof will be in the pudding as to whether they’re cutting too deeply and have to start over again, as opposed to cutting just right.”
Phillips says Time Inc. has already established itself as an industry leader and is making all the right moves to maintain that leadership. “I think what they are doing is what most media companies need to do,” he said. “They’re rethinking their business because of the impact of the Internet. They’re reducing their expenses on their print brands and investing those savings in online and they’re doing it simultaneously.”