Time Inc. and Meredith Merger Raises Important Questions for Magazine Media
Does a changing industry paradigm mean opportunity or peril for publishers?
2017 is ending with a bang in magazine media. Maybe even a metaphorical big bang, as the wave of consolidation this year is forecasting a future of change that is unprecedented for this industry. In other words, magazine media as we’ve known it for more than 100 years may never look the same after the Time Inc. and Meredith’s merger becomes official in 2018.
By now everyone has heard the news, the 96-year-old Time Inc., the purported largest magazine publisher in the U.S., is being sold to The Meredith Corporation, for $2.8 billion. But the road for these companies arriving to this intersection is a long and interesting story that could certainly fill a multi-part documentary.
To quickly summarize that history: Time was founded by Henry Luce in 1922 and grew into a company that published some of the most prolific and successful titles in magazine media with Time, Sports Illustrated, Life and Fortune. It also launched its fair share of titles and acquired many that are still successful, like Southern Living. It became part of the larger conglomerate Time Warner in 1989 (also up for sale), but spun off and formed its own publicly traded company in 2014. Meredith, on the other hand, grew out of much simpler roots 20 years earlier in 1902, with Edwin Meredith’s launch of Successful Farming. From there, it too had a number of successful launches and acquisitions, and built out a very profitable network of local TV stations. For nearly 25 years straight the company has paid its shareholders a dividend, a feat that’s commendable.
While all of that history is interesting, what’s more significant is the potential impact this deal will have on the brands these companies own, as well as the industry as a whole. After all, this isn’t the first major acquisition this year in magazine media. Us Weekly was sold to AMI for $100 million, and then a few weeks later it also bought sister brand Men’s Journal from Wenner Media. Wenner Media isn’t done though; it’s also put its flagship brand Rolling Stone on the market and intends to sell off the remaining 51 percent it owns after moving 49 percent off last year to BandLab. But the even bigger transaction this year saw the sale of the 87-year-old Rodale to Hearst for an undisclosed sum. So with all this consolidation, we’d be remiss to not ask around to find out what all of this means, and where things might go from here.
What It Means for Time Inc. and Meredith
Obviously before you think big picture, we should probably boil down what each of these companies gain or lose from this merger. Because Time Inc. is publicly held, its financial woes are no secret. And things weren’t turning around quickly enough to make investors comfortable. For Meredith, who has weathered the difficult storm of industry-wide print advertising declines and falling revenues, this deal gives the company even more scale, and legacy brands that fit into its portfolio, but it also brings some challenges.
“This deal will offer Meredith some valuable assets and some toxic assets, and will slightly postpone Time Inc.’s steady march into financial and cultural irrelevance,” Bob Garfield tells us. The co-host of NPR’s “On the Media” goes on to say: “This will come at a cost: Titles will be folded. Jobs will be lost. Journalistic resources, already drastically diminished, will be cut to the bone and deeper.”
Pretty bleak, but not an unfair assessment given how these things work. And Garfield isn’t the only one we spoke to who thinks Meredith isn’t interested in the entire Time Inc. portfolio. “In a year or two Meredith will probably be able to sell the weeklies [Time, Sports Illustrated and People] for more than they paid,” Samir Husni, professor at the University of Mississippi and director of the Magazine Innovation Center, says. He adds that “People magazine is what saved Time Inc., not any of its other brands. It could bring as much as this whole deal is worth if Meredith is able to change the business model.”
Former editor-in-chief of Folio:’s sister publication min and industry analyst for more than 30 years, Steven Cohn, takes Husni’s speculation a step further by suggesting the benefactors of this deal — the Koch Brothers — who bankrolled more than a half-billion dollars to Meredith to get this done, might be future players in divestment opportunities. “Perhaps the Koch Brothers have first dibs,” he ponders. “Controlling Time would be a huge prize because of its legacy, and the thought of Time matching their conservative politics has to be tempting.” That idea has been expressed by many media and political pundits prior to this deal getting done, but Meredith has said the Koch’s will have no involvement under the current structure and are merely in this as an investment opportunity.
Of course, Garfield is skeptical. “I used to think the Koch brothers were smart,” he says. “But if they have indeed backed this deal without a seat on the board, much less operational control, they have just set fire to a very large pile of money.”
Husni disagrees with that assessment, however. “These people are not fools. They know there is still money to be made here, and that’s why they got in.”
Todd Krizleman, CEO and founder of MediaRadar, has a similar mindset to Husni, in that this is a smart buy for Meredith, a great deal for Time Inc. shareholders and a positive sign of things to come for magazine media. “I do think it is very encouraging to see the valuation, which is an 80 percent premium from the $10 stock price at the close of day on Nov 8,” he says. “Time Inc. has been improving its performance and so the price is a strong endorsement of the shifts in the business.”
What It Means for Magazine Media
CEO of Trusted Media Brands, Bonnie Kintzer, sums up the big picture outlook pretty well. “Consolidation whether through mergers or acquisitions will continue to shape the industry in the year ahead as more media companies pursue opportunities to expand their offerings to consumers and marketers on all platforms,” she says. “This consolidation reflects the need for media companies to invest in emerging platforms either by adding or acquiring new assets or resources such as staff or technology.”
While Time Inc. may have been reeling from print losses and a bloated infrastructure that CEO Rich Battista was constantly trying to fix, it had also been making a slew of smart, savvy investments in digital media. In many ways it’s years ahead of the industry. Particularly when it comes to data, in thanks to its acquisition of Viant, but also in video and custom content. So Meredith wasn’t just buying a stable of brands here, and this is perhaps one of the most important takeaways for everybody in magazine media. It was also buying technology, talent and other pieces of the jigsaw puzzle that will make up the future of magazine media. Any publisher in today’s world that isn’t thinking like this is doomed to fail.
“We never really had a magazine problem, we had a business model problem. Companies like Hearst and Meredith have invested a lot in digital without ignoring print,” Husni says. This could suggest that dual investment strategy hasn’t been ubiquitous across magazine media.
Naturally, Garfield sees it slightly differently. “A wave of consolidation will be triggered in which a few companies snap up dozens of data-rich properties that operate unprofitably at scale,” he says. “So we are re-entering an era of media concentration — except that the new titans will be titans of bad businesses turning out bad products. In short, we are witnessing a supernova. A huge, bright, energetic, explosion of a dying star.”
Krizelman, on the other hand, is much more optimistic when it comes to this particular transaction, but does suggest it’s part of a much more significant trend, with uncertain outcomes. “I don’t think this single acquisition will create a new ripple effect, he says. “I do think it is part of a generational change in ownership of media companies. The Bancroft family sold the WSJ to News Corp in 2007. Martha Stewart sold her media business to Meredith in 2015. Mort Zuckerman sold The Daily News to TRONC. And now there’s even rumors that News Corp will sell itself.”
What It Means for Print
As Husni, who goes by the trademarked moniker “Mr. Magazine” loves to say, “If it’s not paper and ink it’s not a magazine,” so we can’t ignore the 600-pound gorilla in the room—magazines. Yeah, the things that built all of these companies.
It’s no secret that Time Inc. didn’t have a lot of faith in the future of print. The company was continuing to scale back expenses that were largely due to the bloated nature of print media. Paper is expensive. Shipping is expensive. People are really expensive, and making a magazine requires a lot of them. So as Time Inc. was investing in its digital future it was also cutting way back on its print. However, what’s interesting here is Meredith has repeatedly exhibited a commitment to the medium. It has in fact cut frequency in some publications, but rate bases for several of its brands have grown. Plus, not only did it invest in Martha Stewart’s print holdings just a couple years back, it has also launched a new print title within the past year, with The Magnolia Journal, a magazine inspired by home improvement celebrities Chip and Joanna Gaines.
A former industry executive who competed with both companies is equally optimistic for the future of print in light of this deal. “I hope that it’ll be good for the industry in that a publisher that’s doing very well in print is taking over one that seems to be denying they’re in the print business,” the unnamed source says.
Jim Elliott, founder of James G. Elliott Co., an outsourced media ad sales company, shared with us a similar sentiment. “I think Meredith is a best-in-class publisher,” he says. “What I think this means is they see value in print and always have. And they see value in a print brand. I think that’s a good thing. I think it sets a tone.”
While nobody we talked to has a crystal ball that can see into the future, most agreed that consolidation is inevitable for economies of scale, and this particular transaction, while massive and potentially game changing, is nothing more than another sign of the times. Where things go from here is still anybody’s guess, but one thing is certain: More change is coming.