The race to transform legacy publishing companies into multiplatform, more digitally-oriented media networks is playing out in real time with Time Inc., which announced its third quarter earnings on November 5. The company reportedly beat Wall Street expectations, but aside from another jump in digital revenues, a $952 million goodwill impairment sucked the oxygen out of financials for the quarter.
Third-quarter revenues of $773 million were six percent lower than the same period last year. Nearly the same could be said of the nine-month period, which saw a drop of seven percent to $2.23 billion versus the first nine months of 2014.
Time Inc.’s print business continues to be a challenge. Print advertising fell $44 million/12 percent in the quarter to $319 million as media buyers continue to shift their budgets to other marketing sources. According to the company, the average cost per ad page was also down. Domestically, the beauty, fashion/retail and financial categories were down, while sales were stronger in tech and food.
Digital ad sales remained a bright spot, jumping 22 percent, or $14 million, in the quarter to $79 million. Revenues from this sector are 20 percent of total ad sales, but the $14 million gain clearly did not catch up to the $44 million drop in print.
Meanwhile, the company reported lower circulation and subscription revenues. Newsstand sales of $86 million for the quarter were down $12 million, a 12 percent drop. Subscription revenue decreased three percent for the quarter to $168 million.
With print revenues on the decline, cost containment was the name of the game again for the quarter, with a seven percent drop in production costs and a 12 percent decrease in editorial costs.
The company also expects to save $50 million annually as a result of moving its headquarters downtown and the sale of its U.K.-based Blue Fin building—on the market for $634 million—will trigger a stock repurchase of up to $300 million and a debt reduction of up to $200 million.
Yet other costs, such as those connected to acquisitions, jumped 45 percent to $42 million compared to the year-ago quarter.
And the company announced a major goodwill impairment charge of $952 million, which accounted for the higher net income loss of $913 million for the quarter. That contrasts with a $48 million in income during last year’s third quarter and is attributed to a drop in share price and the continuing erosion of circulation and print advertising revenues.
Adjusted net income is $40 million for the quarter.
In an effort to speed up digital revenues, the company made several acquisitions this year, including several sports-oriented deals, creating the Sports Illustrated Play network, and more recently bought up women’s lifestyle sites HelloGiggles, xoJane and xoVain.