Thoughts on the deal which, when completed, will leave Hearst and Meredith as the two behemoths of the US magazine industry following Hearst’s acquisition of Rodale
The Meredith-Time Inc. deal caught the industry by surprise not so much for it actually being completed, but for the timing of the announcement. An industry that really needed a few days off this year had to hear that one of the nation’s iconic magazine publishers would be acquired by another iconic publishers. NYC publishing people seemed a bit perturbed, as if the money of a company out of Des Moines wasn’t as good as that of an east coast company (many weren’t happy that Chicago-based tronc bought the Daily News, but that is a more complicated situation).
So far, the analysis of the deal feels a bit shallow. The problem is that so many media reporters have backgrounds in the newspaper business, and the trade press that covers magazines is more often than not just cheerleaders and willing to accept at face value what magazine company execs tell them.
So, here some of my own thoughts on this deal, which may come from someone with over 30 years in the publishing business, but also comes from flyover country, so with only with the inside information I have that comes from those I know within both companies.
That is, how is it even possible that so iconic a publishing company as Time Inc. could get sold off, let alone to a Midwestern competitor?
The sales was preordained the minute Time Warner spun off its print division and saddled it with debt. It would have been heroic work by Joe Ripp, his management team, and the staff, to make a go out of a spun off Time Inc.
But it didn’t help that Time Warner chose the wrong people to run the company. If they were serious about Time Inc. succeeding they would have thought through things a bit and brought in executives with both serious magazine and digital media credibility.
From the beginning, the company shifted from dogged determination to move forward, with dogged determination to succeed through cost cutting. One step forward, two backwards. It all culminated in the last regime, whose origins could just as easily been determined by a real world game of musical chairs, with the last person standing getting to sell off the company.
People I know at Time Inc. told of a disorganized mess of a company where one hand did not know what the other was doing, and where everyone was made to feel that they jobs were secure hours before they were let go. Today, who really knows where they will be working a year from now.
Is this a good deal for Time Inc.?
The answer depends on who you are talking about. As usual, the same over paid people who couldn’t make a success of the company will be paid handsomely and walk off into the sunset cheering for Trump tax cuts so they can keep more of their payoffs.
For the staff, it will be more of the same, only more of it.
Shareholders who want the Time board to approve the sale at $18.00 and hung in there when the sale did not happen last year, will be rewarded for their patience. $18.50 and the assumption of debt is a good deal for them, which is why Time Inc. mentions it right up front in their press release, and Meredith talks about refinancing debt further down in their own release.
Keep this one thing in mind about M&A: acquirers who buy traditional media companies generally are buying what the company used to represent, not what they will represent in the future. This is why it always feels like tech deals are too expensive, the acquirer is paying a premium because they believe they can make the acquired company into something massive. This is rarely true for a newspaper or magazine deal.
Is this a good deal for Meredith?
Most major media deals don’t result in much success, and so cost cutting and portfolio trimming then follows. What the company looks like after than usually determines its chances for success.
Time Inc., after all, only became part of Time Warner after that merger in 1989, and was only on its own following the 2013 spin off. One would have to conclude that the last company to acquire Time Inc. did not deem it a successful deal.
As for Meredith, if you remember, the company was oh-so-close last year to completing a merger with Media General. It was seen at the time as confirmation that Meredith saw its future as being tied to broadcast, not print. In fact, there was talk that if the deal could be completed that its print side would be spun off or sold off.
Now, Meredith has acquired more print, no local broadcast. Had it only acquired Southern Living and a few other titles, no one would have batted an eye, especially since many of the titles would have been produced from outside NYC.
It is more than quite possible that Meredith already has a good idea what it plans to do with all the titles, its debt, etc. It has had a long time to think about this, and unlike some NYC based media folk, I have some confidence that Meredith knows what it is doing. It better.
What has happened since the last time Meredith tried to buy Time Inc. may have made the deal more inevitable. Time Inc. has trimmed its circulations and reduced staff.
Still, Meredith sees much more cost cutting, though much of that will be shared costs with its own portfolio of magazines. Much of the core editorial should remain in tact, but look for yet more reductions to the sales staffs, especially since Time Inc. underwent a major reorganization this year that disrupted so many of the brands. As a publisher, this would be a major concern.
But who believes in publishers, or even individual brands these days? Nowadays, everyone wants to sell print and digital advertising across brands, usually at far more discounted rates than they originally imagined… and if possible programmatically.
What about that Koch money?
To worry about the influence of the Koch brothers seems a little misplaced as it lies on the assumption that TIME magazine and others Time Inc. titles were still influential. If you believe that then maybe there is reason for concern, but I guess I just don’t see that as being the case.
But the Koch brothers are old guys, so maybe they read TIME and think that it important it reflect their views.
But doesn’t the magazine already reflect their views? It’s not like TIME magazine has been anything other than a voice for conservative, hawkish politics since its founding.
But David Folkenflik, media correspondent for National Public Radio, made a good point when he observed that, for the Koch brothers there has “to be better investment opportunities” that Time Inc.
Future of Time Inc. UK
None of the stories from US media reporters have mentioned this unit at all, which is weird since the last big news coming from Time Inc. prior to the sale was that this unit would be sold.
The British division was known as IPC Media before it was rebranded in September 2014 and now could be sold off by the end of the year, with the money from that sale remaining within the company for the benefit of the new owner. If not, Meredith could continue to pursue buyers.
A few years ago, when the UK magazine market was seen as surviving better than the US market, this might have been seen as a valuable property. Now, it may be seen as a way to cut into the new debt Meredith has absorbed, or supply it with the cash infusion it would need to manage its absorption of Time Inc.