Feeling a bit stung by a rolling scandal, News Corporation recently decided to split the company in two, cleaving off newspapers. Their decision led some industry observers to suggest that Time Warner might consider doing the same thing with its magazine division.
Advertising Age recently argued that a spinoff is unlikely, in part because Time Inc. doesn't have a huge external scandal to contend with. Of course, Time Warner's stock price hasn't moved much in the last eight years, and today it trades below what it sold for in 2004. No scandal, just poor performance.
These debates seem so remote that I find it hard to develop an opinion one way or another. Does the future of Time Inc.'s magazines really depend on whether the company also owns movie studios or television networks? It would seem more useful to focus on its ability (or inability) to meet the needs of content consumers, today and into the future.
Maybe that kind of question isn't interesting to M&A specialists, who have done their share of business with the company. Time Warner has already spun off its book business (now operating as Hachette Book Group), its cable business and of course AOL.
Time Warner's cable business is an interesting case study. The division had been financially restructured repeatedly over the last 20 years or so, in part because a prior management team thought its true value wasn't reflected in the stock price. To goose the stock, they legally separated the cable company and sold shares in the entity to outside firms. Not quite the recipe for an agile strategy.
Time Inc. hired a new CEO last December (the prior one lasted five months), and she has hired consultants from Bain to recommend … something. We're thought to know soon. I wonder if any of what they recommend will start with readers.
A bit of disclosure: I worked at Time Inc. from 1983 to 1995, for the most part on their weekly magazines.
