Commentary
Time Inc. Lays Off Over 100, Announces Weak Earnings
- by Erik Sass , Staff Writer @eriksass1, August 4, 2016
Close on the heels of a sweeping reorganization affecting both the business and editorial sides of the company, Time Inc. is moving to slash costs with around 110 layoffs, most of them concentrated in the publisher’s sales and marketing force, according to multiple press reports.
The laid off staffers equal roughly 1.5% of the company’s total workforce of 7,200
employees, as stated at the end of last year.
The layoffs come as Time Inc. revealed weak second-quarter earnings results, with total revenues basically flat at $769 million, down less than 1% from $773 million, due mostly to a 7.1% drop in circulation revenues.
This decline more than offset modest increases in advertising revenues, up 1.4% to $426 million, and revenues from other sources, up 8% to $107 million. The company’s total net income for the quarter came to $18 million, down 25% from $24 million during the same quarter in 2015.
Taking a closer look at the ad numbers, prints ads were down 12.8%, while digital advertising jumped 65%, due in large part to Time Inc.’s acquisition of ad platform Viant in February.
It’s worth noting that Time Inc. remains heavily indebted, carrying a total of $1.24 billion in debt, down slightly from $1.29 billion during the second quarter of last year. Most of this debt was incurred in connection with the transaction to spin Time Inc. off from its erstwhile corporate parent, Time Warner, back in 2014.
Moreover, the publisher has revised the forecast for its estimated operating income for the full year 2016 down from $430 million to $400 million. That yields a ratio of debt to operating income of around three-to-one, making it a highly leverage company by common investor standards.
For comparison, Meredith Corp., another big publicly traded magazine publisher, has a debt to earnings ratio of 2.3 to 1.
Erik Sass is editor of Publishers Daily. You can reach Erik at eriksass@gmail.com.
Very interesting, Erik, especially about the print ad decline. NY Times announced a plunge of 14 percent in print ads, and Time Inc. announces 12 percent? At this rate, the print business is basically obsolete in a year. How can they sustain with that kind of freefall? As you note, any increase in digital is wholly attributable to their purchase of Viant, not to any digital ads their products got on their own. This is more than a trend.
The notion that print advertising will become obsolete is patently absurd. There will always be print, and there will always be marketers that recognize the bang for their buck that print can still provide. People will come to realize, soon enough, that dropping money into the digital morass is akin to pissing in the wind.
Kenny, some buyers will keep recognizing print, but enough to sustain behemoths like Time Inc., that are already overloaded with debt? Something has to break somewhere.
Buyers will continue to recognize print, yes. Buyers of all sorts. And marketers too. They will recognize print by investing in it, with increasing confidence of actual returns, and increasing numbers as more and more recognize what an unaccountable morass the "digital world" really is.
I'm a "buyer." I currently subscribe to five magazines that are delivered to my home by mail. I actually look at, read, and have appreciation for the ads in those magazines. As such, those ads have value. I'm sorry, but in the two decades that I've been online, and the past decade that has seen my squinting at my "mobile" device, I've never clicked through, read, or paid attention to an ad. EVER. And I never will, simply because I don't have to. I'm not alone...
When I'm relaxed, andf thumbing through one of my favorite magazines while in a hammock, I actually do appreciate to pop of color, and creativity that the typical print ad offers as I come upon it. I'm not alone there either.
So, I guess, we're quibbling over your statement that print will become obsolete in a year. The definition of obsolete is "replaced entirely by something else better."
That ain't happening.