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Print magazines are passé at Time Warner, it seems. Never mind that the company is named after one of them. It is in talks to spin off all but three of its titles to a publicly traded joint venture with Meredith, the publisher of Better Homes and Gardens and Ladies' Home Journal. This seems sensible. Print publishing is fighting secular decline. In 2012 publishing, which also includes marketing services and a niche book publishing business, was just 12 per cent of revenue at Time Warner and 8 per cent of earnings before interest, tax, depreciation and amortisation. More exciting bits such as television networks and film production drive the company's results.
The spin-off talks include the wildly popular celebrity gossip title, People, but exclude Time (the namesake news weekly), Fortune (the business magazine) and Sports Illustrated (home of the swimsuit issue). According to UBS, those three account for less than 10 per cent of EBITDA at the publishing unit. If that is right, a multiple of five to six times EBITDA would value the remaining titles at about $2.7-billion – or about 5 per cent of Time Warner's market cap. Is that cheap? Expensive? A JV would at least provide some time to reap benefits of scale while the prospects for magazines – be they on glossy paper or tablets – crystallise.
And why not just spin off the lot? News Corp is not bothering to ringfence The Wall Street Journal as it splits off its publishing business. Sentimentality? Maybe not. The business and sports titles are not a great fit with the homey titles published by Meredith. And Time and Fortune are still good calling cards with newsmakers; they could be of use to recently anointed chief Jeff Zucker as he tries to shake up CNN. Meanwhile, Mr Zucker is said to be interested in beefing up the sports coverage. If not, the trio could always be sold later on – perhaps to another buyer more focused on prestige than profit.