When companies go public, it’s supposed to be a joyous occasion, with much cheering by investors and bright hopes for the future, as the CEO rings the bell at the NYSE. In the case of the newly-public Time Inc., however, the bell sounded more like the one that tolls during a funeral: after all, the legendary publisher is weighed down with debt, and most of its properties seem to be pulling up the rear digitally rather than blazing new trails. What does the future look like?
A New York Times piece does a good job of cataloguing Time Inc.’s challenges: For one thing, former parent Time Warner saddled the new company with $1.3 billion in debt, which means it is already behind the eight ball financially. According to the Times, the new entity has to cut its editorial costs by a massive 25 percent in order to have any hope of keeping its head above water. As the NYT story puts it: “Skeptics have suggested the spinoff is more akin to a burial at sea.”
Time's looted, debt-ridden print spinoff looks like it's almost designed to fail. http://t.co/HvVackPIGe
— Dan Gillmor (@dangillmor) June 9, 2014
Time Inc. was once a shining symbol of everything that was glorious about American magazine publishing, as Michael Wolff described recently — a place where executives in wood-panelled suites ate from fine china, and handed down editorial decrees from on high — but it has been downsized fairly dramatically already. How on earth is it now supposed to cut editorial costs by more than 25 percent? Cutting your way to profitability is a lot harder than it sounds.
Although the New York Times story doesn’t mention it, the challenge that Time Inc. faces is very similar to the one the Times itself is struggling with: namely, to get from a world in which print still produces the vast majority of profits — but is shrinking rapidly — to one where digital comes first. The NYT just produced a whole “innovation report” about it, and it doesn’t contain any magic bullets.
As the Columbia Journalism Review notes, the Times can’t just stop printing the newspaper, even though it accounts for a huge proportion of the company’s costs, because it also generates an equally vast percentage of the NYT’s revenue. Similarly for Time Inc., going all-digital in one fell swoop — or “burning the boats,” as venture investor Marc Andreessen put it a number of years ago — isn’t a realistic option at this point, especially as a public company.
Obviously, it would have helped if both Time and the Times had started to try and make this transition a long time ago (like, say, a decade ago) when it became apparent to many that the web was going to trigger a massive, tectonic shift in the way media behaves. But both decided to wait — or to make tiny, incremental changes — and the reason for that revolves around the number one thing that both media giants need to figure out:
1) The culture:
Management guru Peter Drucker once said that “culture eats strategy for breakfast,” and you can see the effects of that throughout the New York Times innovation report, and in the aftermath of its publication. Digital advocates both inside and outside the NYT say they have repeatedly made the kinds of recommendations contained in the report, and failed to have much effect. This is a central part of Clay Christensen’s Innovator’s Dilemma: the inability to change even when the need to change has become blindingly obvious.
How does Time Inc. (or the NYT) solve this problem? The first step is to choose editorial and business leaders who understand the digital world, and aren’t tied to the cultural procedures of the print world. The NYT has a challenge in that department because its new executive editor is very much a product of the print culture at the newspaper. And who has Time chosen for a similar role? Joseph Ripp, longtime chief financial officer of Time Warner. As Dan Primack put it in a somewhat ironic post at the new Fortune website:
Here’s the bear case: Time Inc. may not actually know how to innovate, or at least not how to do it at scale. After all, it’s pretty tough to flip the switch when those mental muscles have been atrophied after more than a decade of being told “No, don’t spend money on that.”
2) The platform:
Time Inc. has a whole series of powerful brands, from People magazine (which produces a staggering $1.4 billion or so in annual revenue) to Fortune and Sports Illustrated. But like much of the rest of the industry, the company’s approach to digital mostly consists of bulky websites with content shovelled online from the print version, or “mobile” apps that amount to photographs of the print product, with little or no sign that anyone knows how content behaves online.
For a glimpse of how the future might work, Time needs to look at digital-native players like BuzzFeed, or better yet, Gawker Media. Much like the magazine giant, Nick Denton’s Gawker is a series of vertical brands devoted to specific topics — Deadspin for sports, Kotaku for games, Jezebel for women’s issues, and so on. What does Denton know that Time doesn’t? Mostly it’s how content functions now. As Ken Doctor notes in a post at the Nieman Journalism Lab, Vox Media also looks a lot like a new digital-first version of Time Inc.
What do Eater, Curbed, Racked, Polygon, SBNation, The Verge, and the new Ezra Klein Vox have to do with each other, other than a common platform and synergistic sales? Not much. Yet, without the legacy burdens, the tortured history — and the $400 million in cash flow — Vox simply wants to become the next-gen Time Inc.
3) The business:
In his piece at Fortune, Dan Primack tries to make the case that even though it is saddled with debt and its innovative muscles have likely atrophied, Time Inc. has a chance to shine because it is no longer being used as a piggy back by its corporate parent, and so it can plow whatever profits it generates into reinventing its assets. But it’s going to take more than some snazzy website redesigns to do this — Time Inc. has to rethink not just what it looks like, but what the purpose of a “magazine” is in a world of real-time information and social distribution.
That could mean taking some cues from Forbes, which has reinvented itself as an online platform (although not everyone likes the result, and the publication is struggling to find a buyer) or from the Atlantic, which has had some success with new ventures like Quartz and The Wire. Is there any appetite at Time Inc. for — or even awareness of — what that kind of innovation involves? That’s not clear.
The bottom line is that if that kind of thinking doesn’t exist at Time Inc., the company had better find a way to get some, or it’s financial future is going to make Newsweek‘s financial implosion look like a day at the beach.