Not even Kate Upton could convince Time Warner Inc. (TWX) to keep its magazine segment. The company announced Wednesday that it will be spinning off its Time Inc. division, creating a new public freestanding company. The announcement comes less than a year after News Corp. (NWSA) announced similar plans for its own publishing business.
Rich in history but light in profits TWX's publishing division has seen its business shrink dramatically, never recovering from the recession of 2008. Last year publishing saw revenues shrink 7% to $3.4 billion. Operating income declined a whopping 25% to $420 million, less than half of the $907 million in profits posted in 2007.
The spin-off will leave Time Warner focused on its growing cable television and film segments which include TNT, TBS, HBO and Warner Brothers film studio. The remaining assets accounted for nearly 90% of Time Warner's revenues and 92.5% of operating income in 2012.
The timing of the deal reflects both the failing economics of the print industry as well as optimism about the stock market's willingness to buy shares of a struggling company in a dying industry. The swimsuit edition of Sports Illustrated which this year featured Ms. Upton wearing nothing but dab of bodypaint is one of the few bright spots for the company. The annual edition regularly sells more than a million copies and accounts for 7% of all Sports Illustrated's advertising revenues.
Even if money managers, actors and world leaders were all willing to strike unnatural positions wearing wildly inappropriate clothing Time Inc. would be in trouble. Time, Fortune, Money and People may have less and less to offer other than prestige. According to the Wall Street Journal, People magazine which once accounted for half of the magazine division's profits is struggling to compete with the instant gratification found on TMZ and other celebrity gossip sites.Read More »from Time Warner to Spin Off Shriveling Publishing Unit