In a strategic move to unlock the value of its core business
Time Warner Inc.
) decided to go ahead with its plan to spin off Time Inc.
magazine into a separate, publicly traded company. The news of
the divestment, which is expected to be completed by the end of
the year, pushed the shares of this Zacks Rank #3 (Hold) company
up by 78 cents or 1.4% to $56.24 during after-market trading
The move to shed Time Inc. followed the negotiation between
Time Warner and
) to create a magazine based company, which eventually did not
Management believes that the decision to offload Time Inc.,
which includes brands such as
People, Sports Illustrated, InStyle, Time, Real Simple and
, would augur well for Time Warner, as this would facilitate the
latter to concentrate purely on television networks and film and
TV production businesses. The company's magazines boast over 110
million readers nationwide per month, and its websites witness
traffic of approximately 50 million every month.
The decision would be accretive to the shareholders of Time
Warner in the same fashion, when this diversified media
Time Warner Cable Inc.
) and AOL Inc.into independent companies. Laura Lang, the CEO of
Time Inc. would renounce her position once the new successor is
found but in the meanwhile would continue to assist the company
through this transition.
The secular headwinds and the migration of advertisers to the
Internet due to increasing online readership have been hurting
the publishing business, and Time Inc. remains no exception.
According to the data released by Publishers Information Bureau,
U.S. magazine advertising revenues dropped 3% to $21 billion in
2012. Time Warner's Publishing division's revenue fell 7% to $3.4
billion reflecting a 5% decline in both advertising and
subscription revenues and a 21% drop in other revenues.
Another media company,
) has decided to split into two separate publicly traded
publishing and media and entertainment entities. There has been
immense pressure from shareholders to divest the publishing arm,
which has been grappling with lower operating profit compared
with the entertainment unit. The Publishing Company will comprise
publishing businesses, education unit and the integrated
marketing services business. On the other hand, Entertainment
Company will include cable and television assets, filmed
entertainment, and direct satellite broadcasting businesses.
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