Time Inc. is laying off 500 staffers, or 6 percent of its global workforce of 8,000 employees. It’s the largest round of cuts to affect the country’s leading magazine publisher -- a unit of Time Warner Inc. (NYSE:TWX) -- since 2008, when about 600 positions were eliminated.
In a memo obtained by Bloomberg News Wednesday, Laura Lang, the company’s CEO, spoke of a new normal in which magazine companies have to learn how to do more with less. “With the significant and ongoing changes in our industry, we must continue to transform our company into one that is leaner, more nimble and more innately multi-platform,” Lang wrote. “To make this change, we need to operate as smartly and efficiently as possible to create room for critical investments and new initiatives. These reductions are part of this important transformation process.”
Lang had no experience in print publishing when she took the reins of Time Inc. in early 2012. She was hired from the brand agency Digitas and has been working to create a more profitable synergy between Time Inc.’s print and digital platforms. The problem? Digital advertising is not nearly as lucrative as print, and as print-ad revenue continues to dry up, Web and mobile alternatives are not making up for the shortfall.
In addition to its flagship Time magazine, Time Inc. publishes a cadre of well-known titles, including Fortune, InStyle, People, Sports Illustrated and Real Simple.
Even as analysts expect Time Warner to report higher fourth-quarter earnings next month, the company’s publishing unit, which comprises about 12 percent of its total revenue, continues to struggle. In a Jan. 15 research note, Michael Nathanson, an analyst with Nomura, estimated that Time Warner’s publishing unit will report a 9 percent decline in fourth-quarter operating profit. “Lower projected expense growth is not enough to offset lower revenue growth,” Nathanson wrote. “We continue to estimate advertising declines of 4 percent and a 5 percent decline in subscription revenue.”
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Perhaps the greatest single challenge facing Time Inc. -- and the magazine business as a whole -- is the decline of newsstand sales. According to a report by the Alliance of Audited Media, total paid circulation at many of Time Inc.’s titles was only slightly off for the first half of 2012. For instance, People magazine’s total circulation nudged up by 0.2 percent for the period, but its single-copy sales declined by a whopping 19 percent. Industry wide, single-copy sales fell 10 percent for the period, with almost half of the nation’s top 20 magazines seeing double-digit declines.
The 500 layoffs at Time Inc. will occur across the company, with just under 250 affecting staffers in the New York City area, according to the New York Post. Meanwhile, Reuters reported Wednesday that Time Warner is considering selling its massive headquarters at Manhattan’s Columbus Circle, one of the last remnants of its much-derided merger with AOL (NYSE:AOL).
Time Warner is planning to report its fourth-quarter earnings on Tuesday, Feb. 6, at 10:30 a.m.