The US media world was abuzz yesterday with the news that Time Warner was in talks to spin off and then sell the profitable People magazine and other publications to Meredith, the owner of Better Homes and Gardens and Ladies’ Home Journal. Somewhat puzzling was the notion that Time would keep its more troubled flagship publications like Time magazine and Fortune. Normally it’s the ailing part of a company that is sold off to protect the rest of the firm.
But if Time Warner’s ultimate goal isn’t to get rid of its less-profitable magazines, but to get out of the print business altogether, then a separation could still happen for Time, Fortune and Sports Illustrated—just not immediately. The deal with Meredith allows Time Warner to sell the bulk of its print titles. Afterward, Time, Fortune and Sports Illustrated could be separated from Time Warner, leaving the parent company protected from the uncertain future of print. A person familiar with the matter said a future spin-off of those magazines is still being considered by Time Warner, but the parent company could also decide to hang on to them.
The New York Times has a good explanation of how the spun-off company containing People and other titles would pay a dividend to Time Warner, turning the structure of the possible Meredith deal into a sale. Time and Meredith would essentially form a joint venture with publications focusing on the female market.
The question is what would happen to Time, Fortune and the other publications that are not part of the Meredith deal if they are spun off in the future. Currently, those magazines benefit from being housed inside a large corporation with profitable entertainment assets. The losses or profits of individual magazines aren’t broken down. But if they are separated, those warts would be revealed.