Koch Brothers Part of Time’s Sale to Meredith

[Updates prior version]:  Meredith Corporation made its acquisition of Time, Inc., official Monday, in a deal valued at about $2.8 billion.

It includes $650 million in preferred equity commitment from Koch Equity Development (KED), the finance arm of Charles G. and David H. Koch.

The boards of directors of Meredith and Time Inc. have approved the $18.50 per- share in an all-cash transaction.

The deal caps the end of an era, as the WSJ’s nut graph sums up:

“Time, whose namesake Time magazine hit the newsstands in March 1923, emerged as one of the country’s great journalistic enterprises, shaping both the political and cultural landscapes. But in recent years, the magazine publisher lost ground as a shift among readers to digital platforms cut into traditional print revenue and a new generation of online rivals emerged, among them BuzzFeed, Vice Media and Refinery29.”

The digital side of the merger reflects the reality for media brands: roll up massive audiences to offer advertisers a breadth of reach and depth of granularity that digital promises:

“The Meredith and Time brands will have a readership of 135 million people and paid circulation of nearly 60 million,” Meredith says. “Monthly unique visits are expected to range in the 170 million range and more than 10 billion annual video views.”

The deal should help the merged companies target younger audiences who consume most of their content on mobile devices.

Meredith Corp. brands include titles that consumers of glossy, highbrow mags might never fess up to reading: Better Homes and Gardens, Family Circle, AllRecipes and Parents.

This observer has been a subscriber off and on to Better Homes and Gardens and Family Circle. (My mom gifted them to me after I moved out of the city and worried that I might not realize the stove is more than a place to store things.)

Articles for women — raising kids, dealing with family issues, fashion and home decorating abound. If you want to improve your game in the kitchen, they deliver.

These titles may owe more to their profitability than middle-America fare, however. Most of the Meredith titles are free of politics or delve into it with balance. They generally avoid political correctness that so many highbrow magazines feel is their duty to foist upon readers these days. If it’s not your brand of politics, then it kills the immersive experience that magazines are supposed to deliver in their editorial mission.

The New York Times questioned whether Time will now become an organ for the Koch Brothers’ conservative causes. The Koch organization puts that to rest, saying “KED will not have a seat on the Meredith Board and will have no influence on Meredith’s editorial or managerial operations.”

The employees of Time, rather than counting their luck that their jobs may not be cut, trundled into a company auditorium in a “funereal atmosphere” according to a New York Times article:

The questions [from employees] captured a profound sense of loss afflicting a company that had once defined modern magazines, although it was not yet clear what would become of it under its new minders.

“It was a once very powerful, very important, very profitable force in the global publishing industry and an important player in the journalism world,” John Huey, the editor in chief of Time Inc. from 2006 to 2012, said on Monday. “It’s now a severely wounded animal.”

To sum this up: The Koch Brothers have helped keep Time and its stable of publications viable with its equity arm’s investment. KED will maintain a distance from the editorial operations, despite the fact a lot of people on the right would like to see them champion conservative thought in traditional media publications, or at the very least, ease up on hostility to conservatives. And Time employees are likely in better shape with their jobs as a result of the acquisition.

They might want to look up the word gratitude.

Meredith’s top executives seem happy about the deal, with Stephen M. Lacy, the chief executive, calling it a “transformative” moment for the Meredith Corporation.

With its distance from the deal’s structure, the Koch brothers would not quite fit the trend of magnates who have turned to publishing investments, notably Amazon’s Jeff Bezos takeover of the Washington Post, which has veered even more left in its editorial coverage and tone, and casino magnate Sheldon Adelson’s ownership of the Las Vegas Journal Review, which backed then-candidate Donald Trump.

Time has been struggling to keep revenues stable amid falling subscribers and advertising dollars and the inexorable decline of print margins in a world of digital media. Last summer, it targeted $400 million in spending cuts and planned more layoffs of about 4% of its staff.

In August, Reuters reported that Time reported a loss of $44 million, or 44 cents per share in the second quarter, compared with a profit of $18 million, or 79 cents per share, a year earlier, on revenues of $694 million, down 9.7% from the same period a year-ago.

At any rate, the Time, Inc., stable of magazines live on under new ownership that is one of the most profitable in all of magazine publishing. Analysts rate Meredith stock, which trades in the $60 range, a “strong buy,” which is not something you see in the mature world of print publishing these days.

Meredith’s revenues in its first fiscal quarter for 2018 were $393 million, compared to $400 million in the prior-year period in which it took in $15 million worth of political advertising. So it’s doing well after an outlier year of 2016’s election-year spending.

The magazine division’s operating profit grew 4 percent to $25 million, “driven primarily by lower operating expenses in Meredith’s magazine business.” Its broadcast properties deliver the lion’s share of its overall profit.

Meredith will continue to print its titles on tissue-thin paper. Time, itself printed on tissue paper these days, will be in good company. It’s all about keeping print costs to a minimum with magazines today.

Although the big news about the deal is about positioning digital properties for content and reach, digital advertising on average comes nowhere near the margins that print publishing still squeezes out, even as its subscriber base shrinks.

Digital is ascendant. For now, at least, the printed word remains.

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