Milking People mag
CEO Ripp tinkers with title’s cover prices
PEOPLE magazine has started charging different newsstand prices in different parts of the country — with prices in affluent areas getting hiked and those in others areas getting cut.
The groundbreaking move rolled out by Time Inc. CEO Joe Ripp is being tested on a limited basis.
The move is part of the newly spunoff company’s plan to improve profitability, Ripp told Wall Street analysts on Tuesday when discussing the publisher’s first quarterly report as a standalone company.
“Magazines are one of the few products that have one price nationally,” he said. “That makes no sense to me.”
“There are certain counties where we can raise the price of People magazine and certain counties where we should probably consider lowering the price,” Ripp said.
People generates about 20 percent of Time Inc.’s revenue.
“I agree that there’s not a good reason for the price to be the same in Arkansas as it is in Connecticut,” said John Harrington, a circulation expert who publishes “The New Single Copy.”
Ripp might want to go even further and try different prices in different types of retailers — say higher in airport and train terminals where the buyer is captive, Harrington said.
The move could inspire others to follow suit.
When People boosted its cover price to $5.99 many rivals in the weekly celebrity category — including Star and Us Weekly — weren’t far behind with their own increases.
While volume fell, newsstand revenue for People was actually up 4 percent, the company said.
“We want to use price as a lever that we have not used before,” Ripp said.
Time Inc. reported secondquarter revenue fell 1.6 percent from a year ago, to $820.4 million. Earnings before interest, taxes depreciation and amortization fell 30.2 percent, to $100.6 million.
Time also revised its revenue and earnings outlook downward for the rest of the year.
Digital revenue, reported as a separate line for the first time, rose 12 percent to $60 million. Excluding onetime items, digital revenue was up about 15 percent.
Chief Financial Officer Jeff Bairstow revealed the company within the next week is going to hire a new senior vice president to explore mergers and acquisitions.
Ripp said acquisitions will be only one consideration of how to use the company’s ample free cash flow — with share buybacks, debt repayment and dividends also getting some thought. The company revealed it took $150 million in severancerelated charges in the first quarter as 500 employees were laid off and another $55 million in the second period.
While Ripp said there are no major restructuring charges expected for the rest of 2014 — that may not be the case next year.
There are 250 people working in Bangalore, India, and the company anticipates adding to the offshore total in 2015.
Information technology, advertising operations, and consumer marketing are all areas where some functions could end up getting outsourced to India, he said.
Time Inc. is scheduled to move downtown next year — and the previously announced plan to have editors reporting to businessside executives will result in a radical change in the floor plan for the newsroom, Ripp noted.
An “open floor plan” will be employed to enable the company to accelerate its “cultural transformation” for “closer collaboration between the creative and business sides of the organization and for greater sharing of resources across brands, the chief said.
Time Inc. shares rose 6 cents, to $24.37, on Tuesday.
Weak start for Trib
Tribune Publishing, the publisher of the Chicago Tribune, LA Times, Baltimore Sun, Hartford Courant and several other newspapers, did exactly fly out of the gate on its first day of trading Tuesday after being spun off by Tribune Media.
The stock dropped 4.4 percent, to $21.15.
CEO Jack Griffin appeared unperturbed by the decline, though. “With respect to how the stock trades on any given day, it’ s not a big deal,” he said, saying he is more interested in his getting “a good reception in the debt and equity markets” during a recent twoweek roadshow.
Hamed Khorsand, an analyst at BWS Financial, said he thinks Wall Street is discounting the stock too heavily.
“I have a $50 price target,” he said, saying the risks stated by the bears are overstated.
Tribune recently inked a new fiveyear affiliation deal with Cars.com, which Khorsand said brought in $34 million in cash flow last year.
The company went out the door with $350 million in total debt — $275 million of that going to former parent Tribune Media.
Nevertheless, Tribune Publishing has already whetted its appetite for some small acquisitions, snapping up two small papers in Maryland.
“In terms of a growth strategy, it is meaningful but not necessary,” Griffin said of future targets.
On the labor front, the CEO, who survived only a short stint as chief of Time Inc. in 2010 and 2011, would not rule out any layoffs to the 7,600strong payroll.
“We have to conform to the changing revenue base of the business,” he said. “Ongoing cost management is part of the job.”
Griffin said the company is rolling out new Web relaunches modeled after the May relaunch of the LA Times Web site.
Tribune brass are forming an ad agency with 100 dedicated staffers to help local advertisers design digital ads, Griffin said, noting the company has “the benefit of being a mostly local company with national scale.”
Gannett to split
Gannett President and CEO Gracia Martore revealed that the company was going to be the latest to spin off its newspaper division from its TV operations.
One company will house 46 broadcast stations and digital operations, including CareerBuilder.com, while the assets of the print entity will include USA Today and 81 local US daily publications — as well as Britain’s Newsquest, which has 17 paid daily papers.
“Even with all the growth of its broadcast business[most recently through the acquisition of Belo’s stations], it’s still a company that is defined, at least in part, by its newspaper roots,” Ken Doctor noted in the Nieman Journalism Lab.
“The standard threeword explanation for all these splits is the desire to ‘maximize shareholder value,’ ” Doctor said.
“Media company CEOs split companies because it usually works,” Doctor said. “The newly established TVplus businesses often assume the entire value, or close to it, of the old “combined” company.
The standalone newspaper company value may be relatively small, but now it’s icing on the refrosted cake, Doctor said.
Investors appreciate the clarity on the changes, and the ability to better pproject future cash flow, he said.
Gannett Publishing, with its flagship USA Today, will keep the Gannett name and will be virtually debt free. The TV side has yet to decide on a name. The president of Gannett’s US Community Publishing division, Robert J. Dickey, will become chief of the print entity.
“The bold actions we are announcing are significant next steps in our ongoing initiatives to increase shareholder value by building scale, increasing cash flow, sharpening management focus, and strengthening all of our businesses to compete effectively in today’s increasingly digital landscape,” said Martore, who will be CEO of the yettobe named TV operation.