Gabriel Sherman has made a virtual hospice visit to most of the major players in the soap-opera that formerly was Time, The Weekly Newsmagazine. Time Inc. is staggering on the brink of financial collapse. The howling of circling New Media wolves is getting louder. In Henry Luce's time, the mantra was "Go West, young man." Today, it's "Go Online, you dummy." Will Time Inc. survive a declining stock price yoked to crushing debt-payments? If this is a (fair & balanced) call to "stay tuned," so be it.
[x NY 'Zine]
The Matter Of Time
By Gabriel Sherman
Tag Cloud of the following piece of writing
In the 92 years since Henry Luce co-founded Time Inc., there have been just seven journalists to hold the title of editor-in-chief. More people have walked on the moon than have sat in Luce’s custom Eames chair in his office on the 34th floor of the Time-Life Building. With wood paneling, private dressing rooms, and sweeping views of Rockefeller Center, the stately backdrop was an emblem of publishing’s glamour and power—Luce’s American Century brought to life. In fact, it was the Time-Life Building that the producers of "Mad Men" turned to when scouting period details for the offices at Sterling Cooper Draper Pryce.
But one morning earlier this month, when I arrive to meet Norman Pearlstine, Time Inc.’s new top editor, he receives me on the second floor, in a modestly furnished office with a street-level view of a Citibike stand and a halal-food cart. As a cost-saving measure, Time Inc. shuttered the 34th floor and relocated senior executives to a former conference center. (Pearlstine has been working here since April.) Next year, the company is scheduled to abandon its midtown headquarters altogether and move into a cheaper space in lower Manhattan. “I really was never a fan of the 34th floor,” says Pearlstine, who occupied it for a decade when he served as editor-in-chief. “I mean, great offices. But it really created barriers.”
The office downsizing reflects the economic realities for Time Inc., the nation’s biggest magazine publisher, whose stable of roughly 90 titles includes the newsmagazines Time, Fortune, and Sports Illustrated, as well as fashion and lifestyle glossies like People, InStyle, and Real Simple. Time Inc. titles still generate remarkable cash flows—InStyle sells more ad pages than Condé Nast’s Vogue, and People brought in more than $600 million in revenue last year. But while the company claims that none of its titles lose money, it has seen earnings fall by nearly 65 percent since 2006. The number of advertising pages in the flagship Time has dwindled by 50 percent over the past five years. Even People is sputtering: Newsstand sales slid 12 percent last year, and the news budget has been cut in half. Layoffs have become an annual rite. In the past four years, Time Inc. has churned through three CEOs and endured nine months during which there was no single executive running the company.
Last year, the financial trends and management upheavals broke the patience of Jeffrey Bewkes, CEO of Time Inc.’s corporate parent, Time Warner. “He didn’t like and didn’t know how to deal with Time Inc. in a situation where revenue was flat and they didn’t have the growth characteristics to fix it,” says Don Logan, a former Time Inc. CEO. A steely, by-the-numbers ex–HBO CEO, Bewkes saw Time Inc. as a millstone weighing down his stock price. So after a somewhat desperate play to merge Time Inc. with the Meredith Corporation failed, Bewkes decided to spin Time Inc. off. “It was a financial decision,” Logan says. A newly formed Time Inc. made its IPO on the New York Stock Exchange this June.
Bewkes’s strategy was validated a few days later, when Rupert Murdoch made a stunning $80 billion takeover bid for Time Warner, which represented a roughly 20 percent premium over its stock price. (Time Warner’s board rebuffed the offer, but left many believing the company is still in play.) But for Time Inc., the send-off was brutal. Time Warner had saddled the new company with $1.3 billion in debt and required it to pay Time Warner $1.4 billion to acquire IPC, the British magazine-publishing division, and furnish a dividend to shareholders. Time Warner kept "CNNMoney," a profitable website, as well as "Bleacher Report," a fast-growing online sports destination. Time Inc. journalists, looking at the terms, felt betrayed. “Time Inc. wasn’t given the respect that you’d give a pimple on your ass,” a longtime editor says. By contrast, Murdoch, a print sentimentalist, provided his publishing arm with a $1.8 billion cash safety net when News Corp. split in two last year. “Time Inc. is like Iraq. It’s a dire situation,” says a former senior executive. “The business model is collapsing. And now with the spinoff, it’s too much for one company to bear.”
Iraq it is not, but Time Inc. is the most vivid case study of the crisis confronting all legacy media companies. Condé Nast, which this fall will be preparing for its own move downtown, is also groping for financially sustainable strategies for its titles. (Last month, The New Yorker announced it would adopt an online paywall; this month, the company announced it would be spinning off the magazine Lucky and selling Fairchild, its group of trade publications.) Earlier this year, this magazine reduced its print schedule to biweekly, in part to devote more resources to its digital operations. But arguably no media company faces as challenging a near future as Time Inc., which created the very idea of the modern magazine company and is now forced to decide—very quickly—what a modern magazine company should be.
It’s not easy to find people who want to take on management operations like this. Bewkes first offered the job of CEO to Mike Klingensmith, a former Time Inc. CFO, who turned it down. Last summer, Bewkes settled on Joe Ripp, a blunt, silver-haired finance executive. Ripp joined Time Inc. in 1985 and rose to serve as CFO of Time Inc. and Time Warner. After leaving in 2004, he worked as a kind of corporate firefighter running into burning buildings. In 2008, he became chairman of the Journal Register Company as the newspaper chain emerged from bankruptcy. Ripp slashed costs, invested in digital, and engineered a sale to a hedge fund. “I didn’t go to the best school in the world,” Ripp says (he graduated from Manhattan College in the Bronx). “Somebody told me if you want to have a fun career, take on the hard job.” Time Inc., he says, “is a hard job.”
Ripp had plans to blow up the Luce culture and was getting resistance. “When I came back, I found an organization where almost 8,000 people could say no. And no one seemed to be able to say yes,” Ripp says. Last summer, he invited Martha Nelson, the editor-in-chief, to his Nantucket home and told her he was thinking of doing away with the editor-in-chief title and creating a chief content officer. In this scenario, magazine editors would no longer report to her. Instead, they would work for the titles’ publishers. It would be a tectonic shift for a company that had all but pioneered the concept of the “church-state” separation of journalism and business. “I could not be a part of that,” Nelson told Ripp.
Back in New York, Ripp invited Pearlstine to breakfast. Pearlstine, who at the time was working at Bloomberg LP as chief content officer, showed none of Nelson’s reservations. “I thought there were so many layers in the editor-in-chief job,” Pearlstine says. “It actually infantilized the editors, and they were being second-guessed on everything from cover shoots to whether the covers had too much yellow in them. I just thought that the editors would be much stronger if they felt really responsible for the brands. If you don’t like what they’re doing, then you change editors.” A few weeks later, Ripp called Pearlstine with an offer. “It took me about five seconds to say yes,” Pearlstine says.
And so, one morning in late October, Ripp called Nelson into his office and informed her she was being replaced with a chief content officer. He couched the move as central to his mission to reinvent the company for the future.
“Who is it?” Nelson asked, expecting Ripp had recruited a new-media visionary from a web start-up.
“It’s Norm,” Ripp replied. According to a person briefed on the conversation, Nelson burst out laughing.
“Norm?” she said. “Really?”
The two men now responsible for charting Time Inc.’s future make for an odd pair of change agents: Ripp is 62; Pearlstine is 71. During the last dot-com boom, Ripp was known inside Time Warner as being the skeptic. When one AOL executive told him he thought like “an old-media guy,” Ripp reportedly shot back, “Good, because all you new-media guys are going bankrupt.” But both Ripp and Pearlstine now say they have found religion in digital media. Time Inc., they insist, needs to adapt. “If you have a church and nobody shows up, it doesn’t work so well,” Ripp says. “One of the reasons I have Norman back as my partner and not some kid from Vox is that he understands [Time Inc.’s] traditions. And we understand we need to change.”
When Ripp first discussed taking the CEO job with Bewkes, he said that Time Inc. needed to stop thinking of itself as a magazine company. But what exactly Time Inc. will become depends on who is talking. Ripp tells me it will be a significant player in video. (The company has backed the online channel 120 Sports and has rolled out channels for sports, celebrity news, and business.) Ripp also wants to branch into e-commerce, conferences, and events. Pearlstine praises Forbes’s user-generated content model. He supports “native advertising,” the practice of running sponsored content that looks similar to editorial content, and also said his dream acquisition is LinkedIn. M. Scott Havens, a digital executive Ripp hired from Atlantic Media, recently told The Guardian that Time Inc. needs to build “the next Gilt, the next Facebook.”
None of this talk has eased skeptics’ doubts. “What is this company?” one recently departed editor asked me. “They’ve declared print dead and hastened the end of the magazine business. But they don’t have an idea of what the company is instead.” Given the crushing debt load, roughly two and a half times earnings, that has to be serviced somehow, many inside the company anticipate extreme budget cuts. And Ripp’s finance background has triggered speculation that Time Inc. is being gussied up for a sale. “Private equity could drain the cow until there’s nothing left,” speculated another longtime Time Inc. executive.
Ripp shoots down that idea. “I would not come back to a company that would be bled and drained,” he tells me. “I didn’t want any part of that. This company defined my life.” Instead, he says he’s approaching his job as “a classic turnaround situation.” His model is his corporate hero, Lou Gerstner, the iconoclastic IBM chief who transformed a moribund mainframe manufacturer into a fast-growing technology-services company.
Pearlstine insists the search for new revenue models won’t chill Time Inc.’s journalism. “What doesn’t change is a commitment to editorial independence and editorial integrity,” he says. Dan Okrent, a longtime former Time Inc. editor who consulted for Nelson, sees it otherwise. “The world is filled with excellent publishing companies where editors work for the business side,” he says. “The problem is, if you have an 80-year tradition and then you change it, there has to be a reason. I can’t think of a reason that’s anything but a threat to editorial independence.”
In mid-August, when "Gawker" published an internal company spreadsheet ranking SI.com writers in part on how much content they produce that is “beneficial to advertiser relationship,” a chorus of prominent journalists erupted on Twitter. “Henry Luce must be spinning in his grave,” wrote the critic Paul Goldberger. Pearlstine tells me that he hadn’t been aware of the chart—“Had it gone past me, I would have said, ‘What the fuck is this?’ ”—but also that the criticism is overwrought. “It’s bullshit,” he says. “In a dot-com world, if you’re judging people on audience traffic, one of the qualities of those things is ‘Are you creating traffic for advertisers that you can monetize?’ That’s a legitimate question.”
Journalists at Time Inc. are on edge. “All of it confuses me,” says veteran Time columnist Joe Klein. “Everybody is worried, obviously.” A 25 percent cost-cutting target has been set across the company. In recent months, according to sources, there were discussions about converting Time to a biweekly. Time managing editor Nancy Gibbs protested and was able to delay a decision. “If you want to save money you can start with my salary,” she told executives. But she’s had to genuflect to the business side in other matters, scaling down foreign resources in particular.
Pearlstine’s central role in this shift has inspired considerable anger among former colleagues and left longtime relationships strained. In particular, John Huey, the garrulous Southerner whom Pearlstine picked to succeed him as editor-in-chief in 2005, was wounded by the ease with which Pearlstine swept aside Nelson, Huey’s handpicked successor. “There are some folks looking at Norm, who admire him as a journalist, wondering: Why would you want to go out in your last job as a man who gets paid to watch a cadaver put in the ground?” one former senior editor told me. Adds another: “It’s like watching Tommy Lee Jones doing those insurance commercials. It’s like, really? This is sad.”
Pearlstine has heard the criticism and is unfazed. “I love the debate,” he says. He has no trouble arguing he’s made the right decision about ending the church-state separation and says he still regularly reads and weighs in on sensitive stories. “In a fast-moving age for digital, for video, for new technologies, I thought it was really important there was close coordination between edit and the business side,” he says. “I mean, we’re not a cultural artifact at all. We are trying to serve the best interests of our stakeholders and our customers.”
In his long career in business journalism, Pearlstine has frequently carved out room to practice journalism as a business. At The Wall Street Journal, which he joined in 1968, he wrote the business plan for The Wall Street Journal Europe. As managing editor of the Journal in the ’80s, he watched his reporters cover the boom in leveraged buyouts and in 1992 left to launch a fund of his own. It lasted just a year, until one of its investors, QVC chairman Barry Diller, made a hostile bid for Paramount, infuriating another investor, Paramount chief Martin Davis.
In 1995, Pearlstine became editor-in-chief of Time Inc. But he wanted a hand on the business wheel, too, and tried securing an office next to the CEO. Jason McManus, his predecessor, intervened. “You absolutely cannot do that,” McManus told Pearlstine. “I listened,” Pearlstine now says. “I look back on that and feel it was a mistake.”
Still, he managed to find operational responsibilities—Time Inc.’s international, television, and nascent internet divisions reported to him. In 2001, Pearlstine worked on the $1.6 billion acquisition of IPC. And shortly after he stepped down in 2005, he joined the media and telecom practice of the Carlyle Group, the politically well-connected superfund. His arrival sparked speculation that he would help engineer a buyout of his former employer, but Pearlstine tells me that he never looked at acquiring Time Inc. In fact, his timing was terrible. When he was first considering joining Carlyle, private equity was booming, and “it seemed like you could buy anything.” By the summer of 2007, the credit markets had seized, and Pearlstine soon left Carlyle without completing a single transaction.
Now that he’s back in media again, Pearlstine has come to see flaws in the way journalists work. “I think all the journalistic instincts are to have heroes and villains. It’s either ‘this person is good, this person is bad,’ ‘this person is smart, that person is stupid.’ More often than not, there’s a lot of gray. There are a lot of decisions. And I think people who are successful don’t give enough credit to luck. Right place, right time.”
Pearlstine’s decision to leave Time Inc. in 2005: good luck. Revenues had peaked the previous year and were nosing downward. It was left to Huey to confront the darkening financial picture. Complicating matters, Huey’s relationship with Ann Moore, Don Logan’s successor as CEO, was rocky. She’d earned the nickname “Launch Queen” by writing the business plans for InStyle and Real Simple. Huey could be dismissive of the company’s softer, more profitable titles, and was known to say privately that “Fortune was one of the few Time Inc. magazines you couldn’t read when you’re drunk.”
Far more problematic than the sniping on the 34th floor was the lack of a coherent strategy to adapt to the web. Moore’s solution was to hit her profit goals through cost cutting. “Ann was managing to the number,” a former senior executive says. Morale sank as she enacted rounds of layoffs and purged top executives. At times, her management style could be almost comically tone-deaf. She once held a meeting with Time staff in the Leonard Bernstein suite at the Hôtel de Crillon, where she was staying during a Fortune conference in Paris. “We have to get serious about cost cutting,” she declared.
Time Inc. wasn’t alone among media companies flummoxed by the rise of online journalism and the simultaneous deterioration of print-advertising dollars—disorientation, and some level of panic, has been the constant emotional state at every legacy-journalism outlet. But being a division of a sprawling media conglomerate prevented Time Inc. from making significant digital investments, especially since, ironically, it still delivered profits. After the AOL merger, when the business was healthier, Moore tried spinning off Time Inc. She recruited Goldman Sachs to manage the IPO, but Time Warner’s then-CEO Richard Parsons rejected the proposal. “We were like some stupid little colony,” says a former executive. “It was like extraction mining, and absolutely nothing was returned.”
In 2009, Terry McDonell, then the editor of Time Inc.’s sports group, attempted a digital intervention. Apple was rumored to be readying a “genius device” that would save the magazine business, and McDonell partnered with design firm the Wonderfactory to develop a prototype of Sports Illustrated’s tablet magazine. The exercise generated media buzz when McDonell debuted a three-minute video demonstration online. But according to sources, Steve Jobs was upset that the company had released the prototype before he had had a chance to reveal the iPad—and a tablet edition of Time—to the world. “I think it’s stupid. Really stupid,” Jobs told Time Inc. executives during a meeting in New York in 2010 when asked about the prototype. The meeting went downhill from there. Jobs, suffering side effects of hormone treatment following his liver transplant, started tearing up as he complained that Fortune had kicked him when he was down by running a story on his stock-option-backdating scandal. At that moment, Moore walked in and the iPad she began playing with started blaring music. “What do I do? What do I do?” she said, handing it off to McDonell.
By this time, Bewkes was growing increasingly frustrated with Time Inc.’s performance and decided to bring in a new CEO. In August 2010, he tapped Jack Griffin, president of Meredith, a publisher of mid-market titles like Better Homes and Gardens and Diabetic Living. But Griffin’s arrival only deepened the dysfunction on the 34th floor. He struck some senior executives as a poor cultural fit. (In a meeting full of female executives, he joked, “Having come from a company that published women’s titles, finally I have magazines I can read.”) And the outside executives Griffin hired to advise him on strategy became a polarizing presence. Peter Kreisky, who had formerly worked at McKinsey, was a particular flash point. One person close to Huey and Nelson says he was an “overpaid blowhard.” Kreisky fires back: “We found feelings of entitlement within the company that really blinded executives, possibly willfully, to the seriousness of new competition,” he tells me.
In early January 2011, Griffin’s conflicts with Huey came to a head. According to sources, Griffin became furious during a meeting when Nelson, then editorial director, openly questioned his plan to invest in Time after pushing for cuts at other titles.
Later that day, Griffin called Huey and demanded that Nelson apologize.
“I won’t tolerate that kind of insubordination,” Griffin said.
“I don’t think you have the juice to take out Martha,” Huey returned.
Griffin hung up and called Time Inc.’s general counsel, asking to see Huey’s contract. Huey began telling friends Griffin was preparing to fire him. Instead, Bewkes, fearing an exodus of top editorial talent, fired Griffin. (Griffin, Huey, and Nelson declined to comment on the episode).
The company drifted for the next nine months without a CEO—months when advertising continued to erode. Bewkes finally hired Laura Lang, whose experience running the digital ad firm Digitas sounded promising. But he was unhappy when, in the fall of 2012, she presented another round of declining numbers. Then, a few months later, Lang found herself in the middle of an embarrassing scandal. At the InStyle Golden Globes after-party at the Beverly Hilton Hotel, Lang’s husband made lewd advances toward several female Time Inc. employees, including InStyle publisher Connie Anne Phillips. Time Warner human resources got involved to clean it up. Within a few months, Phillips had been let out of her noncompete contract (she became publisher of Condé Nast’s Glamour) and Lang had left the company with a $19 million severance. (Lang could not be reached for comment.)
Time Inc. had become an intractable management problem for Bewkes. One acute source of frustration was a failing online partnership between Sports Illustrated and Turner Sports, a shotgun attempt to challenge ESPN. Turner executives wanted to promote leagues whose broadcast rights they owned, which angered S.I. editors. At one point, a Turner executive told S.I. not to publish photographs on the site of NBA players wearing jewelry because the league did not like it. “You’re done, we’re going to take you over,” a Turner executive told S.I. editors in one meeting. In 2012, Bewkes dispatched his communications chief, Gary Ginsberg, to mediate. But the relationship had become too toxic to salvage, and Bewkes had by this time already settled on spinning off Time Inc.
Last fall, Ripp arrived at a company in total chaos. At first he treaded lightly. “You’d have to be really arrogant to walk in the door after a 14-year absence and say you know everything about the industry,” he says. “I’m not that stupid.” His first major move was an old-media deal: He finalized the acquisition of American Express Publishing, whose titles include Travel & Leisure, Food & Wine, and Departures. But Ripp soon set about recruiting a team who would help him navigate the digital terrain.
On a recent morning, I visit Colin Bodell, an Amazon executive who joined Time Inc. as chief technology officer. With his trimmed goatee and black T-shirt, Bodell looks like a Silicon Valley coder and says things like “I don’t care if it’s the janitor who comes up with the next big idea.” He recently held a “hack day” with Time Inc. engineers, and he’s building a “rapid application development lab” to roll out new content products. “We know we have to iterate very, very fast,” he says. He’s overseen website relaunches that feature cleaner navigation and streamlined publishing tools. His biggest bet so far has been an application called OneBot that allows editors to track where their content is trending online.
Entrepreneurial talk, like “failing fast” and “rapid ideation,” peppers lots of conversations at Time Inc. these days. “I feel we’re a start-up in a lot of ways,” says Paul Fichtenbaum, the current editor of the sports group, where Sports Illustrated’s digital growth is outpacing its decline in print. In May, Time Inc. unveiled the online video series “I [Less than symbol]3 My Closet” and “Eyesore,” a home-makeover show with "SNL" alum Rachel Dratch. In June, it acquired Cozi, an online scheduling application for families. In the coming months, M. Scott Havens says the company will look to launch digital products for technology enthusiasts, teens, brides, and baby-boomers. “We have to invest in the future and break free from the chains of being a magazine company,” he says. Time Inc. has recruited Brian Lew, a mergers-and-acquisitions executive from Time Warner, to hunt for digital deals.
Will all of this be enough? Recently announced second-quarter results show print-ad revenues having declined by another 6 percent and newsstand revenue down 13 percent. Digital-ad revenues jumped 12 percent, to $74 million, but the dollars are minuscule for a company that generates $3.4 billion in total revenue and reportedly could pay up to $50 million in annual debt service. Even if all of Time Inc.’s strategies in video, apps, and conferences take hold, it’s hard to imagine they’ll generate the profits its shareholders expect. Meanwhile, the rumor mill churns: Is Ripp planning to sell off the Alabama-based Southern Progress titles? Will Entertainment Weekly move entirely online? Even Pearlstine was taken aback by the state of the business when he returned. “I called up John Huey and said, ‘Jesus, it was fine when I left,’ ” Pearlstine tells me.
Not long ago, I asked Walter Isaacson, the former Time managing editor, how he would reverse the company’s slide. “It has to find a mission,” he said. “That mission is the social, mobile, and journalistic common ground in an era in which information has become balkanized. It’s about using social media, mobile, and digital to say, ‘There’s a place you can find common ground and common sense.’ ” Other longtime editors worry the clock may have run out. “What the hell do you do?” says Okrent. “Corning was once a glassmaking company that didn’t see much future in making glass, so it became a fiber-optic-cable producer, and I don’t see Time Inc. getting into fiber-optics. As a magazine company, the future looks beyond grim.”
In our conversation, Ripp is less fatalistic. He finds, for instance, the concern about Time Inc.’s debt load overblown: Wall Street would have penalized the company, he argues, if it had enough cash on hand to “dump $500 million on some silly internet thing that doesn’t make any money.” Still, he’s honest about the stakes. “Amazon can invest in helicopters that can deliver your packages and not have to earn a nickel. I do,” he says, with a flash of frustration. “You know the BuzzFeeds and Voxes are valued on the number of buzzes they get. Who gives a damn what that is? We have to make tough decisions, because what’s the alternative? Let it all die? The reality is, magazines as a print business will ultimately die. If we don’t transform this company, someone else will come in and do it.”
As Ripp and I talk, the topic turns to Luce, and I ask him how much he thinks about the company’s founder. The answer is: not much. “Some people say to me, ‘You know, Henry Luce would not have done that.’ And I say, ‘You know the great part about Henry Luce? He didn’t have to worry about what Henry Luce would have done. He wasn’t held to his past.’ ” With a stock price to worry about and debt payments to make, Ripp is too focused on the present. “If we can’t get that right,” he says, “then we’re screwed anyway.” Ω
[Gabriel Sherman is a contributing editor at New York Magazine. Currently, Sherman is also a Bernard L. Schwartz Fellow at the New America Foundation. His first book was a biography of Faux News founder Roger Ailes The Loudest Voice in the Room (2014). Sherman received a BA from Middlebury College.]
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