A Move Toward Digital Comes Too Late at Time Inc.

 Time Warner’s (NYSE: TWX) publishing arm, Time Inc., has hired a senior digital media executive to run the largest magazine publisher in the U.S. Laura Lang, who headed digital ad agency giant Digitas, must reinvent a print media business into one that operates largely in the world of electronic publishing. Time Inc.’s legacy businesses are too large for that to happen while making its operations profitable.

Time Inc., like every large, medium and small print firm, has tried to move its subscribers from paper products to ones on PCs, tablets and smartphones. Publishers like the Wall Street Journal and the New York Times (NYSE: NYT) have had some success. They also have hundreds of thousands of customers who get printed versions every day. Advertisers have moved away from those print products to online-only media like Yahoo! (NASDAQ: YHOO) and Facebook. Print advertising’s market share of ad dollars shrinks each year.

Print companies must battle both the cost of physical products and the attrition of their largest advertising bases. They also must contend with large media, which range from CNN.com to ESPN.com to TMZ. The online content world is already almost too crowded for new media to enter in any force.

Time Inc. still has magazines with millions of consumers who read them via subscriptions and newsstands. The company cannot simply strand these customers and force them to consumer content online. Too many of these customers would reject such a move and argue that online media is not worth paying for in a world in which so much news and entertainment on the internet is free.

The costs to print and ship the number of magazines Time Inc. produces is well into the hundreds of millions of dollars each year. These magazines also have huge balance sheet liabilities. Their readers have paid for subscriptions upfront that are fulfilled by the publisher over several months or years. It is a contract that the publisher must fulfill once it has cashed each customer’s check.

Time Inc. would like to move magically from print to online, keep its current revenue base and have the advantages of the low costs of digital content distribution.

If wishes were horses, all the beggars would ride.

Douglas A. McIntyre