One Last Look at Time Inc. Spin Out

It didn’t take long for Time Warner’s stockholders to see the wisdom of the company’s decision earlier this month to spin off the Time Inc. publishing unit.

In fact, they could be feeling so flush these days that they might want to ask Time Warner Chief Executive Officer Jeff Bewkes: “What kept you?”

On the heels of the official announcement of the spin-off, the Time Warner (NYSE: TWX) shares climbed to $56.46 in early trading on March 7; the intraday high that day was $56.89, and the close was $56.78. The intraday high-water marks were, in fact, the highest levels witnessed since March 2002. Meanwhile, the closing price was the highest close seen since February 2002. That was when hopes ran high for the then-new combination of AOL and Time Warner. As we know now, this amalgamation has arguably been the most unsuccessful corporate teaming of all time.

Time Warner have aid their dues, for sure. The stockholders are pleased by the prospect of shedding Time Inc. because the publishing unit no longer fits in the overall game plan of hard-headed Time Warner Chief Executive Jeff Bewkes.

Bewkes envisions a television-movie-entertainment company. It is all about stressing growth units. Bewkes said in a press release that the move provided strategic clarity for Time Warner, “enabling us to focus entirely on our television networks and film and TV production businesses. Time Inc. will benefit from the flexibility and focus of being a stand-alone public company and will now be able to attract a more natural stockholder base.”

You might say it is the survival of the fittest in Bewkes’s vision for the 21st-century Time Warner. The publishing division is out of vogue among American consumers, including news junkies. They look at Time Inc. and they don’t see the company co-founded by Henry Luce, the father of the modern magazine industry. They don’t reflect on the remarkable tradition of excellence of Time or Fortune or Sports Illustrated.

Instead, the naysayers (aka the realists) see dead-trees symbols. As our popular culture gravitates to the Internet, the magazine industry seems more and more obsolete and stuck hopelessly in the 20th century.

For his part, Bewkes — though he would not want to admit it publicly — wants no part of the 20th century. He recognizes that he has one mission, above all others: keep the stock price as high as possible. This, of course, is the primary responsibility of every CEO. The successful ones address the challenge. They all but proclaim that they refuse to be tied to the past. They prefer to address the seismic shifts in the society and are able to turn their back on the concept of nostalgia. It may be painful but it still has to be done.

What separates him from his two most recent predecessors in the corner office, Gerald Levin and Richard Parsons, is Bewkes’s reluctance to give in to the power of nostalgia, not to mention his company’s history and tradition.

Bewkes achieved prominence within Time Warner through the HBO door. The key to understanding Bewkes is that he was not a creature of the traditional Time Warner hierarchy. HBO is a relatively new phenomenon. It has had so much success at awards time that it seems like it should have been a fixture on the culture scene for the past half-century. But its pedigree is not in the same league as Time Inc. — which has been around forever.

Bewkes had tried to do a deal with Des Moines, Iowa-based magazine publisher Meredith Corp., in which Meredith would acquire the Time Inc. properties except for Time, Fortune and Sports Illustrated — three newsy publications that have been damaged badly by the Internet age. When the proposed transaction fell through, Bewkes decisively returned to Plan B: the spin-off Time Inc.

Wall Street apparently likes everything about the deal. The shedding of a non-core asset gives the promise that Time Warner can move forward in the digital age.