The real promise of the Meredith-Time merger

In its heyday, Time Inc. was a publishing colossus, delivering weekly magazines to millions of people around the world. They influenced the way people digested news, sports, leisure and entertainment. The Warner merger created America’s largest media company. But insiders remember just how the deal was driven not so much by a search for scale or synergy as by the fear of being taken over by Rupert Murdoch or Robert Maxwell. How times change. And it’s been downhill pretty much ever since, as Time Inc has continued to lose subscribers and advertising dollars.

Time Inc had revenues throughout the 1990s of more than $4bn – almost four times that of Meredith, which had much lower costs. Meredith’s 4,000 people are not much more than 50% of the workforce of its gilded New York competitor whose $400m profits it matched in 2017. That was the year the Des Moines company made the biggest splash of all – by agreeing to acquire Time Inc for $2.8bn. Everything about the acquisition (due to complete in the next week or so), emphasises the stark differences between the two companies.

What next?

The real promise of Meredith-Time is that it will produce market-leading women’s print and digital media and create the opportunity for another leap in product licensing revenues. Meredith executives were appetised by Time Inc’s outgoing CEO Rich Battista, who said in his last annual report: “We believe brand licensing is an area with large-scale potential. Two of our larger licensing programs are Real Simple’s partnership with Bed, Bath & Beyond, where we currently have hundreds of products, and our partnership with Dillard’s, which carries a line of Southern Living products. We intend to focus more closely on this potentially high-margin area, particularly by pursuing opportunities across more of our brands.”

That is the hidden potential of this stretching acquisition.

The air in Des Moines is thick with excited talk of the “transformative deal”, even though the sheer diversity of Time Inc sits uneasily with Meredith’s long-standing claim that “Our cornerstone is knowledge and understanding of the home and family market.” Steve Lacy and his team have no need to be dazzled by taking over some of America’s best-known magazines because – in Better Homes & Gardens – they already own the country’s most profitable one. And their global leadership in retail licensing says it all.

In a year when media consolidation will never be far from the minds of investors and executives alike, competitors will be watching Meredith closely. If the quiet achievers from Iowa really can unlock the digital and retail riches of Time Inc, there will be plenty of other candidates for merger. Could Hearst, whose magazine-media is now a challenged mid-portfolio operation, be motivated to merge its magazines with those of frenemy and sometime partner Condé Nast? If Meredith-Time makes it, even Condé-Hearst could be a cake-walk.

Read more…