Just a few years ago, Time Warner had one huge problem: AOL.
These days it still has that problem, but perhaps not for much longer. As has long been anticipated, the media giant is preparing to spin off the sagging online giant, as it shed its cable operations earlier this year.
A decision on AOL is near, reports the company, though no date has been set.
But that leaves Time Warner and CEO Jeff Bewkes with a problem it didn't have several years ago, Time Inc. and its magazines.
Once the powerhouse of American magazine publishing, Time Inc. is suffering with the rest of the magazine industry from the double whammy of readers going off to the internet and a weakened magazine ad market that's been made even worse by the recession.
In chatting with analysts yesterday, Bewkes lumped AOL and print magazines in one basket, noting, "Advertising at AOL and Time Inc. especially is proving even tougher than expected."
Indeed, pages for Time Inc. magazines took an especially harsh beating in the first three months of the year, with ad sales down 30 percent.
Entertainment Weekly's ad pages fell 37.5 percent, the second-worst decline in the entertainment/celebrity category, behind only Bauer's Life & Style, which was down 51.4 percent. The category was down 19.3 percent.
People, the category leader, was down 13.7 percent.
Money magazine saw pages fall 25.8 percent. While decent for the personal finance category, which was down 28 percent, it's still a disastrous fall for what was long one of Time Inc.'s top titles.
Time also beat its category average, falling 23.3 percent, while newsweeklies as a whole were down 25.2 percent. But again it was the sort of dropoff unimaginable several years ago. Sports Illustrated was down 28 percent. Fortune was off 26.3 percent.
What makes Time Inc. a more daunting issue for Bewkes is that, unlike AOL, its future would appear far darker.
In preparing to spin off AOL, Time Warner has hired Tim Armstrong, a former Google executive, to head the division, further enhancing its potential value as a stand-alone operation.
But there's also the promise of a bright future for AOL for whomever solves its myriad challenges. The internet market has slowed in this downturn but it will speed up again, and AOL will surely rise with it.
That's much harder to say for Time Inc. Magazine advertising may recover some but it will never come back to what it was even last year.
Bewkes envisions Time Warner as evolving into a movie and TV company, as a creator of content rather than a distributor, and that vision would not appear to include Time Inc.
But if Time Warner were to decide to spin off Time Inc., the question becomes: Who would buy?
