Time's Financials; Time Buy Is a Win for Legacy Brands
Excerpts from a WSJ report: "Time generated revenue of $173M in 2017, and operating profit of $33M, according to [sources] who reviewed an offering document used in the transaction process. Revenue is expected to fall nearly 9% to $158M in 2018, reflecting industrywide pressures, while operating income will be about the same. The Benioffs are paying around 5.76 times operating profit for Time... Craig Huber, a media analyst at Huber Research Partners, said 'Meredith did very well with the price that they got.' He said the Benioffs may find it difficult to operate a single magazine at a time when magazine publishers with greater scale are struggling. Daniel Kurnos, an analyst with Benchmark, said the price the Benioffs are paying is in line with Meredith investors’ expectations. Meredith doesn’t disclose financials for individual titles. A spokesman for Meredith said the actual valuation multiple would be closer to 8 times operating income, if additional expenses are factored in that would lower Time’s earnings"...Digiday: Time's $190M price tag is "widely considered a high price... close to six times operating profit, according to [the WSJ] report, which is on the high end of recent similar transactions, said Reed Phillips, managing partner at investment bank Oaklins DeSilva + Phillips"... The deal "points to the staying power of brand. If the past few years of digital media’s rise have shown anything, it’s the importance of brand... Publishers that have improved their chances of sustaining themselves online have solid brands on which they’ve built reader revenue streams in the form of digital subscriptions, donations or memberships...They are also commanding higher prices with buyers. A subscription-focused business can get a price of eight to 12 times EBITDA vs. four to seven times for a business that’s only ad-supported, Phillips said. The trophy quality of publications with strong brands is no doubt part of the appeal to buyers like the Benioffs. (Marc Benioff called Time a 'treasure trove of our history and culture' and said he saw themselves as 'stewards of this iconic brand.') The high prices paid for Time and those other news publications in recent years aren’t a reflection of the media M&A market in general, though, especially when the buyers are purely financially motivated. 'It’s a one-off,' Phillips said. 'There appears to be a strong interest on part of wealthy individuals who made their money not in media to support these brands. Clearly, Time is an iconic brand and means a lot to a lot of people.' Still, the new owners of Time are taking on a title that’s been on the wane. A title that around 20 years ago generated $100M in profits was just teetering on profitability in recent years, according to a former executive with direct knowledge of the numbers... Time’s guaranteed print circulation is 2M, down from 3.25M four years ago, according to the Alliance for Audited Media, and it has struggled to make money from events and digital paywall. Still, the magazine continues to have relevance. Nearly half its online audience was millennials, as of 2016, per comScore. It still grabs headlines for its covers. 'It’s all on the ‘digital come,'' said media consultant Peter Kreisky. 'While to some, Time is a tired and failing brand, to others its marquee visibility offers opportunity for a digital transformation on steroids, with the print edition as a loss leader, to keep it at the center of the national conversation'"...
Time Hires Seven, Promotes Seven
On Friday, prior to Sunday's announcement that Salesforce founder and CEO, Marc Benioff, and his wife Lynne, are paying $190M to buy Time from Meredith Corp., Time editor-in-chief Edward Felsenthal--who will remain editor as the publication changes hands--sent a letter to staff Friday, announcing seven new staff, seven new promotions and new assignments. Time readership was up 45% in the first six months of 2018, compared to the same period last year, he wrote.The magazine is “on target for nearly 2 billion video streams on Time.com this year, including a new record of 17 million streams on Time.com in July.”Judy Berman is joining Time as television critic, while Anny Kim is being promoted to copy chief at Time. Gina Martinez is joining as a reporter on the news desk. Annabel Gutterman and Kat Moon join as associate audience engagement editors.The magazine is expanding to new assignments in Asia and the Middle East, with various promotions: Feliz Solomon becomes senior editor in the Hong Kong bureau, Charlie Campbell becomes East Asia correspondent and Joseph Hincks becomes Middle East correspondent.Jamie Ducharme and Abigail Abrams are being promoted to staff writers, while Abby Vesoulis is now a reporter based in Time's D.C. bureau"...
Benioff Explains Why He's Buying Time Magazine
In an informal, texted Q&A with the NY Times while he was getting a massage, soon-to-be owner of Time, Marc Benioff, says he's been talking with Meredith's CEO since Meredith bought Time Inc.'s assets. He calls them "great assets" that are "aligned with the "impact investing I do... I have a portfolio of almost 200 companies I have invested in." On why he bought Time instead of Fortune: "Time is the best fit for us. I really liked the Meredith team, and I definitely wanted to do something with them. It just wasn't clear what it was. When Time emerged as the candidate we all felt it was right. That took nine months to figure out... If Meredith didn’t buy Time Inc. this never would have happened. Meredith is the key player." He confirms that Time will stay in New York, and that "We don’t get operationally involved in our investments... I’m busy enough with my job. They [Time] have a great team. It’s a very strong business. Very profitable. Meredith will continue to be a key partner going forward... I feel our values are aligned. Trust is my highest value and it is Time’s as well."He also says that he read Time even as a kid: "I've always loved it."
The Two Reasons Billionaires Are Buying Up Print Media
MarketWatch: "Billionaires from the tech world see the enduring value of the printed product, even when people in the industry don't," said Samir Husni… There is value in the print brand's history, and a print product is less disposable than a digital product where you read and then click away, he said... 'I think the best of the billionaire media owners--[Amazon owner] Jeff Bezos, [Boston Globe owner] John Henry, [L.A. Times owner] Patrick Soon-Shiong do it out of a combination of public-spiritedness and ego,' said Dan Kennedy, author of "The Return of the Moguls: How Jeff Bezos and John Henry are Remaking Newspapers for the Twenty-First Century." Public spiritedness because they genuinely want to play a role in saving institutions that are important to our democracy; ego becauseit raises their public profiles, and because they may believe that success they've had in business will translate to figuring out the dilemma of how to make money in journalism."
Conde Names New Chief Editor for Pitchfork
Adweek: "Pitchfork, the music website that Condé Nast acquired almost three years ago, is getting a new editor.Puja Patel, who has most recently been editor of Spin, will start as Pitchfork’s editor-in-chief October 15. Patel replaces Ryan Schreiber, who founded Pitchfork in 1996 and has led the publication since then. 'Puja is a highly-respected and innovative editor who has spent her career covering the music industry,' Schreiber said in a statement. 'We expect that she will bring new perspectives and ideas to Pitchfork’s incredibly talented editorial team. I’m confident she will help further solidify Pitchfork’s standing as the most esteemed music brand in the industry.' At Spin, Patel made the brand digital-first and increased the audience by 14% in her first year, according to a statement. She was also a senior editor at Deadspin and has had her work featured in MTV, The Village Voice, Rolling Stone and The Washington Post. Schreiber will serve as an advisor to Patel. He has not yet publicly shared what he has planned next"...
Wired's 25th Anniversary Issue Celebrates 25 Digital Icons
Release: For its 25th anniversary issue, Wired's editors "have selected 25 icons of the digital revolution who have had the biggest impact on the worlds of technology, science, and business over the past quarter-century. Additionally, each icon has nominated a maverick, visionary, or rising star who will shake up the next 25 years. 'With each pairing, we’ve tried to create some kind of conversation between the two,' writes Nicholas Thompson in his editor’s letter. 'Our hope is that in 2043, you’ll go back through the choices we made in this issue and see some that make sense and some that, in retrospect, seem insane. That’s the way it’s always been with Wired.'" The icons include Microsoft's Bill Gates, nominating Stephen Quake, professor, Stanford bioengineering and physics, and Salesforce's Marc Benioff, nominating Boyan Slat, founder, Ocean Cleanup. Release lists all of them.
Meredith Names Steven Grune VP, Licensing
Release: Meredith has named Steven Grune VP, brand licensing, effective immediately. He will report to Meredith consumer products president Tom Witschi. Grune will oversee all of Meredith's licensing activities spanning more than 60 partnerships and 12 Meredith brands, including its flagship line of 3,000 Better Homes & Gardens-branded products at Walmart. His senior leadership team will include executive directors Sondra Newkirk, Toye Cody and Kristen Payne. Grune had been VP and group publisher of the Meredith Parents Network since 2016. He was the founding publisher of Meredith's Allrecipes magazine, and he also worked at Midwest Living and Better Homes & Gardens.
Senator: Congress Likely to Support Social Media Regs
Ad Age: "Mark Warner, the Senate Intelligence Committee's top Democrat, said Thursday a broad bipartisan majority in Congress likely will back new regulation of social media, though such legislation might take time to come together."Depending on how we framed it, I think we'd have an overwhelming majority," Warner of Virginia said at a conference on digital privacy in Washington sponsored by the Atlantic magazine. "I think there is a high chance that people realize that the days of the wild, wild west are over, that there needs to be some guardrails'... Warner is pushing various ideas, including mandatory labeling of automated social media accounts known as bots, portability of personal data from one company to another, and a legal requirement that companies take down sites that promote violence.The senator said he isn't yet sold on Europe's sweeping new privacy rules. "Whether the European approach grants us that real protection or simply impedes innovation, I think the jury is out," he said.After his speech, Warner said in an interview that it's likely any major legislation would come next year, though he said some ideas could move forward sooner"...
Q&A: Founder, Good Company Magazine
Grace Bonney, author, blogger, and entrepreneur, has launched Good Company magazine. Inspired by a book she wrote called “In the Company of Women." it focuses on marginalized communities of people who run their own creative practices and businesses, and continues the conversations she started in the book. Excerpts from a Q&A with Samir Husni: "I’ve really come to love the web for its immediacy and its flexibility, but it’s a place I find that people have a harder time guiding into more serious topics. As Design Sponge (Grace’s blog) evolved and I got more into print projects that were about the people behind the design, I found that people on the Internet weren’t coming to read longer form pieces or to talk about things that might be a bit more complicated. So, that’s where I find print really excels over other mediums because when you hold something in your hand and you have time to spend with it, you’re more likely to sink your teeth into something that’s a little longer and a little more serious"...
OTHER NEWS OF NOTE:
Schnucks to Buy 19 Shop 'n Saves from Supervalu
SN: "Schnuck Markets has agreed to acquire 19 Shop ‘n Save supermarkets in the St. Louis market from Supervalu Inc. Financial terms of the deal, announced late Monday, weren’t disclosed. Schnucks and Supervalu said the sale of the stores--14 in Missouri and five in Illinois--will be staggered and start on Oct. 7. The transaction is expected to close in late October. Also under the deal, Schnucks will acquire four of Shop ‘n Save’s seven fuel centers as well as 16 Shop ‘n Save pharmacies. Fifteen of the pharmacies are inside Shop ‘n Save stores, and the other is a stand-alone pharmacy in Union, Mo. Schnucks is also buying the prescription files for 10 other Shop ‘n Save in-store pharmacies and will transfer those prescriptions to nearby Schnucks stores. In connection with the sale, Schnucks also has entered a primary distribution agreement with Supervalu for nine current Schnucks supermarkets in northern Illinois, Iowa and Wisconsin... The Shop’n Save locations and pharmacies will be converted to the Schnucks banner. Schnucks said it expects to close each store about two-and-a-half days for the conversions, which include posting new signs and fixtures, switching out point-of-sale systems and restocking merchandise... For Supervalu, the sale to Schnucks furthers plans to exit the grocery retailing and focus on growing its wholesale business as part of United Natural Foods Inc., which in late July announced a deal to acquire the Minneapolis-based company for $2.9B. That transaction is expected to be finalized in Q4, pending regulatory and shareholder approvals and other closing conditions. The 17 remaining Shop ‘n Save stores will operate as usual as Supervalu seeks one or more buyers, but the company said it will close the stores later this year if no purchasers are identified. Founded in 1979, Kirkwood, Mo.-based Shop ‘n Save has about 2,800 employees and has served the St. Louis market area for nearly 40 years. When the acquisition closes, Schnucks will have 114 supermarkets, 110 pharmacies and nine specialty pharmacies in Missouri, Illinois, Indiana, Wisconsin and Iowa. Schnucks last month opened a new store--a former Shop ‘n Save--in Maplewood, Mo., and the retailer is currently building a new store in Warrenton, Mo., that’s scheduled to open later this fall"...
Aldi Officially Launches Grocery Delivery in 75 Markets
PG: "Hard-discounter Aldi is officially launching grocery delivery to 75 major markets across its entire 35-state footprint, including San Diego, New York, Miami, Minneapolis, and Raleigh, N.C., by Thanksgiving.Made possible through a partnership with San Francisco-based third-party grocery delivery service Instacart, the service is launching after successful pilots in Atlanta, Dallas, Los Angeles and Chicago. Aldi customers in 5,000 Zip codes in these markets will have access to such fresh groceries as organic produce, antibiotic-free meat and fresh seafood, all available for delivery within an hour. Shoppers can use the grocery ecommerce service by filling a virtual shopping cart at Instacart.com or through the Instacart app. Customers choose a delivery window – anywhere from one hour to one week later – and let Instacart's personal shoppers build and deliver the order.Aldi began piloting delivery in the Atlanta, Dallas and Los Angeles areas last August. Following the "overwhelmingly positive" response to those pilots, Aldi and Instacart expanded with an additional pilot in the Chicago area.Aldi has been rapidly growing, investing more than $5.3B to remodel and expand its store count to 2,500 by the end of 2022"...
Aldi Launches 'Shop Differntli' Campaign
MediaPost: "Aldi may be serious about low prices, but it’s got a sense of humor about its customers. It’s introducing a new “Shop Differentli” campaign that spoofs the concern people have about things they love: The kickoff ad shows a mother gently explaining to her son how Aldi selects only the very best olives for its olive oil, before we realize she’s got the young adult trapped in a shopping wagon’s child seat.Aldi, based in Germany, hasn’t been shy about its plans to dominate the U.S. grocery landscape. It already has 1,800 stores in 35 states, and recently revealed plans to spend $5 billion expanding to 2,500 in the next five years, remodeling existing stores and dramatically expanding fresh-food offerings. And while the company made its name with a limited assortment and a no-frills attitude that keeps prices low, industry observers are describing its store remodels as remarkably upscale, more on par with chains like Trader Joe’s and even Whole Foods Market. The expansion effort emphasizes fresh, organic and easy-to-prepare options, as well as online ordering and delivery in its major markets... A spokesperson for Aldi, with U.S. headquarters in Batavia, Ill., tells Marketing Daily the spot is the first in the new national advertising campaign, and includes 30- and 15-second formats on broadcast and cable networks, and also includes online video and social media advertising, as well as print. Leo Burnett is the agency.Additional ads focus on the chain’s new push into high-quality fresh produce, fish and meats, that it believes are crucial to winning over more fans.Meanwhile, Lidl, another German grocery chain expanding in the U.S., hasn’t let up on its efforts to get shoppers throughout the Southeast to #RethinkGrocery. Its ads portray regular supermarket owners as con artists."
Will Competition Force All Grocers to Offer Free Store PIckup?
RetailWire: "With Walmart, Target and Whole Foods all offering free grocery pick-up, should Kroger and other traditional supermarkets stop charging as well? Kroger’s ClickList pick-up program charges $4.95 for regular orders and $7.99 for expedited ones in most markets. (Walmart’s and Target’s pick-up promise excludes perishable items.)A note from UBS that came out last Wednesday estimated that offering free-in-store pickup would cost Kroger five to 10 cents a share. The calculation assumes one to two percent of Kroger’s sales are purchased using the service, the average order is $100 and average fee is $4.95. 'While we don’t expect Kroger to change its fee structure in the near term, we believe there’s a chance it may revisit it in the next few years,' UBS wrote, citing pressures from Walmart and Whole Foods, according to Barron’s. UBS noted that Kroger may be able to offset its margin pressures through the automation and best practices upgrades it is instituting with the help of Ocado, the British e-grocer. Under an exclusive deal reached in May, Ocado is developing automated warehouses for Kroger in the U.S. UBS’s note came out a day before shares of Kroger fell 10 percent after the grocer reported second-quarter earnings that missed Wall Street’s targets. The comp growth of 1.6% (excluding gas sales) vs. strong mid-single-digit growth in grocery for Walmart and Target in the quarter was an indication that Kroger is losing share to the discounter giants.Analysts attributed the growth in grocery seen at Walmart and Target to investments the retailers have made in pricing, assortment quality (including private brands), as well as technology, including online and store pickup.Kroger’s digital business, which includes ClickList and home delivery, was a bright spot in the quarter, up 50%. Whole Foods doesn’t generally compete with Kroger in its markets, but Amazon’s ownership may change that. Last month, Whole Foods launched grocery pickup, including perishables, for Prime members at select stores. Orders are free over $35, $1.99 under $35, and $4.99 for 30-minute pick-up with no minimum order"...
China to Retailiate When Trump Tariffs Take Effect
Washington Post: "Beijing struck back Tuesday against President Trump’s new tariffs on $200 billion in Chinese imports, vowing it would immediately retaliate when they take effect and threatening a protracted dispute that could raise the prices of household goods in both countries.Chinese President Xi Jinping has refused to budge amid mounting threats from Trump, who vowed to place higher border taxes on practically everything the United States buys from China if Beijing unveils new duties, effective Monday at noon... The Chinese government will impose tariffs of up to 10 percent on an additional $60 billion in American goods following Trump’s escalation, slapping higher border taxes on nearly all U.S. exports to China... Trump accused China in a pair of tweets Tuesday of targeting American workers in the heartland, wrongly saying the country had “openly stated” it was aiming to sway U.S. elections"...
Report: Automation Will Create More Jobs Than It Kills
MNB: In contrast to the recent Pew Research Center study (reported in Washington Post) concluding that in several countries around the world, large majorities of people believe it is most likely that robots will be doing much of the work done by humans within 50 years, a new report from the World Economic Forum (WEF), "The Future of Jobs 2018," concludes that while “machines will overtake humans in terms of performing more tasks at the workplace by 2025,” there still could be "58M net new jobs created in the next five years” by this technological revolution--meaning that a lot more jobs will be created than displaced. "Some of the context reported by CNBC: 'Developments in automation technologies and artificial intelligence could see 75M jobs displaced, according to the report. However, another 133M new roles may emerge as companies shake up their division of labor between humans and machines, translating to 58M net new jobs being created by 2022... At the same time, there would be ‘significant shifts’ in the quality, location and format of new roles, which suggests that full-time, permanent employment may potentially fall. Some companies could choose to use temporary workers, freelancers and specialist contractors, while others may automate many of the tasks. New skill sets for employees will be needed as labor between machines and humans continue to evolve, the report pointed out.'"
OTHER NEWS OF NOTE: