ADOTAS — Time Warner recently announced that it was spinning off its ailing magazine division, after failing to reach a deal to sell many of Time Inc.’s magazines to the Meredith Corporation. This news has profound ramifications for the publishing industry – a harsh wake-up call that digital publishing may be the only option for long-term stability – but going digital is not always as promising as it may seem.
As covered in Adotas earlier this year, traditional publishers are still reeling from the emergence of digital channels, with downward spiraling print subscriptions being replaced with online business models. The Atlantic recently reported an alarming statistic about the industry: “In 2012, newspapers lost $16 in print ads for every $1 earned in digital ads. And it’s getting worse, according to a new report by Pew. In 2011, the ratio was just 10-to-1.”
Print ads have fallen from $45 billion to $19 billion since 2003, while online ads have only grown from $1.2 to $3.3 billion. The means that the total ten-year increase in digital advertising can’t make up for difference between the average single-year declines in print ads.
Regarding the Time Inc. news, the new magazine company is expected to start with $500 million to $1 billion in debt, in stark contrast to the publishing company that the News Corporation will spin off this summer, which will have no debt. In Q4 2012, Time Inc.’s revenue fell 7 percent, to $967 million, while revenue at Time Warner’s cable channels soared. After the split is finalized, Time Inc. will no longer have its former parent company’s profitable film and television entities to stabilize its future.
In a New York Times interview, Don Logan, the chief executive of Time Inc. from 1994 to 2002, noted just how daunting a task it is to transition a print magazine to the digital age, even for Time Inc., which has such well-known brands.
“It’s not an easy company to manage,” Logan said. “It’s hard to balance this. I don’t fault anybody.”
Motor Trend Dives Into Digital
With all the news surrounding the spin-off of Time Inc., another legacy publisher, Source Interlink Media, has apparently has made the segue to digital — this time with a focus on video. Its Motor Trend publication recently surpassed the 1 million subscriber milestone on YouTube, exemplifying the success Interlink has achieved launching the motor enthusiast brand into the digital arena.
The channel has experienced more than 600% audience growth since switching to episodic programming in February of last year as part of YouTube’s original channels initiative. Bringing to life Source Interlink Media’s most powerful automotive media brands, the company claims that its Motor Trend Channel “is the world’s largest automotive video channel, regularly attracting almost four million views and 30,000 new subscribers each week.”
The Motor Trend Channel has amassed an audience equivalent to a Top 30 TV market in the United States, according to Nielsen, and close to that of a top 10 US market cable provider, based on NCTA data. And the current growth rate means the Motor Trend Channel audience is expected to double by the end of the year.
“We’ve set it up as an on-demand video channel with a deliberate programming strategy,” said Source Interlink Media Chief Content Officer Angus MacKenzie. “Our focus is automotive, but our programs appeal to different people in that audience. There’s something for everyone.”
This year, The Motor Trend Channel will stream more than 60 hours of original programming, a 50-percent increase over 2012. In addition to onboarding videographers, editors and producers, Source Interlink Media tells Adotas that it has invested in a new 15,000-square-foot studio in El Segundo, Calif. capable of state-of-the-art digital post-production, as well as full CGI animation and visual effects.
“High-quality episodic video programming is now a core competency for Source Interlink Media,” said MacKenzie. “We have invested in the capability to create programs that only a true multi-platform media company can create. The credibility and authenticity of our shows has not only resonated with our existing audience, but also brought a new audience to our brands.”
In order to learn from Time Inc.’s mistakes, Interlink will need to invest heavily in digital publishing in addition to its recent investments in video content production. Data provided by comScore shows that many of Time Inc.’s Web sites, including CNN Money, Sports Illustrated and People, all experienced declines in unique users between February 2012 and February 2013. Compete.com indicates that site traffic for MotorTrend.com has declined overall during this same time period, but has been slowly on the rise over the last several months.