Meredith Corp.’s sale of Time magazine elicited surprise for the buyer (Salesforce CEO Marc Benioff and his wife, Lynne Benioff) with its $190 million price tag.
It’s widely considered a high price for a publication whose advertising, circulation and profits have been in decline for years. The price paid was close to six times operating profit, according to a report, which is on the high end of recent similar transactions, said Reed Phillips, managing partner at investment bank Oaklins DeSilva+Phillips.
The deal is important as another example of super-rich individuals buying media companies (See: Los Angeles Times, The Atlantic, The Washington Post). It also 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. Backed by venture capital money, digital upstarts came out of nowhere and built big ad-supported audiences on social media, using tactics that old media would eagerly copy. Unrealistic growth expectations collided with reality, and tough times ensued for companies like LittleThings, Mashable and BuzzFeed.
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. (See: The New York Times, Financial Times, Guardian.)
They are also commanding higher prices with buyers. A subscription-focused business can get a price of eight to 12 times EBITDA (operating profit plus depreciation and amortization expenses) versus 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 $100 million in profits was just teetering on profitability in recent years, according to a former executive with direct knowledge of the numbers. Today its revenue is around $170 million, with an operating profit of around $33 million, according to reports. Time’s guaranteed print circulation is 2 million, down from 3.25 million four years ago, according to the Alliance for Audited Media, and it has struggled to make money from events and digital paywall. It faces stiff competition from other high-quality news sources.
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 Peter Kreisky, a consultant to the media industry. “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.”
And Time staffers have reason to be celebratory, knowing the new owners are the Benioffs and not David Pecker, as they might have feared.