Wednesday, March 6, 2013

Time, Inc. To Split From Warner Bros.

Last month, I speculated in my blog that once Time Warner spun off most of its magazines to Meredith, it should change its corp name back to Warner Brothers.  Well the deal with Meredith appears to have fallen through so step two is to split apart the two companies.  Goodbye synergy; print and video no longer make good bedfellows. "CEO Jeff Bewkes said that the spinoff would allow Time Warner to 'focus entirely on our television networks and film and TV production businesses.'"

True, print media is having a difficult time as it deals with its transition to a digital format.  But the content that is created for print has incredible value in a digital world and combined with video from the network and film side of Time Warner, the makings of great stickiness and revenue generation.  Breakups are never easy.  Now the Time, Inc. side of the business must rely on its own video abilities to augment the value of their brands through these digital growing stages.  The challenge of proving that a growing revenue model exists and that these print brands will succeed in the digital future may have been too tough for Time Warner.  Patience is a virtue but given Time Warner's need to grow profitability, that patience no longer exists.  Synergy cannot be found to make the marriage last and so divorce is forthcoming.  "Time Warner said its goal was to complete the deal by the end of 2013."

Where acquisition was once the name of the game, Time Warner has determined that divestiture is the future.   They spun off Time Warner Cable a couple years ago and now it is Time, Inc.'s turn.  Smaller, more agile, and hopefully, more profitable for the remaining entity, Warner Brothers.

Is Apple Finally Launching A Streaming Music Service?

It's one thing to offer downloads, it's another to offer a subscription service.  Why Apple has been slow to enter this space is unclear, but Apple may be reconsidering.  "Apple Inc has held talks with Beats Electronics LLC, the audio technology firm co-founded by influential hip-hop producer Dr Dre and music mogul Jimmy Iovine, on a potential partnership involving Beats' planned music-streaming service, three people familiar with the situation told Reuters."  

It is time for Apple to announce a full fledged subscription service - music, video, info - available across its product line.  As Apple has never worried about cannibalizing its current offerings, there should be no fear that a subscription service may affect download purchases.  The iTunes store will continue to survive and thrive.  And an Apple subscription service guarantees a measurable monthly revenue stream, something Wall Street would be pleased to see.  

Can we expect movement quickly?  It seems that Steve Jobs had been considering before his death.  "(Jimmy) Iovine said Jobs didn't want to pay the record companies enough, and thought the price would come down eventually."  The resurgence of music, thanks partly to iTunes, shows that not to be the case.  It seems that now might just be a good time, given recent stock performance, to pull the trigger and announce a subscription service.