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Oct 29, 2009

Time Inc. to cut US$100 m, and extensive layoffs expected

Signalling that worse times are ahead for magazines, Time Inc. is expected to announce next week that it will cut US$100 million (RM340 million) from costs, including another big round of layoffs.

Time Inc., the publisher of magazines like Time, Fortune, and People, has already cut costs drastically: a year ago, it announced it was dismissing 6 per cent of its work force, or about 600 people. The timing is coordinated with the third-quarter earnings announcement from its parent company, Time Warner, sources said. That is scheduled for Wednesday morning.

But that was apparently not enough to make up for revenue declines. The US$100 million in costs is expected to come largely from layoffs, said sources, who asked to remain anonymous as they were not authorised to discuss the matter.

Michael Nathanson, an analyst at Sanford C. Bernstein & Company, said that he expected third-quarter revenue at Time Inc. would fall about 19 per cent, to US$900 million.

“For the year, we’re at about US$3.7 billion, and this company had done almost US$5 billion as late as 2007,” Nathanson said.

Since 2004, Time Inc. has cut about US$800 million in costs, Nathanson said.

Over all, Nathanson said, he expects Time Warner to post earnings of 54 cents a share, well up from the 30 cents a share it posted in the third quarter of 2008.

Time Inc. has been cutting costs over the last several years. Since 2007, it has shut down magazines including Business 2.0, Cottage Living, Southern Accents and Life, which it had revived as a newspaper supplement. Last week, Fortune announced that it would no longer be published every other week, and would drop its frequency to 18 issues a year, from 25. A stricter expense-account policy has been in place for some time, and some magazines have decreased the weight of the paper they use.

A number of Time Inc. employees are covered by a union contract, which mandates severance in case of layoffs. Employees of Time, Sports Illustrated, People, Money, Fortune and Fortune Small Business are covered by agreements with the Newspaper Guild of America, said Bob Townsend, local representative for the guild.

Covered employees at those magazines are eligible for severance packages in a layoff, of two weeks’ pay for every year of employment, with a cap of 52 weeks’ pay. Longtime employees get a bonus, with 20-year veterans getting an additional eight weeks’ pay, and 25-year employees an additional 10.
Townsend said that the Guild was usually notified in advance of layoffs, but it had not heard anything yet. “We have not been told there are going to be any layoffs next week,” Townsend said.
Dawn Bridges, a Time Inc. spokeswoman, declined to comment.

The layoffs and cost-cutting follow moves at competitors. Forbes is in the midst of dismissing about 40 to 60 of its editorial staff, and most Condé Nast magazines are reducing their budgets by about 25 per cent, which has included handfuls of layoffs at many of its magazines.

Source : TMI
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