AT TIME INC., PREPARING TO LEAVE THE NEST

c.2013 New York Times News Service

Time Inc., the largest magazine publisher in the United States, with properties like People, Sports Illustrated and Fortune, is preparing for one of the most pivotal periods in its 91-year history.

Within the next six months, its parent, the media conglomerate Time Warner, hopes to spin off Time Inc. into a separate public company. But if the plan succeeds, Time Inc. will become independent at a difficult moment. Not only do the magazine industry’s fortunes continue to sag, but Time Inc. has also shown signs of instability. It has churned through three chief executives in the last three years, and also lost a star editor, its former editor in chief Martha Nelson.

To combat these negative forces, Time Inc. will abandon the traditional separation between its newsroom and business sides, a move that has caused angst among its journalists. Now, the newsroom staffs at Time Inc.’s magazines will report to the business executives. Such a structure, once verboten at journalistic institutions, is seen as necessary to create revenue opportunities and stem the tide of declining subscription and advertising sales.

Overseeing these changes is Joseph A. Ripp, a former longtime Time Warner official who became Time Inc.’s chief executive in September. In an interview, Ripp said it was refreshing to shake things up. In recent months, he confirmed publicly that there would be additional layoffs in 2014. He has also expressed openness to new initiatives, including expanding the company’s television programming and conference businesses.

“Because we were part of a larger media conglomerate, our ability to expand outside of print magazines was always restricted,” said Ripp, who explained that Time Warner’s television and film businesses often hampered the magazines’ ability to move into video.

Time Warner is not alone in separating ailing print assets from more profitable businesses. In 2014, Tribune Co. will try to split its newspapers from its television and digital units. And this year, News Corp. cleaved its film and TV businesses from its newspaper and publishing arms.

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In going it alone, Time Inc. will return to its roots as a stand-alone company, which was co-founded in 1922 by publisher Henry Luce. Roughly a quarter-century ago, Time Inc. merged with Warner Communications. Today, Time Warner is a media and entertainment giant with a $63 billion market value and profitable assets likes HBO. But in recent years Jeffrey L. Bewkes, Time Warner’s chief executive, has shrunk the company, discarding businesses like AOL and Time Warner Cable to concentrate on film and television.

Next on the spinoff block is Time Inc. To run the magazine business as a separate company, Bewkes hired Ripp. He assumed the post this summer from Laura Lang, who lasted only 15 months in the job. She had succeeded Jack Griffin, who was forced out after less than six months in 2011.

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Ripp, 61, a former chief financial officer at Time Warner, said that while he moved to restructure Time Inc. and push it into new businesses, he recognized that the company’s value was tied to its magazines’ credibility.

But he draws a distinction between the journalistic standards applied to magazines like Time and those for lighter fare, like Cooking Light. Would it be an ethical breach for an executive on Time Inc.’s business side to suggest a certain type of cream cheese to be used in a frosting recipe? By Time Inc.’s old standards, it would be.

“We will never, ever, ever, violate our trust with consumers,” Ripp said. “If you look at journalism at Time Inc., we have applied the concepts equally to covering budget deficits and food titles. Service journalism can be different.”

To mediate any disputes and help the newsroom side maintain its independence, Ripp recently rehired Norman Pearlstine, Time Inc.’s former editor in chief, to become the company’s chief content officer, essentially acting as a corporate referee.

Still, Ripp’s leadership has caused plenty of worry inside Time Inc. Interviews with roughly two dozen current and recently departed Time Inc. executives on the news and business sides revealed that employees feared that in order to position Time Inc. as a stand-alone publicly traded company with strong financial prospects, it would have to make deep cuts. Current employees also fear retribution if they resist publishers who might allow advertisers to influence content.

“People are really concerned about reporting to the business side,” said one former Time Inc. executive who requested anonymity to speak more candidly. “There’s a lot of trepidation about it.”

Among those who expressed concern was Nelson, the recently departed editor in chief. Before Ripp came aboard and brought on Pearlstine, the magazines’ editors all reported to Nelson, who was seen as a staunch defender of newsroom autonomy.

Late last summer, Ripp invited Nelson to Nantucket to discuss his plans, according to several current and former Time Inc. executives. Troubled by the idea of reporting to the business side, she resigned.

“When Joe suggested a new structure that required editors to report to the business heads, I wasn’t comfortable being part of it,” Nelson said. “You can’t take apart what you have promoted and built.”

Other executives find Ripp’s and Pearlstine’s intentions refreshing as they seek to make Time Inc. more business-savvy while also defending its journalism. Since Pearlstine started his job on Nov. 1, he has consulted Sports Illustrated on legally sensitive articles like the drug case of former NFL player Sam Hurd. He has also encouraged Time magazine to increase its conference offerings, urging executives to use the robust conference business of another company brand, Fortune, as a model.

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“Finally, we are out of this box that we’ve been in,” said Scott Omelianuk, editor of This Old House, who has won approval to expand the title’s television programming beyond its flagship show. “We’re going forward and we’re going to grow these brands. It was clear to me that there was a sea change at the company.”

Other Time magazines are pushing into new areas in search of revenue growth. Paul Fichtenbaum, editor of Time Inc.’s sports group, noted that Sports Illustrated had significantly expanded its television and online coverage. And some magazines had already been reporting to the business side, including those in Time Inc.’s lifestyle group like Real Simple.

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The need for more changes became clear when Time Warner announced the proposed Time Inc. spinoff last March. According to securities filings related to the planned stock offering, the company’s total revenues at Time Inc. have declined to $3.4 billion in 2012 from $3.7 billion in 2010. And the filing also highlighted the company’s heavy dependence on People, which last year accounted for 20 percent of its revenues.

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And now Nelson, the driving force behind People’s success, is gone. Nelson, who became Time Inc.’s first female editor in chief last January, replacing John Huey, also created InStyle, another lucrative title. Those two magazines generated nearly $1.9 billion in revenue in 2012, according to data tracked by the magazine consultant John Harrington.

Daniel Okrent, who worked at Time Inc. in newsroom management positions for more than two decades and left after Nelson’s departure, said her absence left a big hole.

“She was the cover genius for People magazine,” Okrent said. “She built InStyle from nothing. People is the money pot. People is where the profits come from.”

With Nelson’s departure, Ripp will now look for revenue-creation ideas from Pearlstine, who occupied Time Inc.’s editor in chief job from 1995 to 2005. Pearlstine said that in his newly defined role, magazine editors would not report to him but to the business side of their publications. Nor will he manage newsroom budgets. Instead he plans to focus on being a “second set of eyeballs” for controversial coverage, and help plot the company’s future.

“I have a long history of working closely with Joe Ripp and we have an easy, collaborative relationship that allows us to move quickly,” Pearlstine said.

Several Time Inc. executives question the hiring of Pearlstine, 71, arguing that the company should have hired a younger executive to identify opportunities in the digital-media age. Pearlstine said that no matter the medium — either in print or on the web — his job remained spotting great talent and giving them the responsibility to do great work.

“One of my big roles is to identify the people with the age and kind of digital experience that comes from not having been a creature of prior technologies,” Pearlstine said.