Time Life Music Operation Will Have New Owner
January, 6 2004
The New York Times, 01.06.04
Time Inc., the publishing division of Time Warner, said yesterday that it was selling Time Life Inc., its direct-marketing music division that uses ubiquitous cable commercials to sell music collections like "Romantic Oldies" and "Classic Country."
The buyer is Direct Holdings Worldwide, which also owns Lillian Vernon, the specialty catalog and online retailer that markets household items, kitchenware and gardening products. Direct Holdings is a partnership of the investment firms ZelnickMedia and Ripplewood Holdings.
Terms of the sale were not announced, but company executives said that the agreement included incentives making the eventual purchase price dependent on the new owner's ability to turn around the business, which lost more than $50 million in the first nine months of 2003, after earning more than $20 million as recently as 2001. The division is expected to report 2003 revenue of about $350 million.
It is a safe bet the purchase price will be smaller than the $2.6 billion Time Warner agreed to accept in its sale of the Warner Music division to an investor group led by the Seagram heir Edgar Bronfman Jr.
Time Inc. executives, struggling with a challenging publishing environment, were anxious to rid themselves of the earnings drag of the direct-marketing music division, where sales have suffered from a lack of hits and the downturn in the music business.
The main businesses of Time Inc. include the weekly magazines People, Sports Illustrated and Time, and the monthly magazines InStyle and Real Simple.
"We found a buyer who gave the right home to a business which was struggling," said Richard Atkinson, chief financial officer of Time Inc. "The sale allows us to focus on our core magazine business, which we think is well positioned for long-term growth."
Strauss Zelnick, a partner in ZelnickMedia and the former chief executive of Bertelsmann's music division, BMG Entertainment, is the chief executive of Direct Holdings. Mr. Zelnick said yesterday that the deal had been under discussion since last May, when Time Warner's chairman, Richard D. Parsons, called him to discuss the possible sale of Time Life.
Time Inc. executives said that they had chosen Direct Holdings in part because they felt it would be a good steward of the Time Life name; the company will continue to do business under that name. They also said Time Inc. had no desire to go through a public auction, after experiencing Time Warner's efforts to sell its book division last year. That auction was canceled in June after Bertelsmann, the chief bidder, dropped out at the last minute.
Also yesterday, the British publishing division of Time Warner, IPC Media, announced that it would begin producing a weekly general interest men's magazine in Britain called Nuts. The first issue will be mailed free to one million men in Britain next week and the first paid issue will go on sale on Jan. 22.
With a mix of sports, television and news coverage, along with photographic features on women, Nuts joins a collection of racy men's magazines at the division, including Loaded, NME and Uncut.