End of ‘Paternalistic Era’ : Time Inc. Will Lay Off 136; Earnings Tumble
Time Inc. took another step Thursday in its 3-month-old cost-cutting program by announcing that it will lay off 136 editorial and business employees from its magazine division and freeze hiring throughout its New York operations.
The publishing and entertainment company also reported that earnings declined for the final quarter of 1985 and for the year as a whole, partly because of a $13-million charge associated with the layoffs. Time’s fourth-quarter earnings fell 24% to $51 million on revenue of $946 million, while full-year profits sagged 7.4% to $200 million on revenue of $3.4 billion.
The layoffs include 62 editorial and 74 business employees. Another 52 jobs in the division have been eliminated since the cost-cutting program was launched in October, bringing total staff cuts to 188, or 5.8% of the division’s work force.
“A paternalistic era is ending at that company, and this is one more sign of it,” said one analyst, Mara R. Miesnieks of the Smith Barney, Harris Upham brokerage in New York.
Early in the day, the company distributed a memo telling employees that, as Time seeks to run a leaner operation, “regrettably but inevitably this effort must also involve reductions in our staff.”
The employees who will lose their jobs will be told within the next several days. A spokesman, Michael Luftman, said the $13-million layoff cost represents money that will be distributed among departing employees. They will receive severance pay based on their length of employment and will stay on the company’s payroll for two months.
The magazine division enjoyed booming growth in 1984, but it slowed in 1985. Meanwhile, Time also struggled to increase the profitability of its pay-television service, Home Box Office. The company has been eager to improve earnings partly because of persistent talk that Time might find itself the target of a corporate raider.
In October, the company said it intended to reduce costs by 2.5%, or by about $75 million annually.
Time would not say how the staff reductions will be distributed among the magazines, which include Time, Fortune, People, Sports Illustrated, Discover and Money. However, the staff of Discover, the smallest of the group, will not be touched.
Barry Lipton, president of the Newspaper Guild local in New York that represents the editorial employees, questioned the company’s need to cut costs through layoffs. He said that two months ago, Kelso Sutton, Time executive vice president, noted in a memo that the magazine division had doubled its revenue and more than tripled its earnings over the past five years. The division’s 1985 pretax income declined 6.4% for the year to $176 million.
Halts Test of Magazine
The company, which lost millions with the shutdown of its TV-Cable Week magazine in 1983, may also face an embarrassment with Picture Week, a mass-market magazine that Time last week withdrew from test marketing. Some observers doubt that the magazine will ever reach a formal launch.
“That may turn out to be their next problem publication,” Miesnieks said. “If they needed only to tinker with it, they wouldn’t have had to withdraw it from test marketing. They may see big problems.”
The yearly results also suggest that Time has not yet overcome the problems of HBO, which has been burdened by growing costs and slower growth in subscriptions.
For all of 1985, Time’s pretax operating income in its video division declined 6.3% to $45 million. The figure hints at HBO’s problems, Miesnieks said, since the other portion of the video division, Time’s big cable system operator, American Television & Communications, “is really doing well.”
Time noted that HBO’s subscriber base had risen by 100,000--a 7% gain from its 1984 base of 14.5 million viewers.
TIME INC.’S MAGAZINE LINEUP
CIRCULATION in millions
1985 1980 Time 5.9 5.9 People 2.8 2.4 Sports Illustrated 2.7 2.3 Life 1.5 1.4 Money 1.5 0.84 Fortune 0.72 0.68 Discover 0.85 0.69*
*Discover launched in late 1980; figures are for 1981
