Time Warner Is Following Lead Of News Corp In Separating Its Print From Its TV And Movie Empire

Time Warner Inc. (NYSE:TWX) is taking a cue from Rupert Murdoch and cutting off an atrophying appendage to its lucrative television and movie ventures.

On Wednesday, the New York City-based media and entertainment conglomerate said it will exile its magazine unit, Time Inc., which produces Time, Sports Illustrated, Fortune, People and other magazines, to its own publicly listed entity worth an estimated $2.5 billion. The company’s total market cap is more than $50 billion.

“We believe that a separation will better position both Time Warner and Time Inc,” said Jeff Bewkes, Time Warner chairman and CEO, in announcing the decision late Wednesday. “A complete spinoff of Time Inc. provides strategic clarity for Time Warner Inc., enabling us to focus entirely on our television networks and film and TV production businesses, and improves our growth profile.”

Like the print publishing industry as a whole, Time Inc. has been suffering a steep drop in ad and subscription revenue amid the Internet media revolution, and the company’s online strategy hasn’t come close to making up for the losses. Murdoch’s News Corp (Nasdaq:NWSA) has been suffering the same problem, and is also in the process of spinning off its print and book publishing assets that were weighing down on the company’s entertainment and television ventures.

In January, Time Inc. announced it was cutting 6 percent of its workforce, and this week CEO Laura Lang said she was leaving because she has no interest in participating in the move to take the unit public, according to CBS News.

Lang and other company top brass “have lacked the imagination to look at the balance of the industry and gather the courage to move beyond the traditional websites that the company operates, at least to experiment with models that might help reverse Time's slide,” wrote Douglas McIntyre, a former Time Inc. executive and current partner at 24/7 Wall St., LLC, following the announcement of the layoffs.

Time Warner had been in talks with women’s magazine publisher Meredith Corporation (NYSE:MDP) to merge its lifestyle publications – People, InStyle and Real Simple – with Meredith under a new company, but those talks faltered over the devilish details of which magazines Time Warner would pass off and how the new company would be managed.

Time Warner’s efforts to separate the chaff of an ailing print unit from the wheat of its television and movie empire, which includes TNT, CNN, HBO and Warner Bros., is a path New York City-based News Corp. started heading down last year when it announced the same decision to separate its own newspaper and publishing endeavors -- including HarperCollins, The Wall Street Journal, The New York Post and Dow Jones Newswires – from its own lucrative television and movie ventures, like 20^th Century Fox, Fox Cable and a slew of global broadcast and network ventures.