Old Media in the Bizarro World

Time magazine, the flagship publication of Time Warner’s Time Inc., is cutting its rate base, or the circulation it guarantees advertisers, according to Ed McCarrick, world-wide publisher of Time magazine. He says Time will cut the rate base by 750,000 to 3.25 million, a reduction of about 19%.

—The Wall Street Journal

It’s hard to know where to begin on this report of Time magazine’s desperate measures to keep publishing, printing, stacking, trucking, and delivering an increasingly irrelevant weekly news magazine to a world now getting its news immediately and effortlessly the same way these words are brought to you: online.

No printing, stacking, trucking, delivering or recycling required.

Time had kept circulation artificially high by offering cut-rate subscriptions, the account went on, noting, Time’s ad pages are up 2% for the first 10 months of the year, according to Publishers Information Bureau, but were down 12.2% in 2005.

Now, for starters, you would think the fact that Time needed “cut-rate” subscriptions to keep up the magazine’s circulation would have clued in management to the fact that in order to keep readers interested, something needed to change—i.e. the price of the magazine.

And you would be right, except you would be wrong.

Let me explain.

You would be right in thinking that the Time elders would realize the need to change their magazine’s price in order to maintain circulation in the face of compelling alternatives to a high-priced, once-a-week bound copy of old information headed straight for the recycling bin.

But you would be wrong in thinking they are reducing the price.

It seems Time (and perhaps other Old Media companies, but we only have one sample in this case) hires only people from Superman’s Bizarro World (frequently invoked by Jerry Seinfeld)—where things are the opposite of what they should be.

For instead of lowering their costs and passing on the savings to induce readers to continue buying, the Time magazine elders from the Bizarro World decided to raise prices.

I am not making that up:

Time is also raising its newsstand cover price to $4.95 from $3.95, Mr. McCarrick says, and offering advertisers the option to purchase space in the magazine based on a guaranteed audience measure.

So what we have here is a business facing declining demand, that is raising prices to meet the challenge.

Perhaps this is merely a knee-jerk reaction by the elders at Time to changes in their external environment, and they are simply reacting as all Old Media types grew accustomed to reacting whenever costs rose or circulation declined.

In that case, I would suggest they take a lesson from Seinfeld himself, by doing precisely the opposite of these apparently deeply held instincts:

George: Elaine, bald men, with no jobs, and no money, who live with their parents, don’t approach strange women.

Jerry: Well here’s your chance to try the opposite. Instead of tuna salad and being intimidated by women, chicken salad and going right up to them.

George: Yeah, I should do the opposite, I should.

Jerry: If every instinct you have is wrong, then the opposite would have to be right.

After all, weekly news magazines with declining circulation, terrible demographics, and a high fixed-cost structure don’t raise prices.

Except, perhaps, in the Bizarro World.

Jeff Matthews
I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.