The move comes on the heels of earlier news that a rumored sale of Time Warner magazines to Iowa-based Meredith has fallen through. Under the terms of that proposed deal, Meredith would have acquired lifestyle and women’s interest brands like People.

Instead, Time Warner’s magazines will be slotted into a stand-alone corporation last year. In the company’s news release, CEO Jeff Bewkes said the move would be similar to earlier spin-offs involving Time Warner Cable and AOL.

“After a thorough review of options, we believe that a separation will better position both Time Warner and Time Inc. A complete spin-off 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,” said Bewkes, adding that current Time Inc. CEO Laura Lang will stay on in the short term for the transition but will soon step down.

The spin-off is likely to mean layoffs or closures at the newly independent magazine entity. In recent years, Time Warner has reaped large profits on its TV content but the magazines, despite their iconic status, have struggled in the face of an ongoing secular decline.

The split also mirrors what took place at media giant News Corp., which last year announced plans to move its publishing assets into a separate company.

According to New York Times sources, the Meredith deal failed to come through after Time Warner could not agree on money nor on what to do with four core titles — Time, Sports Illustrated, Fortune and Money — that Meredith did not want to take on.

Time Warner has not indicated how much equity it will retain in the newly spun-off corporation nor whether it will keep the “Time” in its name in the future. Not long ago, the company was known as AOL Time Warner; now, the Warner part is all that is left.

The service offers unlimited access to over 80 magazines on iPad, up from 39 at launch. Users can choose between an “unlimited basic” subscription, which offers access to monthly magazines like Glamour, Wired and Food & Wine for $9.99 per month, and an “unlimited premium” subscription, for $14.99 per month, that also includes weekly titles like People, New York, New Yorker and Sports Illustrated.

Next Issue Media, which started out in 2009 as a joint venture of Condé Nast, Hearst, Time Inc., News Corp and Meredith, was initially only available for Android 3.0 (Honeycomb) tablets before expanding to iPad — and, potentially, a wider audience — last July.

The Windows 8 launch is “the first time we’ve worked closely with a platform partner,” CEO Morgan Guenther told me. The app integrates features like “snap view” and multitasking from Microsoft’s interface; the software giant is also providing marketing and will feature the app in the Windows App store. “We saw the importance of moving beyond the tablet,” Guenther said, and Microsoft was a “motivated partner.”

Next Issue hopes that users will use the platform across devices. A single subscription can be authenticated on up to five devices. “With greater choice as to where, when and how they access their magazines, users can seamlessly switch from their tablet at home, to their Ultrabook on the road, to their company PC,” John Richards, senior director of Windows app marketing for Microsoft, said in a statement.

Less than half of Next Issue’s users pay

Discovery remains “an issue” on iPad, Guenther said, partly because the Next Issue iPad app isn’t available through Apple Newsstand. The company projects that by the end of this quarter, it will have about 120,000 total users — 50,000 of whom are actually paying for a subscription. Of that 50,000, about 60 percent have a premium subscription, Guenther said, and 40 percent have a basic subscription. The remaining 70,000 or so users are “authenticators” — users who already have a print subscription to a magazine and are accessing the print version through next Issue’s app.

In the next quarter, Next Issue plans to add Facebook integration and social sharing, followed by the integration of “clipping” technology that would let users virtually save individual articles or images from magazines. Guenther also says the library will expand to about 100 titles in the next couple of months.

Though Next Issue originally launched on Android, that platform hasn’t been much of a priority, Guenther said — to the extent that there are only 36 magazines available, less than half the number of titles available for iPad and Windows 8. In the next few months the company will “refresh” the experience on Android, Guenther said. It also plans to expand to Android smartphones and iPhones.

According to the Fortune article, which cited unidentified sources:

In one scenario, most of the company’s publishing titles, such as People, InStyle, and Real Simple, would be carved out and rolled into an independent company and sold to the undisclosed buyer. Under this plan, Time Warner would maintain control of at least three titles – Time, Sports Illustrated, and Fortune – according to the sources. A Time Warner spokesman says, “We never comment on speculations of this nature.”

The New York Times, also citing unidentified sources, elaborated that “Meredith did not express interest in purchasing Time Inc.’s sluggish news titles.”

In 2012, Time Inc. contributed $3.4 billion in revenue to Time Warner’s total revenues of $28.7 billion — a decline from 2011, which the company attributed to lower subscription and advertising revenues. The publishing division laid off about 500 people — roughly 6 percent of its global workforce — in January.

It’s unclear who a potential buyer for Time Inc. might be. BDT Capital, the bank that Fortune reports is involved in the deal, has ties to Warren Buffett, leading AdAge to speculate that Buffett could be involved in the deal.

This story was updated at 5:00 p.m. ET to reflect reports from the WSJ and NYT that Time Inc.’s potential buyer is Meredith.

The study also cites a 400 percent rise in so-called “aberrant traffic” in actions like registration and voting, resulting in a costly nuisance for both publishers and advertisers. Solve Media says it conducted the 18-month study on the basis of 2 billion authentications performed across more than 5,000 publishing sites.

The upshot, according to Solve Media, is that advertisers may be directing up to 10 percent of their online advertising dollars at this fake, robot-driven traffic. Meanwhile, publishers are burdened with purging bots from their comment boards and registration systems.

Solve Media seeks to solve this problem by helping publishers keep the bots away with ”Captchas” — those pictures or squiggly letters that require you to type something.

According to Andy Wilson, SVP of Digital Marketing at Meredith Corp, the Captcha tools have reduced the number of bots entering contests. In the past, he says, bots entered to get their babies on the cover of Parents magazine or to win $25,000 from Better Homse & Gardens.

Ari Jacoby, CEO of Solve Media, says that it’s important for publishers to aggressively battle the bots.

“Once bots begin to attack a sight, they’re everywhere on the site … But once they meet significant resistance, they’re trained to go away.”

Solve Media also claims that its Captchas are calibrated to be easy for humans and difficult for bots. This means that a real person is less likely to encounter an indecipherable squiggly line but instead will get a straight-forward message to type like “Toyota Corolla” (which presents, of course, another advertising opportunity).

Finally, here’s an infographic that Solve Media is using to present its study findings:

(Image by   Principal via Shutterstock)

Next Issue’s expansion to iPad is its first real chance at widespread adoption. The company started up back in 2009, when Condé Nast, Hearst, Meredith, News Corp and Time Inc. teamed up to create a cross-platform digital newsstand — but there were no visible results until the launch of a digital storefront “preview” on the Samsung Galaxy tablet in May 2011. The launch for Android 3.0 (Honeycomb) and above in April 2012 was a small step forward, but few people owned the right tablet.

With Next Issue’s launch on iPad, there’s a better opportunity to see whether readers are interested in all-you-can-read tablet magazines for a flat monthly fee. Thirty-nine popular titles are available now (full list below), with more expected later this year. Subscribers can choose an “unlimited basic” subscription for $9.99 per month, which gives them access to all monthly and biweekly titles, or an “unlimited premium” subscription for $14.99 per month, which adds weeklies like Time and the New Yorker to the mix. They can also purchase individual magazine subscriptions, ranging in price from $1.99 to $5.99 per month, and individual magazine issues, ranging in price from $2.49 to $5.99 per issue. There are free 30-day trials for both unlimited basic and premium subscriptions.

If a user already subscribes to a certain title, he or she can read that digital edition from within the app for free “or a nominal cost,” depending on whether the publisher bundles print and digital editions (as Time Inc., Condé Nast and Meredith do) or charges separately for digital editions (as Hearst does).

“GQ” magazine in carousel view

Is it a good deal?

Next Issue’s app looks great on both Android and iPad, and its availability on iPad opens it up to many more magazine lovers. But will they find unlimited subscriptions worth the fee? It probably depends on how much they’re paying for magazine subscriptions now, whether they’re willing to shift the money they’re paying from print to digital, how much they value a print subscription, how much they want to read popular magazines in general versus specific titles, and whether Next Issue has the titles they want. (As my colleague Mathew Ingram notes, this is also not the platform for people who prefer a Flipboard-style, social-based method of reading content.)

A personal example: My household subscribes to the print versions of New Yorker, Bon Appetit, Real Simple, Martha Stewart Living and the Economist. The total annual cost we pay for those magazines (using the prices listed on the magazine website, and assuming no discounts for multi-year subscriptions or other special offers) is $256.98, or about $21 a month. So an “unlimited premium” Next Issue Media subscription should be a bargain for us at $14.99 a month — except it doesn’t include print issues and two of the magazines we subscribe to, Martha Stewart Living and the Economist, aren’t available, at least for now.

As Next Issue adds more magazines, though — CEO Morgan Guenther tells me that the company plans to double the number of titles it offers this year — it becomes a better deal, and dropping print subscriptions becomes more enticing. In 2013, Next Issue will add its first “outside publisher” titles — i.e., magazines not published by the five companies already participating in the JV — in “key segments.” (That could include magazines like The Economist and Consumer Reports.) The company also plans to expand to some international markets, add search and social features, add some advertising and expand to newspapers (at which point titles from News Corp, the fifth partner in the JV, will become available).

The list of magazines available now, by publisher

*=weekly magazine only included in premium subscription package

Condé Nast

• Allure
• Bon Appétit
• Brides
• Condé Nast Traveler
• Glamour
• Golf Digest
• GQ
• The New Yorker*
• Self
• Vanity Fair
• Vogue
• Wired

Hearst

• Car and Driver
• Elle
• Esquire
• Popular Mechanics

Meredith

• Better Homes and Gardens
• Fitness
• Parents

Time

• All You
• Coastal Living
• Cooking Light
• Entertainment Weekly
• Essence
• Fortune
• Golf
• Health
• InStyle
• Money
• People*
• People en Español
• People StyleWatch
• Real Simple
• Southern Living
• Sports Illustrated*
• Sports Illustrated Kids
• Sunset
• This Old House
• Time*

Houghton Mifflin Harcourt, which publishes K-12 educational books and general trade books, will focus on — what else? — tech. CEO Linda Zecher, who was previously a corporate VP at Microsoft, tells the WSJ that “she is pushing Houghton to strike more partnership deals, which she described as far more common in the tech business.” The company is also pursuing a “device-agnostic” strategy:

I want to broaden our technology partnerships. Bringing in your own device will one day be important in high school. We need to have products on all those devices, be it a Kindle Fire or a Microsoft Surface.

Microsoft’s Surface tablet, which the company announced last month, isn’t for sale yet, and pricing and availability details have not been announced. Saying that your books will be available on all devices sounds good, but in reality the cash-strapped HMH is likely to have to pick and choose which platforms to invest in. As Meredith chief digital officer Liz Schimel said at paidContent 2012 in May, “We get approached by a lot of companies and say no. HP knocked on the door, and we said no, we’re not going to do that one.” Most of Meredith’s readers are women, so if a platform or device is “too male-centric or too niche, we don’t do it.”

Likewise, HMH will need to look at where its readers are — and look at the types of devices high-school students are actually likely to own — and plan accordingly.

Jim Bankoff, Chairman and CEO, Vox Media

Data helps destroy containers, and that’s a good thing. Data creates new content and information experiences and helps bring an end to the notion of content silos, Betaworks’ John Borthwick said: “The moment you start thinking about it as information, you start to think less about the package and more about the users.” Forrester’s James McQuivey pointed out that it’s not just a “tablet or iPad world,” but an “everything world” — and millions of people are consuming content not on iPads or e-readers but on gaming systems like the Xbox 360.

Digital storytelling is a native art. Stories on the Internet are not a new form of magazine or newspaper stories, but a medium in their own right — just like radio or TV. Publishers should develop their platforms accordingly rather than just repurposing other print vehicles. When Wenner Media released Us Weekly on iPad for the first time, it figured out a way to enable the “passalong” that’s so popular with the magazine’s print edition. As Vox Media CEO Jim Bankoff told us, George Lucas had to build a new story-telling platform called Lucasfilm so that he could tell the story of “Star Wars.” And don’t say blogging is dead: “That’s like saying creativity is dead, or personal expression is dead,” said WordPress founder Matt Mullenweg.

Om Malik interviews John Borthwick, founder and CEO, Betaworks.

Not all “media” are created equal. Union Square’s Fred Wilson and Betaworks’ John Borthwick gave a rude awakening to Big Media executives, urging them to give up control of their content — and even to stop calling it “content.” But declaring new digital networks victors over somewhat different traditional print and broadcast operators after simply labelling each “media” can sometimes seem counterproductive and insufficient: What’s being created now are entirely new kinds of information vehicles. The industry is truly “at the crossroads” suggested by the paidContent 2012 conference’s subtitle– but technologists and information producers may now be heading in different directions, as well as speaking different languages.

Publishers have to sell their brands directly to consumers. “Publishing companies need to understand that the thing [companies] like Amazon, Barnes & Noble and other retailers really respect is a brand,” Pottermore CEO Charlie Redmayne said in an explanation of why those companies agreed to send customers directly to the Pottermore site to buy e-books. “If we’ve demonstrated anything, it’s the power of a brand,” he said, noting that over half of Pottermore’s e-book sales result from readers coming directly to the site instead of being referred there by the retailers. Not every brand is Harry Potter — but “need to understand that their role in the future is creating these brands,” Redmayne said.

It’s time to toss CPM as a yardstick for online advertising success. How can Facebook be so inept at advertising? Because it’s handing advertisers a sledgehammer not a scalpel. Betaworks’ Borthwick and GigaOM’s Om Malik say it’s time to discard old-fashioned display ads as the basic unit of online ad success. Instead, it’s time for advertisers to adapt their ads to the evolving nature of the internet itself. That means forgetting about CPMs and focusing on data and social dynamics. On a broader level, it means re-imagining basic precepts of advertising and product discovery in a world where Web pages are being eclipsed by new types of online discovery and interaction.

If you didn’t make it to the TimesCenter yesterday, you’ll find video of all yesterday’s panels here (registration required). And let us know your takeaways from the day in the comments.

Liz Schimel, EVP and Chief Digital Officer, Meredith National Media Group

The biggest challenge for a media company like Meredith is shifting the focus from customer acquisition to customer engagement across platforms, Meredith chief digital officer Liz Schimel said at paidContent 2012 this morning.

Part of that means making the brands available on the right platforms, but not all of them. “We get approached by a lot of companies and say no,” Schimel said. “HP knocked on the door, and we said no, we’re not going to do that one.” Most of Meredith’s readers are “mass-market women,” so if a platform or device is “too male-centric or too niche, we don’t do it.”

Nick Bogaty, Adobe’s director of business development for the digital publishing group, says Adobe’s main goal in the next five years is to “enable publishers to continue to drive paid circulation and make this an attractive platform for advertisers. … That’s the key thing we’re trying to solve as a technology provider.” Adobe recently worked with Wenner Media to create the first iPad edition of “Us Weekly.” The company noticed a lot of people left copies of the celebrity gossip magazine on planes, and other people picked them up. So Adobe built “pass-along” features into Us Weekly’s digital edition. Readers can share a web version of the digital magazine — and their friends can sample it before hitting a paywall.

Barnes & Noble’s Jonathan Shar, GM of digital newsstand and emerging content, says more consumers want ”an edition that’s customized for a platform,” taking factors like screen size into account. Barnes & Noble has found that the best way to do that is often through PDFs with additional features — like adjustable type size — layered on top to customize a digital edition for a Nook tablet or Nook iPhone app.

Check out the rest of our coverage of paidContent 2012. Full archived video on livestream (registration required).

Condé Nast, Hearst, Meredith, News Corp and Time Inc. joined to launch Next Issue Media back in 2009 to sell digital magazines and other content from one cross-platform digital newsstand. But rollout has been slow, with little visible action since the company launched a digital storefront “preview” on the Samsung Galaxy tablet last May.

Now Next Issue Media launches for Android 3.0 and above with 32 popular magazines available. The company expects to add more later this year, eventually getting up to about 75 titles. The titles available are “premium, mass-market titles,” CEO Morgan Guenther told paidContent. “We’re taking a big, fat, short-tail content approach to this and going where the readers are.” Instead of downloading separate magazine apps, users download the Next Issue Media app and can read all the magazines within it.

The most innovative part of the launch is the “all-you-can-read” plan. Users can pay $9.99 per month for unlimited access to monthly and bi-weekly magazines, or $14.99 per month for monthlies and weeklies. Those prices include access to back issues — but the back catalog starts from January 1, 2012, so readers won’t see content from before that.

But will you be able to use it?

The cloud-based app only works with an Internet connection, though users can save individual issues to their device to read them offline. There are no social networking or sharing features yet, though Guenther said those are planned.

For now the biggest limitation is platform. Guenther said Next Issue will submit an iPad app to Apple “within an eight-week window” but it’s unclear how long the approval process will take. And because Kindle Fire runs a forked version of Android 2.3, it isn’t compatible with the Next Issue app.

Allrecipes.com has about 25 million monthly unique visitors. According to Meredith’s press release, the acquisition “more than doubles the audience of the Meredith Women’s Network,” which includes its magazines’ websites and Recipe.com, “to nearly 40 million unduplicated unique monthly visitors,” and “nearly doubles annual digital revenues for the Meredith Women’s Network.” (Meredith does not release annual digital revenue figures.)

Reader’s Digest bought Allrecipes for around $66 million in 2006 and has been shopping it around since last year. Rumored bidders included Random House, Amazon (NSDQ: AMZN) and AOL (NYSE: AOL), according to the NY Post.

Meredith recently acquired Every Day with Rachael Ray magazine and its digital assets, Family Fun magazine and its digital assets and EatingWell.

Full release on page 2.

MEREDITH SIGNIFICANTLY INCREASES ITS DIGITAL SCALE WITH ACQUISITION OF

ALLRECIPES.COM, WORLD’S TOP FOOD WEBSITE, FROM READER’S DIGEST ASSOCIATION

Doubles Reach of Meredith Women’s Network; Supports Total Shareholder Return Strategy

DES MOINES, IA (January 24, 2012) – Meredith Corporation (NYSE:MDP; http://www.meredith.com) and The Reader’s Digest Association, Inc. announced today that Meredith, the leading media and marketing company serving American women, has agreed to purchase Allrecipes.com, the world’s No. 1 digital food site.
“The acquisition of Allrecipes.com, the market leader in the digital food space, significantly enhances our leading consumer and advertiser proposition,” said Meredith Chairman and CEO Steve Lacy. “It more than doubles the scale of the Meredith Women’s Digital Network, and is expected to drive incremental revenue and profit growth, adding to our already strong free cash flow over time.”
The acquisition of a digital brand of scale aligns well with Meredith’s Total Shareholder Return (TSR) financial strategy, which was announced on October 25, 2011. The TSR strategy includes (1) An increase in its annual stock dividend by 50 percent to $1.53 per share; (2) A new $100 million share repurchase authorization; and (3) Strategic investments to drive incremental revenue and profit growth.
The transaction, valued at $175 million, is expected to close later this quarter. Meredith plans to invest in Allrecipes.com to optimize the site for today’s growing online and mobile audiences. This investment spending, along with normal business seasonality, is expected to make the acquisition slightly dilutive – approximately $0.10 per share, or less than 4 percent – to Meredith’s fiscal 2012 full year financial performance. Meredith expects the acquisition will be modestly accretive to earnings per share and free cash flow in fiscal 2013.
The addition of Allrecipes.com fits with Meredith’s previously stated strategic acquisition criteria: (1) National media brands that provide access to new audiences and advertising categories; and (2) Digital platforms that significantly increase scale. Specifically, the addition of Allrecipes.com to Meredith:

• Nearly doubles annual digital revenues for the Meredith Women’s Network.

• Gives Meredith the world’s No. 1 food website to pair with its expanding multi-platform food portfolio, enabling Meredith to offer advertisers access to more than 100 million unduplicated American women.

• More than doubles the audience of the Meredith Women’s Network to nearly 40 million unduplicated monthly unique visitors, making it the No. 1 premium owned and operated website in the important Women’s Lifestyle Category, according to the most recent comScore data.

• Provides Meredith access to a large and vibrant audience to market other products to, including print and tablet magazine subscriptions, as well as drive other E-Commerce opportunities.

• Enables Meredith to apply Allrecipes.com’s proprietary Search Engine Optimization (SEO) expertise across Meredith’s digital platforms, which will improve performance, and reduce Search Engine Marketing (SEM) spending.

• Introduces Meredith brands to new audiences, as Allrecipes.com has 17 sites in 22 countries.

“The acquisition of Allrecipes.com significantly enhances our digital platform and reinforces our leadership position in the food category,” said Meredith National Media Group President Tom Harty. “It increases our relevance with new, younger audiences, and offers advertisers an unmatched ability to now connect with an audience of more than 100 million consumers. We are excited to add Allrecipes.com, the world’s No. 1 food website, to our strong portfolio of digital media brands.”
Allrecipes.com currently has a database of over 500,000 recipes. Its U.S. audience is 70 percent female with a mean household income of $73,000, and it reaches nine out of 10 primary grocery decision makers. Allrecipes.com mobile apps have been downloaded by over 11 million consumers, and they are the No. 1 download on Android, iPhone, and iPad recipe applications. It is also the top food recipe channel on YouTube.
“Allrecipes.com is a dynamic, growing business and our sale process generated significant excitement,” said Robert Guth, Reader’s Digest Association president and CEO. “We are very pleased to have reached agreement with Meredith. We have worked well with them on a past transaction, so we know they will be a great home for this business and the team. For RDA, this is a significant step forward in our commitment to focus our resources on our core businesses, such as the Reader’s Digest brand.”
Added Lisa Sharples, President of Allrecipes.com, “Meredith is the perfect home for Allrecipes.com. Meredith’s laser focus on women, existing strength in food, strong relationship with advertisers and proven consumer marketing expertise are very attractive. Together, I’m confident we can grow the Allrecipes.com brand as well as the Meredith Women’s Network across digital, mobile and social media platforms.”
The acquisition of Allrecipes.com adds to actions Meredith has taken in the last year to strengthen its position as the leader in the digital and food content marketplace. These include the:

• Acquisition of Every Day with Rachael Ray magazine and its related digital media assets;
• Acquisition of FamilyFun magazine and its related digital applications;
• Acquisition of EatingWell, a multi-channel food brand focused on healthy eating and wellness;
• Launch of Recipe.com, a multi-channel food brand that pairs recipes with digital coupons and savings that is already attracting 2 million monthly unique visitors
• Expansion of food and lifestyle content in its leading portfolio of brands across tablet products including the iPad, NOOKColor, Kindle Fire, and Samsung Galaxy.
• Introduction of 12 new apps resulting in more than 3 million downloads, including BHG.com’s highly successful Must Have Recipes; and
• Creation of six new Special Interest Media titles, bringing the total in the food space to nearly 40.

“We are constantly looking for strategic acquisitions and investment opportunities to expand our reach and increase shareholder value,” said Meredith Chief Development Officer John Zieser.
BDT & Company served as financial advisor to Meredith, and McDermott, Will & Emery served as its legal advisors. Morgan Stanley acted as lead financial advisor to Reader’s Digest. Evercore Partners acted as financial advisor to Reader’s Digest. Weil, Gotshal and Manges acted as legal advisor to Reader’s Digest.