TWX » Topics » Real Simple

This excerpt taken from the TWX 10-K filed Mar 11, 2005.
Real Simple is a monthly magazine that focuses on life, home, body and soul and provides practical solutions for simplifying various aspects of busy lives.

      IPC Media, the U.K.’s leading consumer magazine publisher, publishes over 80 magazines and numerous special issues and guides in the U.K. and Australia. These publications are largely focused in the television, women’s lifestyle, home and garden, leisure and men’s lifestyle categories. Its magazines include What’s on TV, TV Times, Woman, Marie Claire, Homes & Gardens, Country Life, Loaded, Horse & Hound and the new Nuts.

      Southern Progress Corporation publishes 8 magazines, including the regional lifestyle magazines Southern Living and Sunset and the specialty magazines Cooking Light and Health.

      Time4 Media publishes 17 sport and outdoor activity enthusiast magazines such as Golf, Field & Stream, Outdoor Life, Ski, Yachting, Salt Water Sportsman, Transworld Skateboarding and Transworld Snowboarding, as well as Popular Science. In addition, Time4 Media oversees the publication and production of This Old House magazine and several television series, including This Old House and Ask This Old House.

      The Parenting Group publishes Parenting and Babytalk magazines.

      Time Inc. also has management responsibility under a management contract for the American Express Publishing Corporation’s publishing operations, including its lifestyle magazines Travel & Leisure, Food & Wine and Departures.

      Time Inc. has a 49% equity stake in Essence Communications Partners, a partnership which publishes Essence, the premier magazine for African-American women. Time Inc. has signed an agreement in principle to acquire the remaining 51% of the partnership that it does not already own. This transaction is expected to close in the first quarter of 2005.

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Table of Contents

 
Advertising

      Advertising carried in Time Inc.’s U.S. magazines is predominantly consumer advertising, including domestic and foreign automobiles, toiletries and cosmetics, food, media and entertainment, pharmaceuticals, retail and department stores, computers and technology, and financial services. In 2004, Time Inc. magazines accounted for approximately 24.2% of the total U.S. advertising revenue in consumer magazines, as measured by the Publishers Information Bureau (PIB). People, Sports Illustrated and Time were ranked 1, 2 and 4, respectively, by PIB, and Time Inc. had 8 of the 30 leading magazines in terms of advertising dollars.

 
Circulation

      Through the sale of magazines to consumers, circulation generates significant revenues for Time Inc. In addition, circulation is an important component in determining Time Inc.’s advertising revenues because advertising page rates are based on circulation and readership. Most of Time Inc.’s U.S. magazines are sold primarily by subscription and delivered to subscribers through the mail. Most of Time Inc.’s international magazines are sold primarily at newsstand. Subscriptions are sold primarily through direct mail and online solicitation, subscription sales agents, marketing agreements with other companies and insert cards in Time Inc. magazines and other publications.

      Time Inc. owns approximately 92% of Synapse Group, Inc. (“Synapse”), a leading magazine subscription agent in the U.S. Synapse sells magazine subscriptions principally through marketing relationships with credit card issuers, consumer catalog companies, commercial airlines with frequent flier programs and Internet businesses. Under the relevant agreements, in April 2006 the other Synapse shareholders may require Time Inc. to purchase their entire remaining interest in Synapse (the “Synapse Put”), and in May 2006 Time Inc. may require the Synapse shareholders to sell their entire interest in Synapse to Time Inc. (the “Time Inc. Call”). The price to be paid upon exercise of either the Synapse Put or the Time Inc. Call would be based upon Synapse’s earnings for 2005.

      Newsstand sales of magazines, which are reported as a component of Subscription revenues, are sold through traditional newsstands as well as other retail outlets such as Wal-Mart, supermarkets and convenience and drug stores, and may or may not result in repeat purchases and revenues. Magazines are supplied by wholesalers or directly through a Time Inc. subsidiary. Time/ Warner Retail Sales & Marketing Inc. is responsible for distributing and marketing newsstand copies of Time Inc. magazines and books and certain other publishers’ magazines and books sold through wholesalers primarily in the U.S. and Canada.

 
Paper and Printing

      Paper constitutes a significant component of physical costs in the production of magazines. During 2004, Time Inc. purchased over half a million tons of paper principally from four independent manufacturers.

      Printing and binding for Time Inc. magazines are performed primarily by major domestic and international independent printing concerns in multiple locations in the U.S. and in locations in approximately seven other countries. Magazine printing contracts are either fixed-term or open-ended at fixed prices with, in some cases, adjustments based on certain criteria.

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