Whether Huey read them or not, Moore’s magazines were driving the profits of the company. People alone constitutes close to 40 percent of Time Inc.’s profit. By contrast, Time magazine brings in just 5 percent. And its profits, while still strong compared with most magazines, were on the wane. At the top of the dot-com boom, 1999, Time made about $95 million in worldwide profit; last year, it made about $50 million.
What’s more, the allies Huey had once had in the Time Inc. corporate hierarchy were gone. The former Time Inc. CEO and Alabama native Don Logan, who was Huey’s bass-fishing buddy, had retired from the upper ranks of Time Warner. Pearlstine, who helped Huey rise to the top of Time Inc., had left for a private-equity job. And just before Huey took over as editor-in-chief, Moore pushed out three of his remaining friends—Time Inc. vice-president Richard Atkinson, Time magazine’s president, Eileen Naughton, and the popular head of Time Inc.’s advertising sales, Jack Haire—in a sweeping set of layoffs meant to quickly balance the books. Huey was shocked and angry—and suddenly isolated. “This is war,” he declared to a friend, in his usual bombastic style.
“It was a tough personal thing, but this is business,” Huey says now, growing moody when I bring up the firings. He says he and Moore “had a frank and open discussion of those issues, and I also expressed my total recognition that these were her decisions and she has to do what she has to do.”
The colleagues Huey had left on the 34th floor weren’t his natural buddies: Moore herself and the new co-COO overseeing the magazines Huey cared about, John Squires, a reserved business executive from Idaho. “This is not a partnership he would have chosen,” says a friend of his. “He has no choice. He knows that.”
Looking on the bright side, Huey says the whole affair actually made things easier. Now there were fewer people to argue with over the changes to come at Time, even if there was no one left to watch his back either. “There had never been that unanimity on that before,” says Huey. “It was more complicated for a variety of reasons, and now it was pretty simple.”
What was simple was that something had to be done about Time. Huey and Moore both saw the problem coming. Time had long depended on a “rate base”—the number of copies Time tells advertisers it puts in readers’ hands—of about 4 million copies. Former CEO Don Logan, who made Time Inc. enormously profitable during the nineties, had told Time-magazine publishers to always protect that base, because it gave Time enormous advantage over Newsweek’s smaller circulation of 3.1 million.
But in the declining ad markets after 9/11, advertisers began scrutinizing the numbers and questioning whether all 4 million of those magazines were really being read, since many thousands of them were given away for free. As Time’s traditional advertisers—especially Detroit automakers—began pulling back on spending, it became increasingly difficult for the magazine to justify its rate base.
So Time decided to do something rare in the publishing industry: drop almost a fifth of its readers. That in turn set off a number of fairly drastic changes. The advertising revenue lost by shrinking the rate base from 4 million to 3.25 million would have to come from raising the price of newsstand copies by $1 and cutting editorial staff from the masthead. To meet cost-cutting targets issued by Moore, Huey hired McKinsey & Company this past fall to examine the editorial operations of Time Inc. so Huey could execute a mass firing earlier this year. The bloodletting eliminated some 50 people at Time, which saved the magazine about $6 million (though the company had hoped for more).
The cutbacks have clearly taken their toll on Huey. In early February, when he attended a meeting with the heads of other divisions of Time Inc., he was stunned to find that many other departments in the company hadn’t met their cost-cutting targets. According to people familiar with the scene, Huey grew red-faced and went into an emotional tirade, angry that he’d fulfilled his financial mandate but others hadn’t. “He was venting and screaming,” says a source. “He felt betrayed. He trusted that everybody was going to do what they said.”
With pressure on the circulation front, advertising pages stagnant, and more cost cuts on the horizon, Time was going to have to make a leap to another business model altogether—a version of Time that could do a lot more with a lot less. It was not so much the blowing up that Huey had envisioned as it was a cutting back. Though that’s not how it was sold to the publishing community. Ads that ran in the Times and trade magazines touted a coming revolution: “We are about to take the publishing industry somewhere it’s never been before: the future,” read one ad. “The most trusted magazine in the world is about to become the most innovative,” said another.