People Magazine Worth 5% of Time Warner’s Stock, 2x More than TIME Magazine

Time Warner (NYSE:TWX) is one of the largest media companies in the world.  The company is in three primary businesses: (1) TV with HBO, CNN and TNT (2) film with Warner Brothers studios (3) magazine publishing.  Time Warner competes primarily with the other major media companies such as News Corp (NASDAQ:NWS), Disney (NYSE:DIS), Viacom (NYSE:VIA) and CBS (NYSE:CBS).

We estimate about 15% of Time Warner’s value is attributable to its magazine business, which includes renowned magazines like Fortune, InStyle, People, Sports Illustrated, and TIME.

Below we compare People and TIME magazines in terms of advertising and subscription revenues, and demonstrate why People is twice as valuable as TIME for Time Warner’s stock.

People Is 5% of Time Warner’s Stock, TIME Is 2.5%

People magazine is one of the top-selling weekly magazines in the US and focuses on celebrity news.  It publishes a number of specialty pieces every year like The Sexiest Man Alive, The Best and the Worst Dressed, and The Most Beautiful People that are quite popular among readers.  We estimate that People magazine constitutes about $1.5 billion of Time Warner’s value.

TIME is another weekly news magazine published by Time Warner and is famous for its special issues like TIME’s Person of the Year and TIME’s 100 Most Influential People List.  We estimate that TIME magazine contributes a little more than $0.7 billion of Time Warner’s value.

People Generates More Advertising Revenue Than TIME

People magazine generates about $205,000 per ad page in a year (or about $3,900 weekly per ad page), which is less than the $227,000 that TIME magazine generates annually per ad page.  However, the number of ad pages for the people magazine is about 3,300 per year, almost twice that of TIME magazine’s 1,680 ad pages per year.

Women make up around 70% of People magazine’s adult audience and the magazine’s ad rich content is targeted primarily at them.

People Yields More In Subscription Revenues Than TIME

During 2009, People magazine had an average weekly circulation base of about 3.6 million while TIME magazine had an average weekly circulation base of 3.4 million.

The difference in subscription revenues between People and TIME magazines can be attributed to the wide difference in their subscription fees. We estimate that People’s average subscription fee is about $2.8 per subscriber, which is about 180% more than TIME’s average subscriber fee of $1.

TIME magazine’s subscription fee has declined slightly over the years due to the magazine’s promotional offers, while the People magazine has been successful in maintaining its subscription fee growth.

For additional analysis and forecasts, here is our complete model for Time Warner’s stock.