Time Warner, News Corp Look To Capture Digital Shift With Next Issue Media

The shift of magazines to the digital medium has been happening for sometime and all of the big media companies such as News Corp (NASDAQ:NWS), Time Warner (NYSE:TWX) and Disney (NYSE:DIS) have been supporting it. It is clear that print sales are declining and apart from few successful newspapers such as The Wall Street Journal, the newspaper industry has seen a disappointing trend. In light of this digital shift, Next Issue Media has released an app for Google’s (NASDAQ:GOOG) Android-based devices where users will be able to subscribe to up to 32 titles for a single subscription fee. This is a joint venture between several media giants and should help recoup decline in print magazine sales.

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We estimate that the magazines business is quite significant for Time Warner, contributing close to 20% to its estimated value. On the other hand, magazines constitute about 7% to News Corp. Nevertheless this shift is applicable to all print media, and thus very important for News Corp as well which owes about 13% of its value to newspaper business. Thus, total print media accounts for 20% of News Corp’s value, similar to that of Time Warner.

Surprisingly, the app has come out on Android first instead of iOS. Perhaps the reason is that iOS already has a newsstand app although it is not specific to particular titles as this one. The business model is similar to that of Netflix – all you can eat for a particular subscription price. This model has been successful for Netflix and we’ll have to see how well it does for this new magazine app.

Our price estimate for Time Warner stands at $40.20, implying a discount of little less than 10% to the market price.

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