Time Inc. in iPad Deal With Apple

Time Inc., the country's largest magazine publisher, has reached a deal with Apple Inc. AAPL -1.96 % to make all its iPad editions free for print subscribers, marking a break in the impasse between publishers and Apple and lending support to Time's contention that it's business-as-usual after the ouster of its chief executive.

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Time Inc.

Starting Monday, subscribers to Sports Illustrated, Time and Fortune magazines will be able to access the iPad editions via the apps, which will be able to authenticate them as subscribers. Time Inc.'s People magazine already had such an arrangement, but readers of most publications have had to pay separately for the iPad version regardless of their subscriber status.

The deal comes as the executive search firm hired by parent company Time Warner Inc. TWX -0.74 % begins to identify candidates to replace Jack Griffin, who was fired as head of Time Inc. in February over what Time Warner Chief Executive Jeff Bewkes characterized as a clash of styles. Since then, Time Inc. has been run by a three-man committee of executives who have attempted to steady the publisher at a critical time.

Though revenue declines have abated, Time Inc. faces key questions about both its prospects for growth and how it fits into Time Warner's long-term plans. The lion's share of Time Inc.'s profit comes from a small group of magazines led by People and Sports Illustrated that is heavily dependent on a U.S. market with limited upside. Time Inc.'s closest competitor, Hearst Corp., recently spent nearly $900 million to acquire all or parts of about 100 publications in 15 countries in an effort to capitalize on higher-potential magazine markets such as Russia and China.

Analysts expect Time Warner to report results Wednesday that show flat revenue at Time Inc. for the first quarter while operating income increases slightly. The expected results, though improving, underscore the lackluster outlook for the U.S. print-ad market. Publicis Groupe SA's ZenithOptimedia predicts advertising in consumer magazines will decline 1% in 2011 and 2% in each of the next two years.

Executives say the $900 million shed from Time Inc.'s costs in the past three years has ensured profit will be robust even if revenue growth isn't. And Time Warner executives insist Time Inc. doesn't need to show double-digit ad-revenue growth to justify its place in the corporate family.

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Mr. Bewkes and other executives have argued the scattering of audiences to digital platforms has put magazines on equal footing with TV networks and movie studios. Time Warner views the "TV everywhere" approach, giving paying subscribers access to content across platforms, as the model for magazines, too.

Mr. Bewkes, meanwhile, is taking a careful approach to the search for a new CEO, who has to be able to navigate the political potholes within Time Inc. as well as the changing media landscape outside of it. He personally courted Mr. Griffin, whose push to centralize power was an irritant to Time Inc.'s highly decentralized culture.

Time Warner has hired Heidrick & Struggles International Inc. HSII -0.26 % to lead the search. The firm has spent weeks interviewing Time Warner and Time Inc. executives and is only now beginning to arrange interviews with potential outside candidates, according to people familiar with the matter.

A decision isn't expected until at least late summer. "He's got to play it safe," a person close to Time Inc. said of Mr. Bewkes's pick. "He can't be wrong twice."

Until then, the company will continue to operate under John Huey, Maurice Edelson and Howard Averill, the editor, lawyer and chief financial officer who were tapped to stabilize the company after Mr. Griffin's departure.

After spending the first few weeks trying to keep people from leaving the company, the three men have settled into a routine anchored by daily 4 p.m. meetings. Anyone who wants a budget or project approved is told to "show up at four," and they typically have an answer before they leave, people familiar with the matter said.

"It's actually working," said Martha Nelson, Time Inc.'s editorial director. "There's no mystery at all about how to get things done."

Still, no member of the team has ever been directly responsible for generating revenue for the company, raising questions about whether Time Inc. can afford to be without a true CEO when media companies are grappling with a fragmenting industry.

Time Inc. and other major publishers have yet to agree with Apple on terms for selling subscriptions to their iPad editions, the next step beyond making them available to existing print subscribers. Talks are hung up on Apple's resistance to sharing information with publishers about their iPad customers, which publishers say is critical to applying the "TV everywhere" model to magazines.

The standoff has left most magazines with only one way to sell titles on the iPad: one issue at a time, which publishers say is asking too much of readers, particularly of the weekly magazines that form the core of Time Inc.'s business. In recent months, a number of the Time Inc. executives involved in talks with distribution partners like Apple and Google Inc. have left the company, leaving what some see as a gaping void in a critical area.

Time Inc. executives say Mr. Edelson, who is Time Inc.'s general counsel, has quietly been spearheading talks with Apple for some time and meeting frequently with Eddy Cue, Apple's vice president of Internet services. They say the latest deal to make iPad editions free for print subscribers is a sign the two sides are moving closer.

Apple declined to comment.

At a Time Inc. awards ceremony last month, Mr. Bewkes joked to a roomful of editors and publishers that the steadying of the company after a "bumpy" start to the year proved there's no need for a CEO. Yet privately, Mr. Bewkes has made it clear that to ensure Time Inc.'s long-term growth, the short-term fix won't suffice.

"Howard, Maurice and John have operated as the perfect team during this interim period," Mr. Bewkes said. "I'm pleased that a new CEO will come in at a time when the organization is stable and performing well."

—Joann S. Lublin contributed to this article.

Write to Russell Adams at russell.adams@wsj.com