Why Time Inc. Is Teaming With Apple on News App

NEW YORK (TheStreet) -- Time (TIME) is betting that Apple (AAPL) can make it cool, and boost its digital revenue in the process.

The New York-based publisher of Time magazine, People, Sports Illustrated and Fortune, joined Disney's (DIS) ESPN, privately-held Conde Nast, The New York Times (NYT) and Hearst as the first content companies to partner with Apple for its News app, introduced on Monday at Apple's developer conference in San Francisco.

The app will deliver content, news and feature stories tailored to individual users' tastes. Much of the curation will be in the hands of Apple rather than the publishers. But for a company such as Time, the opportunity to expand its readership among Apple's hundreds of millions of users, and a 70% share of advertising sales, represented an enticing opportunity. 

"We see it a great opportunity for two premium brands to come together to provide a fantastic experience for people to consume content on their device, and bring Time Inc.'s brands to bear to do that," said Scott McAllister, senior vice president, digital marketing and revenue, at Time Inc.

Besides providing another source of ad revenue, McAllister said the huge installed base of Apple device owners offers the chance to broaden its subscriber base, especially among gadget-loving millennials. "I think it presents potentially new audiences for us we're potentially not reaching today," said McAllister.

Spun off from Time Warner  (TWX) just over a year ago, Time has succeeded in increasing its online traffic. Underscoring the audience shift, comScore figures showed that Time properties across mobile (smartphones and tablets) and desktop in April drew 106.6 million U.S. visitors, compared to 43 million for the desktop only.

The company says its total audience is now split about evenly between the print and digital sides, with each at more than 120 million monthly. Print, however, still accounts for the majority of ad revenue. In the first quarter, only $73 million of Time's $353 million in ad sales came from digital media. The partnership can also be seen as a signal to investors that Time is taking aggressive steps to increase the amount and proportion of its revenue that comes from digital sources. As consumers increasingly favor mobile screens and social media sites for news over print magazines and newspapers, old media icons like Time are racing to adapt.

"This broader move toward distribution being placed in the hands of platforms is a big deal," said Jesse Holcomb, a senior researcher at the Pew Research Center. "Taken as a whole, it does mark what seems to be a shift in distributed content."

As readers migrate to mobile devices, they're also turning more often to third-party platforms such as Facebook (FB), Twitter (TWTR), Snapchat and Google (GOOGL) News to get news rather than going directly to the properties of individual news brands. That's putting publishers under more pressure to team up with the likes of Facebook and Apple.

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