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UPDATE-1-Time Inc begins new era as magazine industry struggles

(Updates after shares start trading, adds background and details)

June 9 (Reuters) - Shares of Time Inc, home to titles such as People, Sports Illustrated and Time, fell more than 4 percent in their market debut, highlighting the problems besetting the U.S. magazine industry as readers switch to digital alternatives.

Time Inc is the latest in a series of spinoffs by parent Time Warner Inc, most notably of AOL Inc and Time Warner Cable Inc, following the disastrous merger of Time Warner and AOL in 2000.

The shares of the biggest U.S. magazine publisher were changing hands at $22.42 in early trading on Monday, down from their "when issued" close of $23.48 on Friday.

The company faces an uncertain future as more readers access news on free sites on their smartphones and tablets.

As a standalone company, Time Inc will also no longer be subsidized by the lucrative businesses of its former parent, which include pay-TV channel HBO and movie studio Warner Bros.

The 91-year old company's Time magazine, launched by magazine czar Henry Luce in 1923, was the first weekly news magazine in the United States and is still widely known for its newsiest "Person of the Year" cover.

Investors had been pushing Time Warner CEO Jeff Bewkes for years to hive off slow-growing Time Inc, which is rated below investment grade by Moody's Investor Service.

The magazine unit, which publishes more than 90 magazines including Fortune and operates 45 websites, has been slashing jobs over the years.

That trend is expected to continue under Chief Executive Joe Ripp as investors scrutinize costs. The company, which slashed 600 jobs in 2013, now has about 7,800 employees.

Time Inc's revenue fell 9 percent to $3.35 billion between 2011 and 2013, while operating profit dropped 40 percent.

The company has also taken on $1.4 billion in debt, partly to help fund a one-time dividend to Time Warner shareholders.

Time Warner shareholders received one share of Time Inc for every eight shares held in Time Warner.

Several media companies, including Wall Street Journal publisher and Fox News owner News Corp, have split in recent years to separate print properties from faster-growing TV and cable businesses.

Tribune Co also plans to cleave off its newspaper properties including the Los Angeles Times and the Chicago Tribune from its TV stations this year.

Wells Fargo started its coverage of Time Inc with an "outperform" rating and $27-$29 valuation range.

"We think an attractive valuation and dividend yield along with untapped upside potential in digital and cost cuts offer a compelling risk/reward for long-term investors," Wells Fargo analysts wrote in a note.

(Reporting by Jennifer Saba in New York and Soham Chatterjee in Bangalore; Editing by Nick Zieminski and Ted Kerr)