Now that the deed is done, a little recapping of the Newsweek saga is in order: In early 2009, Newsweek announced that it would transform itself from a traditional newsweekly to some sort of hybrid mix of styles — a little of the old Newsweek with a dash of The Atlantic and a hearty dose of Mother Jones. As Michael Kinsley wrote at the time:
[Newsweek editor Jon] Meacham–a very smart and thoughtful guy, which in my experience is not necessarily true of all newsmagazine editors (all two, that is) — actually says that his model is “the great monthlies of old” like Harper’s and Esquire. He says the building blocks of the new Newsweek will be “two kinds of stories”: the “reported narrative” and “the argued essay.” So what’s wrong with that? Well, to start, those grand old monthlies at their primes had a smaller paying readership than Newsweek has at its supposed nadir. So duplicating their greatness could be a pyrrhic victory.
Actually, it was worse than that. It is a well-known trend in opinion-journalism circles that circulation is tied to whichever party is in power — that when the party that most closely represents your magazine’s views is in power, circulation takes a dip. Vanity Fair had a piece about this a while back (good article, stupid headline), and specifically about the problems they have been having at The Nation since the ascension of The One.
In other words, Newsweek couldn’t have picked a worse time to pivot to the left. As Ross Douthat pointed out a few months ago, Newsweek’s strength was its (former) “deep brand penetration in middle America (in terms of name recognition, size of subscriber base, etc.)”: The obvious move from a business standpoint was to pivot to the right. When Newsweek put itself up for sale, a bid from the conservative magazine Newsmax offered Newsweek a chance to execute a course correction. We know now that Newsweek rejected the offer for ideological reasons and chose instead to accept a bid from Sidney Harman, stereo magnate and husband of Rep. Jane Harman (D., Calif.).
A report today in The Daily Beast indicates that Newsweek has made a serious miscalculation.
First off, it details just what bad shape the company is in:
As with many weeklies, Newsweek’s financial freefall is jarring. Revenue dropped 38 percent between 2007 and 2009, to $165 million. Newsweek’s negligible operating loss (not including certain pension and early retirement changes) of $3 million in 2007 turned into a bloodbath: the business lost $32 million in 2008 and $39.5 million in 2009. Even after reducing headcount by 33 percent, and slashing the number of issues printed and distributed to readers each week, from 2.6 million to 1.5 million, the 2010 operating loss is still forecast at $20 million.
By contrast, Newsmax posted a $35 million gain last year, up from $25 million in 2008.
Second, it reports that Harman is bringing little but his money to the table. Newsweek needs more than that to get back to even:
But by the Washington Post Co.’s own account, as told via the sales memorandum, Harman’s Newsweek lacks what is necessary for a turnaround: the synergies of another media company. “The right strategic partner can potentially provide scale and synergies on the digital platform,” the memo states. Additionally, if another media company bought Newsweek — such as when Bloomberg rescued BusinessWeek in a fire sale last year — then the murderously inefficient $55 million in general and administrative costs that Newsweek carried in 2009 (covering everything from finance and accounting and rent to legal, HR and IT. Standalone magazines no longer work.) could be greatly reduced by sharing resources.Yet Harman has none of that — neither the scale to juice sales or reduce costs.
By contrast, Newsmax would have been able to offer both.
To be sure, Sidney Harman brings a lot of money to the table. But, as the Beast piece reminds us, so did Sam Zell:
Zell has low esteem in the journalistic community. He is altogether a different character from Harman, but Zell, too, promised minimal layoffs and a commitment to finding a business model that worked; Zell’s tune quickly changed after realizing the realities of today’s printed media world, however, and multiple rounds of layoffs and an eventual bankruptcy proceeding are the legacy his Tribune purchase left behind.
Newsmax stated when it offered its bid that “Newsweek’s staff, advertisers and readers can be assured that . . . Newsweek’s stellar brand and editorial representation would remain distinct from our other brands,” and that “Newsweek would continue in its mission to objectively report the news and provide analysis from a wide spectrum of perspectives.” I can’t read minds, but I think it’s likely that the resulting publication would have looked something like what Douthat suggested:
. . . a center-right . . . outlet for the millions of Americans who think that the elite media is too liberal but find Rush Limbaugh too conservative . . . staffed up with right-leaning columnists, reporters and cultural critics whose work could translate to a broad, not-that-ideological audience.
That plan, combined with Newsmax’s success in the age of Obama, its platforms for expanding Newsweek’s reach, and its resources for reducing Newsweek’s costs might have spelled a return to profitability for Newsweek. To reject an offer like that . . . well, surely Harman has a great alternative plan for turning the newsweekly around:
“Harman was someone who was taken less seriously by the staff who worked on the deal because he had no plan,” says a person close to the deal. “He won the bid because he had the lowest number of layoffs.”
This would have made a great one-hour TV special. Am I the only one who thinks it would have been more interesting than LeBron’s?