Business
More BusinessHow Newsweek Blew It
by Peter Lauria
Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, and Media Magazine, and he’s appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.
Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
Sidney Harman. Credit: Newscom
Ninety-one-year-old audio tycoon Sidney Harman's purchase of Newsweek yesterday was greeted with internal cheers. But a look inside the magazine's financial records, leaked to The Daily Beast, reveals its new crisis.
Yesterday's purchase of a 77-year-old magazine, Newsweek, by a 91-year-old audio magnate, Sidney Harman, had all the makings of a feel-good story, even as editor Jon Meacham announced his departure. A legendary media franchise rescued from an uncertain future by someone who regards Newsweek as a “national treasure” and commits himself to the highest quality. The idealistic Harman also has credibility as a brilliant innovator and businessman of stature. Though he has made his fortune in audio, he loves print. He is the author of two books and said writing “enables the process of self-discovery.” He will take over with a staff overjoyed by his commitment and his manners.
"Harman was someone who was taken less seriously by the staff who worked on the deal because he had no plan."
But make no mistake, Harman's pocket change purchase of Newsweek—he paid $1, plus the assumption of liabilities for the magazine—has to be a passion play, because it certainly isn't a financial one. The Daily Beast has obtained a copy of the 66-page sales memorandum that the Newsweek seller, the Washington Post Co., gave to prospective buyers, and it paints the picture of a media property given to someone unequipped to fundamentally change its current trajectory.
Much will depend on finding a near-genius editor and an inspired publisher and on their freedom and shared approach, as well as on their bankroll. 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.
Dig deeper into the document and the numbers get worse. Newsweek lost money in all three of its core areas in 2008 and 2009: U.S. publishing, foreign publishing, and digital. Even with the smaller guaranteed circulation, it still retains $40 million in subscription liabilities owed to readers. And then there's Newsweek's lease foibles: last year, it paid $13 million in rent, a startling figure for a company its size.
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Into this picture steps Sidney Harman, who is venerable enough to have read the very first issue of Newsweek back in 1933. By Harman's own admission, at a gathering of the magazine's staffers yesterday, his goal isn't to make a profit any time soon, but rather to reach break-even by 2013. Clearly, while the billionaire founder of Harman/Kardon and Harman International Industries is new to the media world, he's already got the "flat is the new up" mantra down pat.
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• The Secret Newsweek FilesBut 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, accounting, and rent to legal, HR, and IT) could be greatly reduced by sharing resources. Standalone magazines no longer work.
Yet Harman has none of that: neither the scale to juice sales nor the media infrastructure to reduce costs. When the microphone had to be lowered yesterday to accommodate Harman's diminutive stature during his address to the troops, he joked, "This microphone will be the last thing I will cut down to size," in an attempt to reassure staffers that he wasn't about to order wholesale layoffs.
In fact, Washington Post CEO Donald Graham apparently considered the fact that Harman would need to retain Newsweek's back-office inefficiencies a selling point, even as his company's sales memo advised otherwise. Graham will not have all that blood on his hands. (When one of the great brands in American journalism sells for a buck, legacy is about the only tangible currency left to haggle over.)
"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."
Thus, further cuts have been kicked down the road, to occur on Harman's watch—or that of his heirs, who may include his wife, California Democratic Congresswoman Jane Harman.
"[Harman] has enough money for this to be a hobby that he can have fun with while trying to fix," says prominent media banker Reed Phillips.
Adds longtime friend and Newsweek political correspondent Howard Fineman, who wooed Harman to purchase the magazine over a mid-May lunch at the Hay Adams Hotel in Washington, D.C., "I told him that it's a great nameplate, and it's worth saving for several reasons, one of which is its global reach. It really does circulate around the world."
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dalelama
Just another liberal rag biting the dust who cares........
IntelAgents
...those who regard journalism as a talent, and a duty.
Internet blogs, posts, and comments are not the same as journalism, especially when the web-editors push information at us digitally with disregard for fact-checking and proof-reading, allowing headlines with typos to be posted worldwide. I like print journalism, whether it's on the web or in the hard copy form of a periodical.
I don't care it the tabloid bites the dust... that's simply format. But, journalism may not survive the transition if pure volume is the only benchmark.
flyoverland
Opinion journalism is not journalism and is the main reason Newsweek folded. Perhaps an old guy who remembers what journalism is supposed to be can give America what it needs and wants, straight news, right down the middle. We have seen what happens when liberal ideologues run publications and radio networks. They fold. Business and Journalism can co-exist. Maybe this guy who has given us great car stereo systems will give us a lasting legacy of helping return an honorable profession to some sense of honor.
JimInNashville
Are you saying that Newsweek hasn't had typos? Good grief, that's what we need -- a truly silly typographical elitism -- when the fundamental problem with liberal media is their fundamental dishonesty and bias.
tonymo
Journalism? Newsweek! What a joke. This liberal rage has been nothing more than a DNC newsletter, and Obama shill!
Journalism, which has been on life support for many years, finally expired during the last election season! Journalism, as I learned it many years ago, is dead.
dalelama
@IntelAgents,
Newsweek folded because no one wanted to read their biased liberal drivel.
HollyK64
If Harman wants to make a success of Newsweek he needs to move it away from the Liberal propaganda machine it had become. If he wants to actually sell copies and have Newsweek be a relevant publication, he's going to have to listen to Middle America not the Liberal cabals in Cambridge, Massachusetts and Washington D.C.
RJB-Boston
conservative propaganda machines make money, why not liberal ones? a niche market is good to have. I think this is more the case of developing a business and operating model that makes sense and then executing - if part of that exercise implies changing the "tone" then so be it, but that is not necessarily the case.
jadams76
Yes, Perhaps if we took both sides of an issue for once. Perhaps we'd be more successful if we didn't always slavishly parrot the Obama talking points people would have a reason to read again. Maybe we could once again stop only speaking to 'journolisters' to coordinate ideas and plot to spin the news and instead speak with moderates and conservatives and get their views too. This could make us a magazine worthy of a readership again rather than just another biased screed and laughingstock like Time has become. We could aspire to be something special in the market...and that in turn would return us to our glory days again before we lost our way with all this leftist slant..yes,...perhaps.........NNaaahhhh.
p3orion
News magazines are a waste of time. They stay so chronically out of date that they have to date them two weeks in the future to seem timely (when was the last time a newsmag was actually the medium that broke a story?) And as for "analysis," they refuse to print anything that disagrees with Democrat party talking points; you can get the same stale liberal drivel on MSNBC, CNN, ABC, CBS, or NBC anytime at no cost. Good riddance, take Time and US Snooze with you.
nightdragon09
Heh, am I the only one who had a flashback to the end of Trading Places when I read that Newsweek basically got sold for... wait for it...
ONE DOLLAR!
*Cues up Eddie Murphy laugh*
dalelama
just about what Obama's Loseweek is worth...
timeisnow
This was the Radical Left arm of the Obama Administration; they plotted and planed just like the Journolist losers did to get this Radical Revolutionary elected, without vetting him or exposing Obama for the "Social Justice" advocate that he is... That's code for" Fundamentally Transforming This Country" into a Socialist country. I don't expect it to change much, or sell much for that matter...Its still a Failure
Saintpeterclan
LMAO! Meacham jumps ship to join government run PBS to continue to spread his liberal tripe, that can't be sold on the open market...Why do normal Americans have to pay for the far left programing of many PBS programs? Sort of like when Bill Moyers left PBS to pursue "outside, private interests"...LMAO, withing four months he was back at the government trough...is it any wonder why liberals want to silence right-wing talk radio and television...the American people weren't anywhere near as "dumbed down" as the DNC first thought and they won't buy the propaganda of the Journolistas...
alex72us
Newsweek in trouble? People have no interest in reading the leftist mash-gruel? No problem; here is the solution: Move the magazine to Cuba. I am sure it will be welcome with great fanfare!
fred88
Let's see, this week's issue featured a puff piece on none other than Al Sharpton, now held in high esteem, I guess, because he doesn't carry a bullhorn and wears nice suits.
Jon Meacham is the poster child for what is wrong with mainstream media; wants to spin you, rather than recite the facts.
samuellenn
He got shafted
Johnnorth
Hey, Newsweek in its time did great things =- not recently I agree. But even a gross cynic llike dalelama would have to concede how brilliantly it covered race and Vietnam in the sixties. But maybe that's what sticks in his jaundiced memory. Admit it will take more than dollars to revive that brilliance from the mismanaged disaster it n ow is (and that has nothing to do with politics, and all to do with journalism)
kdizzydaze
Mismanagement has nothing to do with it. The magazine became a shill for the democrat party and that started in the early 80's.
There was even a recent cover to their magazine hailing the greatest economic American turnaround this past spring. What in the world are they smoking over there?
yuwei56
The problem with Newsweek is that it has become so partisan (Liberal) that it is no longer a news media. It's more like the Democrats' propaganda machine. Who want to read it except the Liberal fanatics ?
WestVillager
Maybe the magazine just sucks now.
RevPettibone
Newsweek blew it when they decided to compete with magazines like People and Us... rather than remain a reliable source of meaningful news reportage.
alloypony
Anyone that tells the truth with reporting has enemies ! In the last decade or two real national treasures were wrecked, recklessly ! God Bless America ! Thank A Republican ! (not)!
stinkin
Newsweek quit reporting the news years ago and the truth isnt a word in their vernacular and has never been a part of the process for writing a story...sensationalize was the only rule for an article. The flush the Koran article was treasonous and cost American soldiers their lives and for this just to go out of business isnt enough. They should be imprisoned.
biggoofer
Your "National Treasure" is someone else's trash.
Republicans probably didn't even touch this fish-wrap.
Democrats don't know how to read.
People capable of analyzing and interpreting news events on their own - so called Independents - are the ones causing financial bleeding to your "National Treasure" such as Newsweek and NYT and WaPo and... and... and...
Dontmakemelaugh
Until this question of the internet age is answered, all print media will go the way of hot lead type setting:
"how do you compete with free?"
kdizzydaze
That is definitely part of Newsweek's and the rest of print media's issue.
amapola101
Dont make me laugh. Not only free, it is no rental offices, no employees,they work and talk on the computers, no law suits, it is a lawless forum,no one can stop it. It goes all over the world,the youth and new generations will not clutter with papar. Folders,in drs,offices are dissapearing dying dinasours.
Centcom
Not so fast. The Wall Street Journal and Washington Times are doing fine. Of course unlike the old Liberal newspapers, they publish the truth. Tell ya what, in the spirt of bipartianship, I'll offer Liberals $5 for their coveted New York Times.
COASTAL GUY
The San Francisco Chronicle was sold to the Hearst Corp a few years back, and to guarantee a two newspaper city, they had to "sell" the old Examiner to the Fang family, along with forty million dollars to guarantee it's survival. In other words, "Here's a newspaper and $40 million, ... NO CHARGE!"
The $40 Million is gone. The Fang Family is gone. The Hearst/Chronicle has announced that they will "find a buyer for the Chronicle or cease publication.", and the Examiner was sold to a group out of Texas that specializes in advertising.
It is free, it is increasing in circulation, it is profitable, and it is hiring!
OH! I fotgot to mention.......... Objective reporting and a conservative editorial philosophy!......IN SAN FRANCISCO!!
My old college buddy Dick Thieriot took Hearst and Young Broadcasting to the cleaners when he figured that the internet had doomed big media, and he dumped everything!
(Oh! Yeah! Jane Harman has a great figure.)
veracity
Free will soon be a thing of the past, and we all will be paying for whatever we read no matter where, except where they hire inarticulate scribblers who don't have to abide by journalist rules.
muhammedx
So now a Congresswoman, a Democrat, own a global newsmagazine. I wonder if she was a Republican would this glaring conflict be passed by. I can imagine the headlines, "Can the News be trusted if partisan politicians are owning our News gatherers??" "Is this the end of objective news??" "Partisan politics and the fate of legacy media" ... the hand wringing on NBC, CNN, ABC, MSNBC, NPR is as predictable as rain in Hawaii. What is also as predictable is the non story the Democrat Congresswoman Jane Harmon is now de-facto owner of Newsweek. So stories like the fake one of Koran in the toilets at Gitmo will be mainstay, that is if the deleterious efect of the story is a negative on Republicans. What I assume won't change at Newsweek with the DNC ownership, is the decidedly slanted and suspect News that willbe generated by it's new Democrat Party masters. I will be anxiously waiting for stories of the "Racist tea party" and such. So business as usual, nothing to see here...move along. We will let you know when a Republican has allegedly done something wrong. Until then it's George Bush's fault. Maybe when Jane Harmon's old husband fails at reviving Newsweek, she can get the government to swing some money his way to help keep it afloat. just ask Maxine how to get that done.
bassinapple
They blew it by attacking Gov. Palin. The cover with her in running shorts can best be described as "jumping the shark". Attacking Palin can backfire. Letterman was exposed as a pervert, after his attack. Conde Nast attacked Palin and the Alaskan Pipeline, and they, like Newsweek, went down.
amapola101
bassin apple,they sold alot of the magazines. The Republicans,to defend her, The Democrats to laugh at her, those who did not care, were interested in learning about who she is. The magazine is a dying industry, but it is True good journalism,should not laugh and mock and ridicule. It would have been the same,as,to put Hillary in shorts and laugh at her.The right destroyed Hillary ,and made her stronger. The left has tried to destroy SP,and they build her,The Media, ,magazines,papers, talk about her even if she sneezes.!!She has become a threat to the big boys in her own party. Funny,and for those who voted Hope and Change better be carefull,the rush to another Hope and Change do not fuel,her,as a new candidate,. She is not the answer,either. But she has withstood,every attack from everywhere&everyone; For that she is admired, everywhere in the whole world. Amercians,are asked do you know SP,??Not do you know NP, or Hillary Or our First lady Michelle.Funny.!!!
dontBugMe
Who needs another cover of Oblaima? Another lefty rag that needs to go down the tubes. Absolutely NO trust in what the media has to say or omit.
IntelAgents
If you think Newsweek is a "lefty rag" you truly are spoon-fed your facts. Keep on trusting in FOX Entertainment - er, News.
dontBugMe
How's that "Change you can believe in" working out for you? Can't stand it when a News outlet isn't in the pocket can you? I think that is the main gripe that the left has against Fox or any other (can't think of one) that does not toe the line. Lefties like yourself can't distinguish between news and commentary so you lump it in the same basket and disparage it all. I don't agree with all that Hannity says but his show is opinion not news. He has one, so do I, and they don't necessarily need to agree. Same as our discussion here.
JimInNashville
Actually, as someone who records Fox News, MSNBC, and CNN, my view is that Fox is at least as objective as either of the other two. In fact, if you watch any news show on these three networks, and simply count the political affiliations of discussants, you discover something really remarkable. MSNBC discussants are almost all democrats, CNN discussants are at least two-thirds democrats, and Fox News tends to be split pretty much even. CNN used to have a show where one Republican faced off against two or three Democrats, HBO has a show, the Bill Maher show, where one or zero Republicans counter 3 or 4 avowed Democrats.
The fact is, liberals are so spoiled by having had complete control of the media for 30 years that they simply cannot adjust to an OBJECTIVE, balanced medium. So Fox News, which is objectively rather balanced, overall, is seen by liberals as horribly biased.
Any honest liberal would have to look at the facts and admit the undeniable -- Fox News is more balanced than CNN, and FAR more balanced than MSNBC.
I say this as someone who finds many aspects of Fox News very irritating. For example O'Reilly and Hannity drive me crazy with their relentless rudeness and interruptions of guests.
ajbruno14
I trust Fox, as do most people who are interested in the news. I am familiar with all news programs and find it interesting how often they fail to report on content.
Next time you watch the network criticize the Tea Party you never hear the merits of their movement, only disparaging personal remarks.
Guess this is "reporting" when you want to avoid REPORTING!
ajbruno14@gmail.com
PaultheConsultant
IntelAgents, do YOU really believe that Newsweek ISN"T a left leaning rag? I quit reading Newsweek 20 years agon because of it's staggaring bias. It really is a DNC newsletter...sad. Not surprising, though.
amapola101
dont bug me,No trust in anything,or anyone. But its inevitable,all are dying diansours. the change of the new era is here. We are programed by 24 hours,news tv,stations,stupid persons giving opinions, advice.All repeating each other,and magazines and paper are also dissapearing,acts. Its the Internet.Even The paper and video Sex industry,is finished.All technology now
Off Duty
The growth of the internet, the public demand for truth.....and that is why newsweek sunk.
realetybytes
Proving once again the media are liars, it was just recently that the guy running newsweek (into the ground), was insisting to O'reilly that they were in great shape, doing fine!
This guy grossly overpaid, and is keeping on the cause of the mags demise!
He could quadruple readership if he fires everyone and starts printing birth announcements.
Ron Reale
realetybytes.com
russellc
When I pick up a news magazine I see articles and news that I read right here at my computer at least one week before. How do you compete with that?
BTW Mr Harman...love your hi-fi stuff.
This comment has been removed by The Daily Beast's editors.
dcunning30
Wasn't it the Newsweek editor who was comparing Obama with Bush and ended up saying Obama was god. Yea, it WAS the Newsweek editor who said that. blah!
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