Newsweek, which ended its nearly 80-year print run last December, confirmed rumors yesterday that its owner, IAC Interactive, was exploring options to sell what remains of the magazine empire.
The sale comes just a month after IAC Interactive Chairman Barry Diller told Bloomberg TV that buying the moribund magazine was a “mistake.”
Diller acquired a 50-percent interest in Newsweek three years ago when he agreed to merge the magazine with his then-profitable online venture The Daily Beast.
Ever since then it has been all downhill for Diller and Co. The revamped Newsweek continued to bleed money until Diller pulled the plug on the print edition in December, and switched to an all-digital model.
Obviously the new strategy wasn’t working all that well either, and now Diller wants out.
IAC Interactive reported a first-quarter loss of $8.8 million in its media group, which includes NewsBeast, as the combined Newsweek and Daily Beast operation is known. This is up from a loss of $6.7 million in the same period a year ago, as Newsweek continued to lose subscribers as well as money.
Sid Harman acquired Newsweek from the Washington Post Co. for $1 and assumed liabilities. With the deterioration of Newsweek in the last three years, it’s not clear if IAC could even get that much for the formerly once-proud magazine.
Here’s the memo from Newsweek CEO Baba Shetty and editor-in-chief Tina Brown outlining the reasons for a potential sale:
Most of you will have seen by now reports in the press of a potential sale of the Newsweek brand. We’d like to give you background on this news and the rationale for it.
Last year, as we worked through the U.S. print shutdown, it would have been impossible to even explore options to sell Newsweek. The costs were massive, and there was no robust digital presence or identity for the brand. Our obligation was to turn the business around, and develop a breakthrough digital product. We’ve done just that. We’ve transitioned the business to one that will break-even in Q4 of this year. We’ve launched an innovative digital presence that Fast Company called “A New Model for Online Magazines”. Under the leadership of Justine Rosenthal, the journalism has been terrific and the quality is evident in the behavior of the audience who reads it. The reaction on twitter to the new digital product has been incredibly positive, including accolades from digital editors and designers from the BBC, The Economist, and Facebook. Don’t just take our word for it, check out the new issue with your own eyes this morning. It’s stunning.
So why explore a sale now? The simple reason is focus. Newsweek is a powerful brand, but its demands have taken attention and focus away from The Daily Beast. The story that hasn’t been told about The Daily Beast is its strength. Deidre Depke and her team have earned the Webby for Best News site for two years running. Our traffic is up significantly yet again this year. And digital ad sales in a very tough environment are up 30% year to date.
Barry has made the point that this process is about exploring options. We will only do this sale if it reflects the value we’ve created. If not, we’ll continue to operate it as now. Let’s be clear. Exploring options for a sale is a focused process that a small team at IAC is working on. For the rest of us, we’ll continue to produce a first-class Newsweek product on an ongoing basis.
All of the above successes have only been possible through the tireless work of a team of incredibly talented people. We’d like to thank each and every one of you for your contributions and efforts. The achievements of the company are your achievements. The company has never been stronger, and it’s all due to you.
Tina & Baba