The grand experiment to save Newsweek by combining it with the website The Daily Beast may be nearing an end. Reuters reported yesterday that the family of the late billionaire Sidney Harman was no longer going to invest in the joint venture.
Newsweek was purchased by Harman in 2010 from the Washington Post Co. for $1, plus the assumption of more than $50 million in liabilities.
In addition to the $50 million, Harman also had to absorb the estimated $30 million a year in losses the magazine generated and was likely to continue generating in the near future.
But that was okay with Harman who was more concerned about saving the liberal leaning magazine than worrying about profits. He knew that with his vast wealth he could afford to lose money for a while at least.
Harman then merged Newsweek with The Daily Beast in an effort to try and leverage Newsweek’s name with The Daily Beast’s web savvy. The combined company chose the high profile Tina Brown, already the editor of The Daily Beast, as editor of Newsweek and hoped that she would lead a turnaround in the moribund magazine.
The results to date have been mixed at best, with Brown’s covers getting plenty of attention, but advertising and circulation down from 2011 levels and the magazine is still losing a lot of money.
As for The Daily Beast, it is also losing money—an estimated $10 million a year. But Diller is a master of leveraging online properties and he will probably find a way to turn the Beast around. Unlike Harman, however, he isn’t committed to saving Newsweek for Newsweek’s sake.
With the advertising market still weak and the Harman’s now capping their investment in Newsweek, the future of the 79-year old magazine is very much in doubt as Diller isn’t likely to be quite as sentimental as Sid Harman was towards the magazine.
Diller would be wise to cut his losses sooner rather than later, and that probably means the end of Newsweek as we know it.