An analysis by Adweek shows that the merger between Newsweek and The Daily Beast has been a financial bust and casts doubt on the future of Newsweek in particular.
The merger, which was announced last November and completed in February, was fraught with risks from the beginning. But the deep pockets of Sid Harman of Newsweek and Barry Diller of The Daily Beast, along with the hiring of Tina Brown as the editor, managed to push concerns about the combined entity to the back-burner.
Now Adweek has taken a look behind the curtain and what they found does not paint a very pretty picture of the operation’s finances.
According to Adweek, Newsweek and The Daily Beast lost a combined estimated $30 million last year, and though Brown said the Beast was on track to be profitable this year that still leaves Newsweek with losses estimated to have hit $20 million.
That’s why Post Co. chairman Donald Graham was so willing to let the magazine go for $1 plus assumed liabilities — it was a money pit.
How bad are things at Newsweek? They budgeted for a 10 percent decline in print ad revenue in 2010 and wound up with a 34% decline, as the economy continued to stumble along and advertisers struggled to figure out what value the magazine brought to them.
On top of that, print circulation is down eight percent in the first half of 2011 and they have lowered their subscription price in an effort to attract more subscribers, which will likely generate even less revenue than the previous year.
Newsstand sales are the one bright spot, up 2.8 percent in the first half of this year, but they only represent three percent of the total circulation. So that has a negligible effect on overall revenue.
It’s not a whole lot better on the digital side, as unique visitors have plunged from 5.3 million for the combined Newsweek and Beast sites last year to just 2.6 million in September 2011. Much of that loss can be explained by Newsweek.com ending its partnership with MSNBC, hoping that they could save money and build traffic at the same time. They were half right.
Despite the drop-off in visitors, the Beast could still make money as a web operation and may even be able to grow its audience. But it is saddled with a money-losing print magazine whose revenues and circulation are shrinking and whose web content isn’t all that compelling in a very competitive marketplace.
Sid Harman saved the magazine from certain doom, but he is gone now and it is only a matter of time before his widow, Rep. Jane Harman (D-CA), and now her partner Barry Diller will be forced to pull the plug in an effort to stem the red ink.
The bottom line is it is a business and right now the business of Newsweek stinks.