The first blow came on Monday, when the estate of the late billionaire Sidney Harman, which co-owns the Newsweek Daily Beast Co with IAC/Interactive Corp, officially announced that it would no longer be investing in the loss-making venture.
The second landed yesterday, when IAC’s Chairman Barry Diller let slip during a quarterly earnings call that “the transition to online from hard print will take place,” ostensibly giving this fall or sometime next year as the point by which the company would have come up with a plan to bury the 79-year-old weekly print magazine, transforming it into a web-only presence.
Naturally, this drove the Twittisphere into a frenzy, with some commentators more bereaved by the alleged news than others:
In the wake of Diller’s comments, Tina Brown, Editor in Chief of Newsweek and its digital bedfellow The Daily Beast, conducted damage control in the form of an email to all Newsweek Daily Beast Employees yesterday with the subject line “Scaremongering.” The email, obtained by Politico, begins:
“Barry Diller would like to make it clear that he did not say on the earnings call as reported that Newsweek is going digital in September. He made the uncontroversial, industry-wide observation that print is moving in the direction of digital.”
Brown then clarified the points that Diller had made in the call while “reporting the tremendous results of this company this quarter,” including the fact that the brand was “stronger than it has been in years.” Signing off, she apologized for not being able to reassure staff in person, explaining that she was “enroute to Jane Harman’s event in Aspen.”
This adds an interesting interpersonal twist, given that Mrs. Harman, a former Democratic congresswoman from California, is Mr. Harman’s widow, and has overseen the interest of his estate since he passed away in April 2011.
On Monday, the Harman family told Reuters’ Peter Lauria (a former Daily Beast staffer) that it had cut investment to the magazine and website. "Given the death of Sidney Harman, who was actively involved in the Newsweek Daily Beast business, the Harman trust has indicated that it does not intend to make further capital contributions to the venture,” the family said in a statement.
Harman had acquired Newsweek from the Washington Post Co in August 2010 for $1, plus the assumption of the magazine’s over $50 million in liabilities, in what was seen as part philanthropic effort, part vanity project for the stereo equipment magnate, who was 91 years old at the time.
In November 2010, Harman merged Newsweek with The Daily Beast, the political website that Diller had launched with Brown, a former Vanity Fair editor, in October 2008. While it was quick to develop an audience in the lead-up to Barack Obama’s election, the free website was losing an estimated $10 million annually. The magazine, which had turned a profit of $30 million in 2007, was also hemorrhaging tens of millions each year by 2010. Brown became Editor in Chief of both publications, and Harman and Diller shared the new property 50-50. Their plan was to leverage the magazine and website’s combined audiences, and cross-sell advertising and subscriptions.
Apparently it was not an instantly successful one: according to Bloomberg, the company is expected to lose $22 million this year.
The Harman trust stopped investing in the loss-making company in May, thus diluting its 50 percent share and giving IAC, which makes its money other web properties such as Match.com and Ask.com, a controlling stake.
June’s revenue figures for Newsweek Daily Beast – presumably those that Brown was celebrating in her email to staff – show a 13.3% rise in advertising, with a 7.6% increase in pages (as compared with a 9% decline in ad pages industry-wide in the first half of the year) for the magazine. Meanwhile, the website’s average number of monthly unique viewers rose 73% year-on-year, reaching 11.4 million in June 2012, and paid digital subscriptions through the app jumped 233 percent.
In an interview with ABC in March, Brown emphasized that structuring the new brand would take time, that they were only about 40% there, and that 2012 had been all about just stopping the thing from crashing into the floor.”
“It seems to me that we have stopped Newsweek from failing and we are now on our way back up,” said Brown at the time.
Image and video courtesy of The Daily Beast