Newsweek Sale’s Hidden Problem: CEO Tom Ascheim
Not only is Newsweek's new owner new to magazines, the money-losing title is holding on to the CEO who devised its business strategy. Plus, view the confidential memo obtained by The Daily Beast.
As 91-year-old radio magnate Sidney Harman begins the hard work of steering Newsweek magazine into a financially solvent future, who will be at his side?
The same man who steered the magazine into its financially murky present.
You can’t blame Newsweek CEO Tom Ascheim for the Great Recession—or any of the other external forces that drove the once great magazine into its sorry economic state—but you can credit him with devising the year-old business strategy that, so far, hasn’t saved it.
Click Image Below to Read the Memo Obtained by The Daily Beast
That strategy, implemented just last year, called for the magazine to cut its subscription base in half and increase its cover price. The idea was to hone Newsweek’s readership into a group that, while smaller, would be more loyal to the brand and more attractive to advertisers. The plan also included a significant redesign of the magazine, one that drew jeers from some corners.
Jon Meacham, the magazine’s press-friendly editor, publicly argued the wisdom of this strategy, and then publicly took the flak when, just eight months into the plan’s execution, The Washington Post Co. put Newsweek up for sale. On Monday, when the company announced it would sell to Harman, Meacham, also a Pulitzer Prize-winning author, said he would leave after a brief transition period. (Meacham declined to comment for this article.)
Ascheim, by contrast, has kept a very low profile. Although he was the chief architect of the strategy, according to several Newsweek veterans, he has escaped the criticism that has been heaped on Meacham, an editor well-versed in the Bible and Andrew Jackson but hardly an expert in the fine points of magazine business strategy. By these accounts, the rate-base cut and other changes were driven by Ascheim and his team. “They were presented to us as pretty much a fait accompli,” said one former senior staff member.
“I kept waiting for Tom Ascheim to say something profound or smart or even interesting. It never happened,” said one Newsweek veteran. “He is responsible for the magazine’s business strategy—circulation decisions, cover price, marketing strategy—not Jon Meacham. Meacham has taken a beating in the press for [Ascheim’s] mistakes. Ascheim got off scot-free.”
This sentiment was echoed in interviews Tuesday with three other veterans of the magazine.
• The Secret Newsweek Files• Peter Lauria & Lloyd Grove: How Newsweek Blew Its SaleAscheim also presided over a schizophrenic Web strategy—initially discouraging the aggressive coverage of breaking news online in favor of pre-planned "packages" of editorial content, only to reverse course when the site's traffic took a significant hit. Staffers joked darkly over time that the game plan changed so often—a problem magnified by constant changeover in the Web editor's chair—that they no longer knew what they were supposed to be doing.
“The repositioning never caught hold,” said Martin Walker, chairman of magazine consulting firm Walker Communications. “It was The Economist-lite. It didn’t have the news element of Time or the in-depth reporting and opinion of The Economist. It didn’t stand out as a uniquely compelling proposition. They made a lot of noise about the editorial format, but it wasn’t unique.”
The Washington Post Co. gave the new model just eight months to work before putting the magazine up for sale. The company’s owners, the Graham family, often have run their media properties more according to sentimental concerns than cold, hard business ones. They clung to Newsweek against all economic sense—and then, all at once, they didn’t.
Harman was chosen among a cast of less-than-ideal bidders chiefly because he was the most like the Grahams: sentimental, a family man, willing to lose a lot of money.
“I thought in Dr. Harman we found a very decent person,” Newsweek senior editor and Graham heir Lally Weymouth told The Daily Beast. “I think that the reason he was chosen in the end is that he guaranteed to keep more jobs than any of the other potential buyers, and to us that was the key to the sale.”
With his purchase—$1 for the magazine, plus the assumption of more than $70 million in debt—Harman is demonstrating patience beyond the Graham family’s. He will hold on to about 250 of the magazine’s 325-person staff. He will take on Newsweek’s considerable losses, which totaled $28 million just last year, and, by sticking with the same CEO, he likely will stay the course with the leaner, pricier, more targeted Newsweek.
Ascheim, a Yale graduate with another degree from the Yale School of Management, spent 17 years at Viacom, ultimately serving as executive vice president of kiddie cable channel Nickelodeon, before joining Newsweek. “He was very well-liked, smart, and strategic,” said Albie Hecht, the former president of entertainment at Nickelodeon. “He was a real champion of creative people.” During his tenure, Ascheim launched cable networks Noggin and The N.
“Meacham has taken a beating in the press for [Ascheim’s] mistakes. Ascheim got off scot-free,” says one Newsweek veteran.
Although many have questioned the wisdom of Newsweek’s strategic shift, Ascheim is well-regarded in the industry. Weymouth describes him as “a really low-key person who doesn’t tell you how great he is 24 hours a day” and “a lot of fun too.” Publishing polymath Steve Brill said, “He has a very good reputation, and I think as a general matter, leaving aside the execution because I have no idea how well it was executed, I think [the strategic shift] was exactly the right thing for Newsweek to have done.”
Still, branding experts say few feats are more difficult than taking a mass-market brand upscale. “Brands develop associations over time,” said Tim Calkins, professor of marketing at Northwestern University’s Kellogg School of Management. “And it’s very hard to change those.” If people are used to reading a magazine’s back issues at the dentist’s office, it is hard to convince intellectual elites to race to their mailboxes every Monday morning.
In the Newsweek sales prospectus, obtained by The Daily Beast, the company spells out an array of dismal cost-saving options to supplement the other strategic shifts. In consideration was a plan to co-bind with other magazines to save an estimated $350,000 a year, to outsource paper purchasing for another $250,000 in savings and, most depressing, to delay the weekly magazine’s delivery cycle by three days, for an annual savings of $400,000. The magazine lost $28 million last year.
Ascheim did not respond to several interview requests Tuesday. Washington Post Co. chairman Don Graham and vice president Ann McDaniel declined interview requests through a spokeswoman, who said they would “let Mr. Ascheim and Mr. Harman speak for themselves.” Harman did not respond to a request sent through his attorney.
“We often see, particularly with large companies, that they are used to having certain staffing levels and paying certain salaries, and it is easier for them to right-size the business by selling to someone else rather than going through the bad publicity of layoffs or headcount reductions,” said Reed Phillips, managing partner of the media investment bank DeSilva & Phillips.
The Post has passed the burden to Harman—and, by extension, Ascheim.
“I think he’s great, Tom,” Weymouth said. “He gave up a really good job to come and work here at Newsweek. He’s a terrific person. And he’s learned a lot about the business in the last three years that he’s been here. I think that it’s really fantastic that he’s agreed to stay.”
Rebecca Dana is a senior correspondent for The Daily Beast. A former editor and reporter for the Wall Street Journal, she has also written for the New York Times, the New York Observer, Rolling Stone and Slate, among other publications.
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, Black Men, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.