“I wish I could varnish this, it would be an easier conversation to have,” Candappa said in audio of the meeting obtained by The Daily Beast. “I think we can pull out of this, but we have to execute with the precision of a brain surgeon. Really, we have to do everything right.”
In the private conversation with top editors on Feb. 21, lasting nearly 90 minutes, the CCO acknowledged a litany of what he described as “significant” financial problems the company faced.
An office raid by the Manhattan district attorney amid an investigation into the company’s finances and ties to mysterious church-affiliated Olivet University have created a number of embarrassing headlines for the company, as had newly surfaced allegations of workplace harassment by Candappa when he was employed by Reuters (an internal probe at Newsweek cleared him).
In the secretly recorded meeting, Candappa claimed that Newsweek’s major financial problems were the result of a February BuzzFeed report showing the media group had committed digital advertising fraud. More immediately troubling, the CCO said the report had spooked advertisers, and that a number of advertising exchanges had subsequently cut off IBT and Newsweek.
“The idea that Newsweek Media Group is legally throwing money to the church is probably a joke,” he said, laughing at the notion that Newsweek had enough money to funnel anything to Olivet University, which is infamous for its bizarre cult-like ties. “There’s no money. I can tell you that. There is no money.”
Candappa conceded that, as a result, the company was operating at “50 percent of the revenue needed to cover the costs,” and that the only thing keeping NMG afloat was a strong revenue haul at the end of last year.
“Those fourth-quarter revenue numbers were frickin’ fantastic,” Candappa beamed. “If we didn’t have that quarter, we’d already be dead by now.”
He then presented an ominous timeline: Cash flow was coming down and would “hit bottom” in April 2018 and, unless the company recouped some of its previous revenue, it would likely not survive much longer.
“If that doesn’t happen in six weeks, now five, in five weeks we need to create ‘V’-shape recovering revenue,” he said. “So when the cash flow runs out, we still have promises that we can make that can keep us going, because if the cash runs out and there’s similar revenue coming in, that’s bad.”
The changes laid out in the meeting were stark, and have already played out in Newsweek’s bureaus in the past several weeks.
He essentially acknowledged that Newsweek’s British outpost was on the chopping block, saying the collapse of the company’s paid traffic and rejection from some advertising exchanges was a “matter of life and death for the U.K. operation.”
“Frankly we are worried about the viability of the business there,” Candappa said, adding: “I can’t see a path, in very short term, to rebuilding the U.K. business.”
The company implemented cost-cutting measures, prioritizing Newsweek proper, laying off some domestic and foreign staff, and encouraging staffers to leave if they were on the fence.
“Anybody who wants to leave, right, don’t encourage them to stay,” Candappa continued. “Any voluntary departures just helps. Unless they’re absolutely critical people, let them go.”
It’s somewhat unclear whether the five-week timeline still applies to the company.
Newsweek was approved for a loan late last month after the meeting took place. Theoretically, that could improve the company’s cash-flow problem. But the loan came less than a week before the company was obligated to pay down a rent payment totaling more than $300,000, an obligation which the company claims was paid off, though it will not release the details of when the rent was paid.
Further, according to court documents filed last week, vendor Discover Digital Group said NMG owed it $84,000.
In that audio tape obtained by The Daily Beast, many of the top remaining staff blamed media reports for exaggerating Newsweek’s financial situation. The editors singled out BuzzFeed News as being obsessed with covering the company’s turmoil, disputing its reporting on Newsweek’s alleged “link spamming” on Reddit.
NMG has tried to combat leaks, threatening to shut off its reporters’ access to an internal traffic-monitoring service if any information on the site’s traffic leaked to reporters. Candappa also threatened editors that if details of the meeting leaked out, he would have “less to say next time.”
Asked for comment about Newsweek’s financial situation and the comments made on the audio tape, spokesperson Ken Frydman at first refused to answer questions via telephone and text, repeatedly berating this The Daily Beast reporter about his age and experience.
“How old are you if you don’t mind me asking,” Frydman said. “Are you 20? Are you even 20? You’re not covering Watergate here. You want a comment, here’s your comment: You need a new beat.”
The spokesperson called back an hour later and apologized, adding the company’s official statement: “Dayan regularly holds meetings with senior editors.”