As 91-year-old radio magnate Sidney Harman begins the hard work of steering Newsweek magazine into a financially solvent future, the challenges can be quantified. So much so, based on the financials for the past three years, that Harman may be attempting the most challenging turnaround in magazine history.
The Daily Beast has obtained a copy of the 66-page sales memorandum that the Newsweek seller, the Washington Post Co., gave to prospective buyers. It shows a magazine that made significant money as recently as 2006—and then fell off a cliff. In 2007, the operating loss (not including certain pension and early retirement changes) was $3 million. That exploded to $32 million in 2008 and then $39.5 million in 2009. In 2010, the loss is expected to be an additional $20 million.
The document also shows a company growing increasingly desperate. Plans are made to boost advertising rates, and slash costs. Sometimes, both simultaneously. Much of the document addresses a gambit to both the rate Newsweek charges per 1,000 subscribers while slashing the number of people reading it. (Incidentally, Newsweek's internal memo puts The Daily Beast traffic at 1.5 million monthly unique visitors even though the number is actually 5 million.)
That move has some defenders, even if the execution was botched.
• Rebecca Dana & Peter Lauria: Newsweek’s Hidden Problem• Peter Lauria & Lloyd Grove: How Newsweek Blew Its Sale“If you do good narrative and good reported journalism, you’ll probably be able to sustain decent circulation,” says Walter Isaacson, the former chief editor at Time magazine and now CEO of the Aspen Institute who nonetheless criticized the magazine's recent editorial emphasis of opinion essays over reporting. “I think it’s better to be high-toned than it is to go downscale because the advertising you get is better. It is also the DNA of Newsweek.”
But therein lies a conundrum. As Stephen Shepard, dean of the CUNY Graduate School of Journalism, and the former editor in chief of another struggling weekly, BusinessWeek, asks rhetorically, “How do you bring costs down while simultaneously improving editorial quality?”
The Washington Post struggled mightily to answer that question. Did they succeed? Or did Harman buy a pig in a poke? Read the sales memorandum and judge for yourself.