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Breaking News: Newsweek Sold Again

Posted on Monday, November 15, 2010 at 8:20 PM

Ownership of Newsweek changes hands for the second time in three months.

By William Dunkerley

Newsweek, just sold last August, has another new owner. Now it's owned by The Newsweek Daily Beast Company, a joint venture created by Newsweek and The Daily Beast (an online news website). Sidney Harman who bought Newsweek in August is a 50 percent owner of the new company. IAC/InterActiveCorp, owner of such websites as Match.com, Excite.com, Reference.com, and founder of TheDailyBeast.com, owns the other 50 percent. Interestingly, IAC's chairman and CEO, Barry Diller, is a board member of the Washington Post Company, the outfit that sold Newsweek to Harman a few months back.

STRAT analyzed the factors of Newsweek's business strategies in our July issue. We found them flawed, but there didn't seem to be a compelling business reason for the sale. Then in our August issue, we reported on the sale to Harman, a publishing novice. We wondered what could have motivated the purchase of the money-hemorrhaging news magazine.

Now, we're left wondering what's behind joining forces with a news website. Newsweek already has a news website (Alexa rank: 1911). But reported plans are to junk Newsweek.com in favor of keeping TheDailyBeast.com (Alexa rank: 2121).

Did Harman buy Newsweek and cleverly flip the property for a nice profit? There have been no media reports of any money changing hands going into the joint venture.

Was Harman merely an intermediary for the acquisition of Newsweek by Diller who himself was afraid to ask for it? Who knows.

Are the principals assembling a print and online news organization to support a 2012-oriented political agenda? Who knows on that count, too.

Some speculate that the wisdom of the joint venture lies in efficiencies of a combined operation. Reports indicate that Newsweek is leading up to a $20 million loss for this year, $10 million for The Daily Beast. It's hard to picture wiping that away with "efficiencies." Our analysis indicates that Newsweek's losses are a result of flawed business strategies. The Daily Beast, on the other hand, is still in a start-up mode (launched in 2008). Thus, its losses are not necessarily a result of any dysfunction at all. It simply may not have had enough time to achieve profitability.

The ostensible objective of the new venture was expressed by its CEO, Stephen Colvin: "Consumers and advertisers value media distributed across multiple platforms. The merger of The Daily Beast and Newsweek audiences creates a powerful global media property for the digital age."

That seems like a sensible statement. But…

Launching a major news-oriented website like The Daily Beast was a considerable undertaking. At just 2 years into it, the job is far from done and it is too early to know if sustainable success will be achieved.

The turnaround of a major print publication like Newsweek, with a legacy of failure, too, is a monumental task with an uncertain future.

And, the merger of two organizations is yet another challenging undertaking unto itself. Merging usually creates unnecessary duplication that has to be dealt with -- a need to accommodate 2 different business cultures through carefully orchestrated process, not by decree; a refocusing of business objectives and a concomitant adjustment of work routines; and dealing with staff resistance to change.

Organizational mergers are indeed challenging enough all by themselves. But when you're dealing with a major website still in the throes of startup and a failed print publication that has yet to display a viable turnaround strategy, and try to merge the two, you have just multiplied the risks involved by an enormous factor.

There are a number of experienced and talented people involved in the Newsweek Daily Beast venture. Maybe they have a good plan and will succeed. Maybe the undertaking is just an expression of bristling egocentricity. Or, maybe there's a hidden political agenda. Time will tell. But, if they are able to produce the "powerful global media property for the digital age" of Colvin's vision, it will indeed be a noteworthy accomplishment, one that will stand as an exemplary model for the industry.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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