Newsweek, put up for sale Wednesday by the Washington Post Company, has hardly any value left as a going business. It is a damaged property in a difficult category, badly trailing major competitors like Time, the Economist and the upstart The Week.
Which is not to say no one will buy it. Newsweek could be a fit for a well-off company looking for a name-brand extension as was the case when Bloomberg bought Business Week for next to nothing last October. Come to think of it, Bloomberg could be a prospect, as it has built a huge and high-quality general news operation, whose work is not widely seen.
Newsweek Editor Jon Meacham has indicated he will try to put together a buyer’s group. Rich investors who share Meacham’s editorial vision could sign on — though they are likely to be alarmed by the numbers and bleak prospects for profit.
There is a third kind of prospect, impolitely known as an “ego buyer,” who is willing to drop some part of a fortune earned in other businesses for the adventure and prestige of high-profile publishing. Real-estate mogul Morton Zuckerman probably has his hands full with the New York Daily News and U.S. News & World Report, but he is not the only fish in that pond.
Post CEO Donald Graham told Newsweek employees Tuesday that beyond price there are “second and third criteria” that will be considered in choosing a buyer – someone who will take good care of the property and staffers that remain. So if Rush Limbaugh and partners wanted to bid (and I can’t imagine why), the answer would probably be no.
Looking at the prospective sale from the Post Co. viewpoint, I think it makes all kinds of sense. The magazine had revenues down 27 percent for all of 2009 and, worse, 30 percent for the fourth quarter. Losses were $29.3 million on revenues of $184.2 million, a negative 16 percent margin. First quarter 2010 results have not yet been announced.
Newsweek accounts for only 4 percent of the Post Co.’s revenues and is just over a quarter the size of its newspaper operation. (The company’s biggest line of business now is Kaplan education services, and it also runs profitable local broadcast and cable system groups).
Graham has said at investor meetings that the Washington Post newspaper has a special place in the legacy he inherited from his mother, implying it will be carried at a loss for some time if necessary. So the logic of stopping the cash drain at Newsweek, then redeploying that money and any proceeds of a sale to keep the company and newspaper strong, is irresistible.
Also the business problems at Newsweek — while worse now — are by no means new. The magazine has had a pattern for decades of briefly getting its head above water, then falling back into the red, always chasing Time but not quite catching the original news weekly.
My take is that Newsweek is badly wounded both as a business and editorially. However, it only takes an enthusiast or two who still see potential there for the publication to get another shot at rebuilding.