Daily Beast-Newsweek Deal Chances ‘at Best 50-50'

A top insider says the deal will happen — or collapse — within a week. Finding a business plan that works is the main obstacle

Negotiations continue hot and heavy between Barry Diller’s “Daily Beast” and Sidney Harman’s Newsweek, with a deal within reach in the next week, according to an individual close to the talks.  

But the individual put the chances of the deal closing at “at best 50-50,” citing financial obstacles.

Both sides find the prospective union appealing from an editorial standpoint.

With Newsweek shedding all its talent, Beast editor Tina Brown could bring her knack for attracting writers and her newly acquired knowledge of the web back to print, where she has made magic — and revenue — before.

And Brown is apparently in favor of the alliance, giving her a broader canvas and the tangibility of glossy pages again.  

For Diller, a union with Newsweek would offer the hope of an end to the red ink bleeding out of the two-year-old Beast and give him access to the revenue stream that print provides.

But the question remains whether there is enough revenue there for both entities. Each carries significant operational costs — Newsweek’s revenues have been in steep decline, and the Beast is a two-year-old start-up that has been operating at a loss throughout its existence (which is true for most start-ups).

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No one knows exactly how much the Daily Beast loses for Diller; one knowledgeable insider says that printed reports of $20 million annual operational costs are too high, but they can’t be that far off given the size of the newsroom and scale of the site.

The individual said that the Beast would come close to breaking even within 18 months if it continued on its current track, with the goal of selling out all its inventory.  That's a claim that's hard to verify. The site has something close to 2 million uniques per month, according to compete.com.

The question is, Does one and one make three financially?

As the insider put it: “Is there a combined business plan that makes sense?”

Meantime, while Newsweek on Monday named a new publisher, Rhona Murphy, but talent continues to escape.

Why? “Because there’s no plan,” said my insider.