The wedding of The Daily Beast and Newsweek is over. On to the honeymoon.
The combined companies are losing an estimated $100,000 every day, so the critical question is this: how much job cutting, circulation boosting and ad selling will be enough to make it work?
More than looks reasonable from here.
Newsweek has been bleeding money so profusely -- even in a time of recovering ad sales -- that a quick rebound would be nothing short of miraculous.
READ ALSO: Is the Media Rebound for Real?
“I regard ‘Newsweek’ as a fantastic, legendary brand,” Brown told Daily Beast staffer Howard Kurtz on CNN’s “Reliable Sources” on Sunday. “And I have this tremendous weakness for fantastic, legendary brands, as you know.”
But brand restoration is not the issue here.
Newsweek has been hemorrhaging cash for years, including $40 million in 2009 and $28 million in 2010 -- which is why 92-year-old Sidney Harman was able to buy the magazine for a single dollar in August, plus assumption of its heavy liabilities.
One knowledgeable insider said the business plan was to aim for losses of only $20 million in 2010. (Uh-huh: only.)
Read also: Diller’s Brilliant Coup -- How He Got Newsweek Without Paying for It
Stephen Colvin, the chief executive of the combined company, was not available for comment on Monday, according to an IAC representative.
One of keys behind the Newsweek deal from the Daily Beast's perspective was getting a print vehicle to leverage ad sales. But part of the problem is Newsweek, like most print magazines, has seen its print advertising decline bleed to the point of, well ... the Washington Post Company having to sell it for a dollar.
Through September -- in a year when a lot of magazine publishers have been touting a Madison Avenue comeback -- Newsweek’s ad pages fell 12.7 percent, according to the Publishers Information Bureau. And Newsweek's estimated ad revenue is down more than 30 percent to $114 million -- or about $50 million less than it pulled in during the first nine months last year. Its paid circulation was 1,610,632, having slashed more than a million copies from its rate base in the last 18 months.
Like it or not, the print product Diller got -- or stole -- may not prove to be the revenue-driver he had hoped for.
And like Newsweek, the Beast has been burning through cash, too. The site loses roughly $200,000 a week, or north of $10 million annually, to go along with Newsweek’s $28 million. “Put the two entities together and you're losing a million dollars every 10 days or so,” Choire Sicha observed on the Awl.com – emphasis his.
According to Newsweek's sale presentation -- posted, ironically, by the Daily Beast in August -- print accounted for 94 percent of Newsweek's $165 million revenues in 2009.
