Newsweek-Daily Beast Deal Dead (updated)

Talks between Sidney Harman, Barry Diller and Tina Brown break down

The Daily Beast-Newsweek deal is dead.

According a representative for the Daily Beast, those “interesting” talks between Newsweek owner Sidney Harman and IAC’s Barry Diller and Tina Brown about a potential merger of the magazine and Daily Beast have broken down.

As TheWrap reported last month, chances of a Newsweek-Beast deal were “at best 50-50” because of financial hurdles, despite the advanced discussions.

Here's Brown's note to her staff:

From: Brown, Tina
Sent: Monday, October 18, 2010 12:32 PM
To: The Daily Beast Editorial; The Daily Beast Sales; The Daily Beast General Management
Subject: note from: Tina Brown

Hi guys,

There’s a report on the WSJ now saying we have decided not to go forward in any more conversations with Newsweek. The engagement was fun but the pre-nup got too complex. We wish Newsweek all the best. The Daily Beast is on a tear and any partnership we think about has to build on that incredible growth. Onward and upwards!

Tina

An official statement from Brown is expected shortly. UPDATE: Here it is:

In a previous post, I mentioned that we were having some interesting discussions with the new ownership of Newsweek about possibly doing something together. The talks were indeed intriguing, but in the end we have decided not to pursue them further. The engagement was fun but the pre-nup got too complex. [...] We wish Newsweek and its intrepid new owner Sidney Harman the very best of luck.

No word on what specifically caused the breakdown. A representative Newsweek did not immediately respond to requests for comment.

But according to WSJ, the discussions "were hung up on the issue of how control would be divided among the three people, all of whom are heavily invested financially and emotionally in their respective news operations and not inclined to cede control." A "person familiar with the matter said talks broke down because the two parties couldn't come to an agreement on governance and editorial control."

Harman agreed to buy the struggling newsweekly in August for $1.00 plus the assumption of its heavy debt, which could reach $20 million this year. According to the report, the two-year-old Daily Beast is expected to lose $10 million this year, but is on track to be profitable by 2012.

Meanwhile, the fizzled merger leaves Harman still without a top editor. Jon Meacham left Newsweek in September, and the magazine's acting editors, Danny Klaidman and Nisid Hajari, are not expected to continue once a new one is named.

UPDATE #2: Here's Newsweek CEO Tom Ascheim and Signey Harman's joint memo to staffers on the breakdown in talks:

From: Ascheim, Tom
Sent: Monday, October 18, 2010 3:00 PM
Cc: Harman, Sidney
Subject: Latest News from Tom and Sidney

As I'm certain you've all heard, we have been engaged in discussions with The Daily Beast about the possibility of an alliance which included the potential for a new editor at Newsweek. We have withdrawn from those conversations. If anything changes on that front, we will be back to you.

Meanwhile, we remain committed to and actively engaged in the search for the best editor for Newsweek. We plan to have news here soon. Thanks to all of you for your patience while the rumors fly.

Please see the brief statement that we are putting out jointly with IAC. "Barry Diller and Sidney Harman explored the possibility of uniting The Daily Beast and Newsweek.  In the end, they mutually decided not to pursue the possibility.  Each wishes the other well."

Best,

Tom and Sidney