Finances Still a Mess at Newsweek-Daily Beast

While the Daily Beast may reach profitability, the magazine holds the company back

A year after their merger, the combined forces of the Daily Beast and Newsweek are still a financial mess, as Adweek's Lucia Moses reported Monday.

Late audio pioneer Sidney Harman, who bought Newsweek from the Washington Post Company in 2010, hoped to resuscitate the reputable brand though its merger with the Daily Beast and the stewardship of Beast editor-in-chief Tina Brown.

However, it appears Newsweek’s poor finances continue to be a drag on the company.

While the Daily Beast may reach profitability in 2011, Newsweek will keep the overall portfolio in the red. The merged companies lost $30 million last year, and continued losses at Newsweek are likely to offset any gains on the Beast side this year.

It may not get much better next year either.

“An Adweek investigation into the company’s finances and revenue drivers … reveals that getting the combined NewsBeast into the black by early 2013 — a time frame Barry Diller, chairman and CEO of Beast backer IAC, has said is reasonable — will be a daunting task,” Moses wrote.

Newsweek’s problems are nothing new. Then when the Post redesigned the magazine and cut its rate base in an effort to court advertisers, things only got worse. Ad revenue continued to plummet and circulation declined. A lower subscription price didn’t exactly boost revenue either.

Advertising revenue and newsstand sales are now on their way back up, but the magazine makes most of its money off subscriptions and the boost in ad revenue is not substantial enough.

The digital side isn’t looking any better. NewsBeast folded the Newsweek site into the Daily Beast site back in August, and though traffic is strong for the Daily Beast, the combined traffic pales in comparison to what Newsweek saw back in 2009 and the first half of 2010.

Now many of those previous Newsweek's readers came from a paid traffic deal with MSNBC. Moreover, traffic is way up at Daily Beast as compared both to last year and earlier this year, according to Omniture.

“That said, assuming it keeps its current rates, Newsweek would still have to almost double the number of ad pages it’s been selling,” Moses wrote. Otherwise, that means major cost-cutting (also known in the industry as layoffs).