How smart is Barry Diller?
With the Daily Beast still losing money and no easy way to get to the scale that will bring in profits, the man just partnered with Newsweek — which is also losing money — to give him a broader canvas for his star editor, Tina Brown.
It would have been smart enough as a survival move for the Daily Beast. But this is Diller, so it’s a lot better than that.
Essentially, he got Harman to be his front man for the purchase of Newsweek. At half price.
Don’t forget, Diller sits on the board of the Washington Post Company. He knows better than anyone the state of Newsweek, and he could have bought it six months ago had he wanted to.
Instead, he let Harman take on the liability — to the tune of tens of millions of dollars of annual losses underwritten by the new owner.
And now he gets to co-own the thing anyway — and gets Newsweek’s mass national audience to plug into the Daily Beast. By combining Newsweek’s 7 million monthly online readers with the Beast’s 4 million, they can sell bigger advertising packages, in addition to leveraging print.
But let’s be clear, this is no slam dunk from a business perspective. Both publications are in the red. It is not a given that there will be enough high-end advertising or administrative efficiencies (read: layoffs) to close the gap.
Diller has needed a strategy to extricate the Daily Beast from the digital bind: With an editor in Brown that advertisers love, there’s not enough ad inventory to produce revenue that will get them to profit. That’s part of the reason he’s been falling back in love with print.
Meanwhile, Harman has tried and failed to find an editor-in-chief who isn’t Brown. And it would’ve taken years for a new, non-superstar editor to attract advertisers back to the unsexy Newsweek brand.
Having Tina Brown in that office brings immediate relevancy and sex appeal.
As one insider wag put it to me today: “It’s more than a win-win, it’s a survive-survive.”
One thing that’s not clear is: Who will subsidize the losses of Newsweek going forward?
Knowing Diller, something tells me it won’t be him.
