'Newsweek' Is For Sale, But Buyer Will Be Hard to Find
The Washington Post Co. (WPO) has decided it no longer wants to own Newsweek. Will anyone else feel differently?
Ahead of its quarterly earnings announcement, set for Thursday, the company revealed it has retained the services of the media investment bank Allen & Co. to explore a sale of the 77-year-old news magazine. "The losses at Newsweek in 2007-2009 are a matter of record," Post Co. chairman Donald Graham said in a statement. "Despite heroic efforts on the part of Newsweek's management and staff, we expect it to still lose money in 2010. We are exploring all options to fix that problem."
It's not an easy problem to fix. The Post Co.'s magazine publishing division, which consists chiefly of Newsweek, had an operating loss of $29.3 million last year and $16.1 million in 2008, according to the company's annual SEC filing. That means the losses steepened even as Newsweekshed over 100 staffers through voluntary buyouts and then another dozen through layoffs, and even as it reduced its guaranteed circulation by over 1 million copies in an effort to lower its production costs.
The circulation reduction, paired with an editorial makeover, was supposed to result in a more targeted, elite audience that advertisers would pay more to reach, but that strategy hasn't panned out. In the first quarter of 2010, Newsweek's advertising pages were down 20 percent from the same period last year, and its reported ad revenue was off more than 40 percent.
If Allen & Co. can succeed in finding a buyer for Newsweek, it will likely be the sort of transaction in which the Post Co. accepts a nominal sum just to rid itself of the expense of publishing a money-hemorrhaging weekly magazine. That has been the pattern with other mass-circulation weeklies that have changed hands in recent years. Macrovision sold TV Guide to OpenGate Capital for the token price of $1 in 2008. McGraw-Hill got a little more from Bloomberg for BusinessWeek, but the $5 million price still put it in the fire sale category.
Newsweek's storied name may be enough to tempt a buyer, even if the Post Co.'s efforts have demonstrated the difficulty of making money with a general-interest weekly news publication in an era when consumers expect their news to be delivered electronically, for free, and updated continuously. But if not, the multipleprognosticators who have predicted Newsweek's imminent closure may soon be proved correct.