A Newsweek-Daily Beast Deal Made No Sense From the Get-Go

Combining Newsweek and the Daily Beast wouldn't have been as big of a debacle as New Coke, but it would have been awfully close. At least now, it won't happen. Billionaires Sidney Harman (Newsweek) and Barry Diller (Daily Beast) ended their talks on Oct. 18 that would have somehow merged the two money-losing websites and placed Daily Beast Editor Tina Brown in charge of Newsweek. The proposed mash-up was convoluted from the start, and as a business proposition made no sense.

Newsweek is expected to lose $20 million this year, and The Daily Beast is on track to lose $10 million. None of the voluminous media reports on the deal ever made it clear how combining the media organizations would allow them to become profitable. They would have probably had to fire staff and contract the articles to low-cost freelancers, something that neither Harman nor Diller seemed particularly keen to do.

Newsweek Has More to Lose

Managing the combined operation would have also been a nightmare. As The Wall Street Journal noted, talks in recent weeks centered around the roles of Harman, Diller and Brown. Bringing peace to the Middle East would have been less complex than figuring out which titanic ego was in charge of what aspects of the combined site. Underscoring this idea, was a statement in the Journal story saying "People from each camp claimed their side ended the talks."

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The potential deal's demise is worse news for Newsweek than for The Daily Beast. Harman, a stereo equipment magnate who acquired Newsweek from the Washington Post Co. (WPO) earlier this year, has been saying the right journalistic things about maintaining the public trust over the pursuit of profits. The problem is that he's one of the few people who thinks the once-proud newsweekly has a future. Many of Newsweek's top writers including Howard Fineman, who convinced Harman to buy the place, have quit.

Brown, who ran Vanity Fair and The New Yorker, is a recognizable brand who'll survive nicely even if The Daily Beast goes under. Writers are eager to work with Brown wherever she collects her paycheck, a luxury that Newsweek doesn't enjoy. Her public reputation for being a bold, innovative editor may explain why Harman pursued this cockamamie idea. Newsweek now has to start that process all over again

Like Rupert Murdoch, Diller and Harman are motivated by ego as much as profits. They want their websites to do well for the same reasons that racehorse owners do -- because it makes them look good. Also like Murdoch, Diller and Harman are both rich enough to fund their expensive hobbies for quite some time.