In the past, whenever Newsweek posted the occasional loss, Don Graham could see a way back to profitability. That wasn’t the case this time around. When the Washington Post Co. (NYSE: WPO) reviewed the magazine’s prospects earlier this year after pulling out the stops on a print and digital redesign, Graham couldn’t see that path. After 49 years, he came to the painful decision it was time to find a new home for Newsweek.
The Washington Post chairman and CEO spoke with paidContent about the decision to hire Allen & Co to explore a sale, the role played by digital’s failure to thrive, and whether he would close Newsweek if they can’t find a buyer. One question that drew a “no comment”: whether WaPoCo would accept a deal along the lines of Bloomberg’s acquisition of BusinessWeek, ie minimal cash plus assumption of liability? Some highlights from the interview:
Why now?: “In 2008, we announced a redesign for the future of the magazine that we gradually implemented through 2009, cutting the circulation back from 2.6 million to 1.5 million, increasing the price and it was overwhelmed by the decline in advertising in late 2008-2009. The reader side of the plan seems to have been quite successful. We are selling at a higher price. We are getting very favorable ratings from our readers. But we reviewed where we stood against our plan at the beginning of 2010, talked among management and board members, and concluded that we did not have a path to sustain profitability for Newsweek within the company. … In the past, Newsweek lost money occasionally but it made money many more years than it lost — and when it lost money it was typically in a recession and there was typically a clear path back. That’s not the case today.”
How can you sell the magazine if you’re saying there’s not a path for profitability in your company? Can you explain why you think Newsweek might fit somewhere else?: “The editorial staff of Newsweek, which is as good as it’s ever been, spends half of its time on a print product and half its time on digital. The print product has almost $160 million in revenue; the digital product had $8 million last year.” Graham doesn’t blame the digital team headed by Geoff Reiss (he made sure I had the spelling right), which he describes as “the best we’ve ever had,” but the inability to make significant money so far from digital is at the crux of the decision. “That’s one obvious way where someone with a better vision or who already owns a site with a large audience could quickly ramp up the revenue.” Why couldn’t Newsweek make digital work? “I think the site is very good but, again, there are a lot of good news sites.”
Are you prepared to close Newsweek if you don’t get a buyer? “We’ll get a buyer. You saw the auction of the Philadelphia Inquirer last week. I donâ€™t have much doubt that we’ll get a buyer.” McGraw-Hill (NYSE: MHP) reported more than 300 expressions of interest in a bad economy; the sale of Philadelphia Media Holdings out of bankruptcy was competitive.
Has anyone shown interest in buying it before? “We havenâ€™t had a serious conversations about the sale of Newsweek as long as I’ve been CEO.”
Do you think you have to be part of a magazine group to get somewhere?: “It has been a plus and a minus. It’s been a minus in that the overhead costs — circulation, mailings, ad sales, accounting — can’t be shared as they are at Hearst or *Time Warner* or Conde Nast. On the other hand, Newsweek is the focus of a lot of attention. I like it, for instance that Jon Meacham, the editor of Newsweek, can decide what’s on the cover and focus on that. There’s no committees. … The people at Newsweek have a lot of authority without a lot of layers of review and whatnot, which occur to people in other magazine companies. Newsweek has been very quick, in part, because it did have great autonomy.”
Some people want to make this into the death of newsweeklies or the victory of real-time news over thoughtful analysis. “I think news magazines have a role to play. Clearly like all media, there are way more advertising alternatives then there used to be and there’s no getting away from that. And there’s more competition for readers from news sources.” Graham: “There’s a secret that the people in news magazines know: the reader really likes those magazines. I heard a longtime consumer products researcher say that he had never seen a category in which consumers like the product as much as news magazines.”
How do you find a place that actually supports that? “If I knew the answer to that we would not have made the announcement we did today, but I think much expanded digital revenues have to play a part.”
Will selling Newsweek enable the company to focus more on other properties like the Washington Post? “I wouldn’t say it will affect the other media businesses one or the other. We’ll try to find a quality buyer for Newsweek, a good home and hopefully a good future for the magazine and the staff.”