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Updated: Newsweek and The Daily Beast will merge after all in a deal forged despite a misunderstanding that stopped earlier negotiations. Th…

Tina Brown

Updated: Newsweek and The Daily Beast will merge after all in a deal forged despite a misunderstanding that stopped earlier negotiations. The news that Daily Beast founding editor Tina Brown will tackle the odd hybrid as her next big thing, fittingly first reported by Nick Summers, a former Newsweek reporter now with The NY Observer, was the latest in a series of twists covered almost obsessively by other media entranced by the spectacle.

The deal will indeed be made official Friday, WSJ reports, in an interview with Newsweek owner Sidney Harman and Brown. The new venture is being dubbed “The Newsweek Daily Beast.” Brown will take over as editor in three weeks. The Daily Beast staff will move out of parent IAC’s building and into Newsweek’s offices as 7 Hanover Square in the Financial District. The two brands will also share one website.

In a Daily Beast blog post, Brown writes that the deal was finalized on Wednesday night, with the union struck with a “coffee-mug toast between all parties” the night before.

Under the new structure, current Daily Beast president Stephen Colvin will become CEO while Harman will serve as executive chairman of NDB. Harman will serve on a board with IAC (NSDQ: IACI) chairman and CEO Barry Diller. Brown will report to that board.

Harman told the WSJ the deal did indeed fall apart because of “misunderstandings” about his place in the new company. But that all has apparently been sorted out. “I have every instinct, and Tina has blessed this, to be a participant in terms of sharing and discussing ideas, but recognizing where the editorial authority simply must stay,” Harman said, hailing Brown “one of the transcendent editors of all time.”

One of the big questions as the two media outfits come together is whether they can both rein in costs or whether this will compound their respective cash flow problems. At the time of Harman’s purchase of Newsweek barely two months ago, the magazine was expected to lose another $20 million by the end of the year. Meanwhile, Daily Beast, which just celebrated its second anniversary in October, will lose about $10 million, according to the WSJ.

Original post: Late last month, Brown, the legendary former editor of Vanity Fair and The New Yorker, said in a Daily Beast blog post that there had been “interesting discussions” with Sidney Harman, the audio exec who acquired Newsweek from the Washington Post Company (NYSE: WPO) two months ago. But ultimately, Brown said IAC had decided not to pursue a deal further.

Now, according to this latest report, the deal calls for a “50/50″ combination under Brown’s supervision. Financial terms weren’t available.

Although a well-respected for his business acumen in electronics, Harman had never run a magazine. Since he emerged as the buyer of the Newsweek this summer, agreeing to ultimately pay $1 for the title and assume about $47 million in liabilities, Harman struggled to find an editor-in-chief. He also presided over a mass exodus of the staff.

The sale of Newsweek was put in motion in May, when WaPo hired Allen & Co. to explore the possible deals. The magazine was founded in 1933 and acquired by WaPo in 1961.

Over the past few years, the newsweekly model began to appear moldy next to the speed of online, which siphoned off readers and ad dollars. Although most magazines have been impacted by the transition to digital, Newsweek appeared to suffer more, especially as its parent company began relying more on its Kaplan education business for revenue and profits.

Initially, there was morbid speculation about the lasting power of the Harman, who is 92. Although he presented himself as energetic, he didn’t necessarily convince anyone that he had a particular vision to rebuild the magazine.

If this deal really is happening — who wouldn’t be surprised to see it had been called off again — this could help the two outlets reach their respective goals. The Daily Beast has been considering the creation of a print version. And Newsweek needs a strong shot in the arm if it’s going to return to relevancy. For The Daily Beast, it is probably less work and less costly to remake an existing magazine with remaining brand equity with readers and advertisers than to create a whole new publication from scratch.

Still, it’s unclear what a “50/50″ merger means. Will it become “The Daily Beast’s Newsweek?” Either way, whatever the name is, it will bear Brown’s distinctive stamp at a time when print advertising appears to be slowly coming back from historic lows. But that doesn’t mean that this merger has great chances of success either. But it does improve the situation, at least for Newsweek.

Over an hour after the NY Observer story surfaced, there was stilll no response from Newsweek’s PR reps on the story. But as Mediagazer’s Megan McCarthy wonders in a tweet if Newsweek’s Tumblr page has offered “cheeky confirmation?” of the deal. Not quite, but the page is offering a series of articles on the — so far unconfirmed — merger.

  1. This is doomed from the start. No chance does this venture work… at all. Maybe there are some Newsweek assets there… maybe not. I really don’t know what Barry Diller is doing. He is seems tired and, from this story here, it appears he would rather be fishing.

    http://mankabros.com/chairmans-blog/2010/10/fishing-with-barry-diller.html

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