The owner of Newsweek, the troubled liberal weekly news magazine, has confirmed reports that it is trying to unload the money-losing operation even despite the fact that it jettisoned its print edition last year. In a letter to employees, CEO Baba Shetty and editor-in-chief Tina Brown confirmed that the parent company of Newsweek, InterActiveCorp, is trying to find potential bidders.
In the letter, Shetty and Brown claimed that Newsweek, which was sold by the Washington Post in 2010 for $1 and an assumption of outstanding debt, was going to become profitable by the end of this year. The confirmation of the efforts to sell the online-only magazine comes as no surprise considering that IAC president, leftist media mogul Barry Diller, stated last month that he believed "it was a mistake" to purchase Newsweek and that "I don't have great expectations" for its long-term success.
Not exactly the best way to attract a potential buyer.
Media trade magazine Variety reported yesterday that that IAC's media unit lost $8.8 million last quarter.
Newsweek was owned for decades by the Washington Post Company but as the magazine sank into debt and lost subscribers, it began casting around for a buyer. The owners of the conservative website Newsmax.com expressed interest in the property and likely could have achieved some real success selling a mainstream weekly that did not lean left (something which does not presently exist) but they were rejected by the Post because the newspaper company believed that Newsweek "strives to be apolitical" and thus would have been a bad fit. Of course, no one outside of Newsweek believed that ludicrous claim considering that the magazine hired only Democrats as its editors, including Eleanor Clift, Jonathan Alter, and Jon Meacham.
Eventually, the Post sold the magazine to another wealthy Democrat, the husband of then-Democratic congresswoman Jane Harman in 2010 for $1. After he purchased Newsweek, Harman merged its operations with IAC to form "Newsbeast."
Before the sale to Harman, under the Post ownership and the editorship of Meacham, the magazine embarked on a hare-brained idea to deliberately lose half of its print subscribers and turn the magazine into a left-wing opinion rag that wouldn't admit it was such, supposedly because readers would see the magazine as some sort of middle-school variant of the Economist. Surprisingly, that strategy failed. Since Newsweek canceled its print edition, its subscriber base has declined from 1.5 million to only 475,000 and is expected to continue to decline according to Variety.
The full text of the Shetty-Brown memo follows:
Most of you will have seen by now reports in the press of a potential sale of the Newsweek brand. We'd like to give you background on this news and the rationale for it.
Last year, as we worked through the U.S. print shutdown, it would have been impossible to even explore options to sell Newsweek. The costs were massive, and there was no robust digital presence or identity for the brand. Our obligation was to turn the business around, and develop a breakthrough digital product. We've done just that. We've transitioned the business to one that will break-even in Q4 of this year. We've launched an innovative digital presence that Fast Company called "A New Model for Online Magazines". Under the leadership of Justine Rosenthal, the journalism has been terrific and the quality is evident in the behavior of the audience who reads it. The reaction on twitter to the new digital product has been incredibly positive, including accolades from digital editors and designers from the BBC, The Economist, and Facebook. Don't just take our word for it, check out the new issue with your own eyes this morning. It's stunning.
So why explore a sale now? The simple reason is focus. Newsweek is a powerful brand, but its demands have taken attention and focus away from The Daily Beast. The story that hasn't been told about The Daily Beast is its strength. Deidre Depke and her team have earned the Webby for Best News site for two years running. Our traffic is up significantly yet again this year. And digital ad sales in a very tough environment are up 30% year to date.
Barry has made the point that this process is about exploring options. We will only do this sale if it reflects the value we've created. If not, we'll continue to operate it as now. Let's be clear. Exploring options for a sale is a focused process that a small team at IAC is working on. For the rest of us, we'll continue to produce a first-class Newsweek product on an ongoing basis.
All of the above successes have only been possible through the tireless work of a team of incredibly talented people. We'd like to thank each and every one of you for your contributions and efforts. The achievements of the company are your achievements. The company has never been stronger, and it's all due to you.