Does the sale of Newsweek to a print-sentimentalist mark the end of weekly newsmagazines? Probably not.

So, in hi-fi billionaire Sidney Harman, the Washington Post Company found a buyer for the ailing Newsweek. Peter Lauria and Lloyd Grove at The Daily Beast have a good report on the sale, based on the sales memorandum circulated.

A few key numbers suggests the challenge the 92-year old Harman (it is his birthday today, as a matter of fact) has taken on:

Newsweek’s financial freefall is jarring. Revenue dropped 38 percent between 2007 and 2009, to $165 million. Newsweek’s negligible operating loss (not including certain pension and early retirement changes) of $3 million in 2007 turned into a bloodbath: the business lost $32 million in 2008 and $39.5 million in 2009. Even after reducing headcount by 33 percent and slashing the number of issues printed and distributed to readers each week from 2.6 million to 1.5 million, the 2010 operating loss is still forecast at $20 million.

Dig deeper into the document and the numbers get worse. Newsweek lost money in all three of its core areas in 2008 and 2009: U.S. publishing, foreign publishing, and digital. Even with the smaller guaranteed circulation, it still retains $40 million in subscription liabilities owed to readers. And then there’s Newsweek’s lease foibles: last year, it paid $13 million in rent, a startling figure for a company its size.

Moving to a cheaper address than 251 W 57th St might be a start. No wonder the article calls the sale a “passion play” and implicitly identifies Harman as something of a print sentimentalist.

Lauria and Grove go on to make this prediction: “Standalone magazines no longer work.”

Part of their argument is reasonably enough, that Newsweek would have been better off had it been sold to a media conglomerate that could have reduced its massive overhead–what Lauria and Grove describes as “the murderously inefficient $55 million in general and administrative costs that Newsweek carried in 2009 (covering everything from finance, accounting, and rent to legal, HR, and IT)”–by sharing back-end operations amongst several magazines.

But let me offer just one counter-point to the broader version of their assertion about magazines–look across the pond to Europe, and you will see several countries with internet use at levels comparable to those in the US where newsmagazines are actually doing rather well–in print, but also online.

In Germany, for example, Der Spiegel, a bastion of news reporting and current affairs coverage with a circulation around 1 million in a country with little more than 25% of the US population, is a leading source of news both in print and online. While revenue dropped from 2007 to 2009 there too (about 15% during the worst recession in the post-war period), they still stand at an estimated €300 million in 2009–almost twice Newsweek‘s, for a company build around a magazine with a smaller circulation in a smaller market.

(The media market in France is rather peculiar for historical reasons, and thus not easy to compare with, but it is still worth noting that news magazines like L’Express and Le Nouvel Observateur have comparatively speaking high circulations (~500,000) in a much smaller country.)

News magazines are under pressures everywhere, yes, and Harman has certainly chosen to take on a major challenge at a rather advanced age, but the business he has entered with this acquisition is not going away–it is changing.

UPDATE (after lunch conversation): The Economist is another interesting but tricky comparison, British-based, but with a much more international audience, the Economist Group based around a magazine with a circulation of about 1.5 million had, according to its annual report, a revenue of £313 million and an operating profit of £56 million (!) in 2009.

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One response to “Does the sale of Newsweek to a print-sentimentalist mark the end of weekly newsmagazines? Probably not.

  1. One year on, mixed news for news magazines in the US–as predicted (from the NY Times): “newsstand sales for the top weekly news magazines told two different stories. Time, the country’s best-selling news weekly, posted considerable gains. Newsweek, under the leadership of a prominent new editor, barely moved the needle despite creating provocative covers like one with a digitally altered and age-enhanced rendition of Princess Diana.”

    (http://www.nytimes.com/2011/08/10/business/media/abundance-of-news-but-mixed-sales-for-news-magazines.html?_r=1&WT.mc_id=BU-D-I-NYT-MOD-MOD-M214-ROS-0811-HDR&WT.mc_ev=click)

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