WaPo Unloads Newsweek for $1; Buyer Clearly Overpaid
It’s official: Sidney Harman, the businessman who made his fortune selling stereo equipment, has secured a deal to buy Newsweek from the Washington Post Co. and will announce the deal later Monday afternoon.
The New York Times and others have previously reported that Mr. Harman was the front-runner to come away with the news weekly, but have cautioned that no deal was certain. Politico’s Playbook e-mail newsletter this morning said a deal with Mr. Harman was imminent, but also cautioned that “no deal like this is done until it’s done.” The deal is now done, according to people familiar with the process.Mr. Harman and the Washington Post Co. declined to comment.
The Times quoted one person briefed on Mr. Harman’s bid who said his plan would retain 250 of Newsweek’s employees. Newsweek counted 379 full-time staffers at the end of March, according to the sale book posted by PaidContent, but a significant number have left in the time since. Losses at the magazine could approach $70 million this year, this person told the Times. Mr. Harman reportedly bid $1 for the magazine but agreed to assume the magazine’s liabilities; those details could not be confirmed on Monday.
Last week, we mentioned the story by the Politico’s Michael Calderone regarding JournoList member Dave Weigel effectively being laterally transferred from the Washington Post to Slate, a Website owned by the Post, a seemingly rather important fact not mentioned by Calderone until the 11th paragraph, and then, only in passing. While Calderone certainly buried the lead, the above Ad Age story on Newsweek deletes it entirely, never mentioning Newsweek’s horrendous redesign efforts which helped to accelerate its plummeting sales — and more importantly, fails to note whom Sidney Harman is married to.
It seems safe to assume that Newsweek’s odd niche as “a liberal opinion magazine written by liberals who don’t want to admit they’re liberals”, as Andrew Ferguson brilliantly dubbed it last year, will continue for the magazine’s foreseeable future.
Update: The New York Post adds, “Newsweek editor Meacham expected to leave after sale:”
Newsweek Editor-in-Chief Jon Meacham is expected to exit after the deal to sell the magazine to stereo-mogul Sidney Harman is completed, The Post has learned.
“Meacham has told [Harman] he should look for a new editor and is ready to leave when one is found,” said a source close to the situation.
Considering that Meacham made Newsweek’s appeal about as “selective” as Spinal Tap’s, that seems like a very wise decision for all concerned.
Update: The Wall Street Journal adds:
The Wall Street Journal reports that Harman won out among the small group of bidders because of his commitment to retaining more employees than anyone else eyeing the weekly news magazine.
Harman is still working out the terms of the deal with The Washington Post Co. His wife’s Republican opponent, Mattie Fein, wrote an open letter to Newsweek editor Jon Meacham voicing concerns over whether the lawmaker would exert influence over the publication. Harman is expected to win re-election in November.
After the magazine’s run of badly slanted, and at times badly-sourced stories in recent years, how much worse can it get?
Update: “Wash. Post Company Chairman Sells Newsweek to Harman Because of Comfort with His ‘Centrist Politics’” — but then centrism is, in this case, clearly in the eyes of the offloader.
Update: Found via Power Line, the Strata-Sphere sums up the story thusly:
[I]n a fascinating twist, the Post appears to have several offers that were much better than this, offers which would have given their own shareholders a much better return on these assets and on all the money that’s been wasted this past year. So why did they turn down those offers and instead, make their own shareholders take a beating by giving Newsweek away for free? Because those nasty high bidders might have actually fired some employees and CHANGED the editorial direction of the Magazine! We can’t have that, oh heaven forbid, we can’t have that! So better to take a huge loss and auger this entire operation into the dirt before even considering whether maybe, just maybe, they’ve been doing things wrong. …
Meanwhile, in the latest issue of Commentary, Andrew Ferguson explores how Newsweek augured itself so deeply into the ground: “Don’t Give the Readers What they Want.”
The Strata-Sphere has the sad story:
[I]n a fascinating twist, the Post appears to have several offers that were much better than this, offers which would have given their own shareholders a much better return on these assets and on all the money that’s been wasted this past year. So why did they turn down those offers and instead, make their own shareholders take a beating by giving Newsweek away for free? Because those nasty high bidders might have actually fired some employees and CHANGED the editorial direction of the Magazine! We can’t have that, oh heaven forbid, we can’t have that! So better to take a huge loss and auger this entire operation into the dirt before even considering whether maybe, just maybe, they’ve been doing things wrong. …
Newsweek could be renamed NewSpeak for a fresh start with the same biases.
Alas, I am far from the first to think of NewSpeak.
Jane Harmon…hmmmm.I guess there is more than one was to get a gov’t bail-out! Has Jane been talking with Maxine Waters on the best way to hide this?…snicker…
Newsweek editor dies by drowning in vomit … not his own …
You insult Spinal Tap with the comparison to Newsweek.
[holds up the cover of "We are All Socialists Now"] It’s like, “how much more liberal could this be?” And the answer is none. None more liberal.
I agree, Spinal Tap is way more popular than Newsweek.
Obviously, he thought he was just buying another subscription.
New masthead motto for “Newsweak”:
“This goes to page 11!”
Who reads Newsweek anymore?
It is transparently obvious that Newsweek and the Post wanted a rich liberal-activist owner who is willing and able to take tens of millions of dollars in annual losses, until either he dies or the magazine dies.
The only thing that matters to them is continuing the relentless stream of liberal lies and propaganda, for as long as possible.
That they turned down vastly higher bids, submitted by groups who were not radical liberals, should open Newsweek up to shareholder lawsuits. The cra- about them using minimal layoffs as the main criteria to select the buyer, is so plainly dishonest and insulting as to be infuriating.
These liberals would eagerly sacrifice their own careers and their entire company in order to push liberalism. Perhaps I should restate that….For years, these liberals have, and will continue, to eagerly sacrifice their careers and their entire company in order to push liberalism.
A sucker is born everyday. Is this guy that wealthy? I can’t imagine this investment being anything but a serious financial loser.
Meachem a classic liberal: Receiving something successful, destroying it, then sticking someone else with the bill.
Time: the magazine for people who can’t read.
Newsweek: the magazine for people who can’t read Time.
Let me guess: the first big cover story will feature – President Obama!
Obama plans to restrcuture the media ala GM. He has talked about it if you’ve been paying attention. That’s the play here I think. Government subsidy to keep rags like this afloat to “protect the free press”.
And why does the GOP not proclaim in no uncertain terms that they intent to sell GM to back to private ownership?
Frankly, I think Jane is a Democrat very much in the mold of Joe Lieberman. A JFK Democrat, who does not have a place at the table with the string of leftists who dominate the party.
Suffice it to say, if she was indeed running Newsweek, it would not look similar to that of Norman Thomas’ grandson, Evan. Norman at least had the decency to wear his Socialism on his sleeve. He would be proud of the headline “We Are All Socialists Now”, in fact, that headline may have been an homage to him.
Jane is a pro-Israel, pro troops, pro national defense, pro homeland security type…a rarity for a Democrat….and non-existent among hardcore leftists who dominate the party.
Sidney is not his wife, but, any influence she may have on him in how that magazine changes, would not be by halves when it comes to the war, national defense or this administration’s treatment of Israel. (or other allies)
In fact, it might give her some cover…since she clearly can’t say some of these things out loud within the current administration.
To think that the WashPo would ever allow a true “centrist” to purchase one of its assets (or, heaven forbid!…a Republican!!!!) would be out of the question. No, the JournoKlan conspiracy headed by one of their own is a mindset that is too pervasive for such a thing…however, before anyone gets a Karman Hardon against this outcome…ponder this:
If you had to pick a Democrat Party supporter to purchase Newsweek, who had ties to a high ranking government official…given its current state of near open sedition…could you pick anyone who is MORE likely to come close to your position or your stance on Israel, homeland security, national defense, than Jane?
If we learned ANY lessons from the leftists from the last four decades, it ought to be this…one of yours on the inside of THEIR private meetings…is worth a hundred of ours inside of our own. Go slowly, quietly, gently into their den and begin to make slow, imperceptible changes to the narrative.
Hey, we can dream…can’t we?
I agree with you. Jane is, as Democrats go, not hard left, and she is not a traitor to the United States of America, like most of her colleagues.
I think this could be interesting. Nancy Pelosi screwed Jane by making Sylvester Reyes (who is a drooling idiot) chairman of the Intelligence committee. (Nancy even considered making Alcie Hastings chairman!).
This could get interesting.
as opposed as to jane harman who has been under investigation by both the cia and fbi for influence peddling and blocking investigations into two AIPAC members accused of espionage?
you’re clearly completely insane.
I’m no expert on these matters, but if the Post had better offers, and turned them down for this one, isn’t there the possibility of a stockholder lawsuit against the board for neglect of their fiduciary responsibility?
Remember when corporations were meant to maximize the wealth of their shareholders? Well thankfully we’ve thrown all that out. The Post had the courage to put profits on the back burner. Who cares how much return granny gets on her pension: we’ve got millionaire JournOlisters to feed!
By the way, this goes for the Government-Sponsored Entities, non-profits and NGOs as well. The executive salaries are as high or higher (when you include the perqs), but no messy “profits” to distribute to ordinary shareholders. Win-win, right? Soon every company will run this way, like it or not.
By the way, I would take with a grain of salt that internal sales memo. Remember, these are the execs who couldn’t turn around Newsweek in the first place. They parrot words like “synergies” and “economies of scale” but I doubt that they could even explain what they mean in a way that would hold up for more than ten minutes.
First, it’s economies of scope, not scale, that being swallowed by another media company offers. Companies which already have such economies, and are still struggling with their cost structures.
Precisely what synergies does Newsweek offer the hypothetically better acquirer? Right now it’s a tarnished brand and a stable of mediocre but socially well-connected journalists. The word “synergies” refers to the transaction cost economics which presumably Newsweek’s ideologues don’t believe in anyway. But let’s say they do. How, precisely, does the Newsweek/MysteryCorp combination create more value or less cost than either do on their own? Harmon may have no synergies with Newsweek, but let’s face it: no one else does either. Certainly WaPo didn’t.
The WaPo memo basically argues for the strategy which has been killing Newsweek and other media companies: industry consolidation into a few companies which have fleets of media brands but share the same team under the hood. The k-cars of the press. This clearly isn’t working. Maybe nothing will work and the market only needs The Economist and a competitor or two– or maybe even zero print magazines.
There’s an alternative strategy, one which has a slightly better chance of Newsweek’s survival (largely because unlike the strategy above it hasn’t been tried and discredited yet).
What are the Harmon/Newsweek company’s combined resources? Tarnished brand and mediocre but connected left-wing journalists on the Newsweek side. Millions of dollars and Jane Harman on the other. Suddenly, there’s a possible story here. Imagine a super-Media Matters: a well-known masthead with a direct connection to dentists’ offices and even theoretically readers. Articles are written and fed to Newsweek by Democratic Party insiders. It becomes (overtly, though perhaps not openly) a party organ.
The revenue comes at first from Harman (consider it a campaign expense if nothing else). Then come the advertisers: interest groups and party satellites at first (donations in all but name), but later corporations and lobbyists. After all, right now, you buy influence with campaign contributions, only it’s not really influence and the process is carefully tracked due to campaign finance laws. But since those contributions get funneled right back to the MSM as campaign ads, why not cut the middle man? I want to influence lawmaker X, so I buy overpriced ads from Newsweek supposedly to sell soap or financial advice or whatever. Lawmaker X delivers the legislative payout to the company, and Newsweek gives the lawmaker the favorable coverage.
Sound far-fetched? The Washington Post’s “salons” were basically an attempt at the same thing: an explicit attempt to set up triangle trade of cash for influence for favorable coverage. That time, it was too explicit. This time, it might be just murky enough to keep the suckers at bay.
Now that’s a synergy. I’m not even kidding here– it’s a combo that will be hard to imitate by rivals and is good for both Harman and Newsweek. Rupert Murdoch would seem to be doing this, but he’s missing the big payoff: influence peddling. Carlos Slim might be doing something similar with the NYTimes, but his goals seem far less ambitious and Pinchy is a bit too mercurial.
The thing that’s missing is a TV network– TV advertising is the big dollar cost in a campaign anyway. But consider this: the Newsweek stable of reporters often ends up on TV as guest correspondents on the pundit shows (socially connected, remember?). So you get another degree of separation: BP, Google and Goldman Sachs GOOD; and Halliburton and Fox BAD.
JournOList Triangle Trade. You heard it here first.
Newsweek, WaPo, HufPo, DailyKos, NY Times…all the same to me.
Harman is 91. He probably shouldn’t be buying green bananas, let alone pink magazines.
And yes, the Post is publicly traded (symbol WPO), although why anyone would own it is not clear, as its longterm viability depends almost entirely on growth of Kaplan schools (the subsidiary that funds the flagging media/propaganda arm). I assume that the holders are low-level Harmans, wanting to shore up a cancer-stricken legend. A decision like this, made for admitted non-economic reasons, is indeed bait for that species of lawyer that makes a career of stock-market class action suits (suits which pay the lawyers but not the nominal clients — something only permitted in our corrupt legal system). These suits are a bad thing, but it would be amusing to see a firm that has championed them hoist by its own petard.
Supposedly Jane and Sid Harman keep separate finances, which Post apologists will keep saying to stress that Newsweek won’t show any favoritism towards her or her party. But if that’s the case, she’s independently worth a half a billion — Congress has been very, very good to her, hasn’t it?
asdf, we’re thinking along the same lines: why would someone want to acquire a business that obviously has negative net worth? If Harmon just wanted a newsmagazine, it would be cheaper to start a new one from scratch. So there has to be some political payoff involved. In addition to what asdf discussed, I read one other thing into this: a government bailout of the MSM is in the works, and Harmon knows it.
Well said, Dave. I was actually going to mention a bailout but figured my post was long enough as is. I think you’re absolutely right, and once those government checks start rolling in, they might as well be an annuity.
Unfortunately this is the scary part of this story. Keep in mind that a business cannot ever be cash negative – it has to come from somewhere, every day. It will be interesting to see how the current and future losses are financed. Will any banks loan them money and with what collateral? Will anyone make an equity investment? What committment did Harmon make to invest his own cash and on what terms? As usual it is instructive to follow the money and the politics. I agree – look for the Obama administration to look after this one using some wierd Progressive logic that links their survival to the general economy, freedom of speech (not), the children, hope and change and blah, blah, blah.
When they say “centrist”, I suppose that means that Mrs. Harman doesn’t get along at all with House Speaker Nancy Pelosi. Which actually could make Newsweek an interesting read this fall, if only for the behind-the-scenes Machiavellian moves that could result from the Democrats’ impending Election Day train wreck in the House and the natural post-mortem finger pointing and the likely effort by other House Democrats to remove Pelosi as their leader for the 2011-12 Congressional term.
So come this November, it’s possible you might actually see some articles in Newsweek lambasting the Democratic Party leadership, and given Jane’s slightly more moderate leanings, those slams from the magazine might actually come from the ideological right, instead of from petulant liberals irate that Pelosi didn’t move far enough left fast enough. It wouldn’t mean Newsweek has come to it’s senses, only that it’s now a voice for the not-totally-insane-wing of the Democratic Party. But that would still be an improvement over where it is right now.
Key buyer quote from the WaPo article: “I do not — and this is crucial — I do not think about this as a business opportunity. I think about it as an enormous intellectual opportunity that will be very well served by my business experience.”
Dinosaurs. Smug ones, too.
As a long time user of Harman Kardon equipment, I have to ask: Why would Sidney want to besmirch his reputation and legacy by taking over a liberal rag? It will not turn a profit (given the liabilities), so is it just a vanity project? Jane Harman, who I generally respect, has given no indication she intends to leave the Congress and take over the magazine, so what’s the point? I’d suggest its credibility might be compromised by being owned by a prominent Democrat, but Newsweek has little credibility to lose.
Ed, if one applies the labor-theory-of-value here, its a fair price.
I on the other hand, merely assume that a subscription to Newsweek is required by the minutiae of Obamacare.
And they didn’t tell any of their employees, one third of them likely to be laid off. They let them hear it on the nightly news. Classy!
Since this guy is so old he’s pooting dust, that means when he kicks it, a liberal foundation will be running Newsweek. Sorry, I mean Newsweak. Considering the track record of liberals running news businesses, it’d be a lot cheaper if they just folded up now.
I think Philip Graham is putting a gun in his mouth and blowing out his brains all over again in his grave. donny graham is no businessman.
As was pointed out above; wapo is subsidized by Kaplan University which is subsidized by the US taxpayer. 90% of the people availing themselves of their services get their loans from the US government, of which, 25% default on their loans at the expense of the US taxpayer.
http://www.google.com/search?client=opera&rls=en&q=pell+grants+kaplan+university&sourceid=opera&ie=utf-8&oe=utf-8
FEDERAL GRANTS. Kaplan University encourages students to apply for federal grants to help fund their education. Pell Grant. Federal Pell Grants are awarded …
online.kaplanuniversity.edu/SiteCollectionDocuments/…/Federal_Grants.pdf
P.S. Just looked up Phil Graham after I wrote the above to spell check his name and knowing he had killed himself in August but not knowing the date and just found out it is today. If I was a classy guy, which I’m not, I would have changed my post.
WaPo better cash that check quickly and be thankful that they found a sucker.
This does get interesting, doesn’t it?
Harmon’s husband owns Newsweek, which employs Eleanor Clift, who is an abashed Leftist who could never say anything bad about Nancy Pelosi, who hates Jane Harmon.
Which will ocurr first:
An anti-Pelosi emphasis in editorial content/comment; or,
Eleanor moving-on to “other opportunities”?
Now, I don’t know if Jane has or hasn’t availed herself of economic opportunities presented to her whilst in Congress; but, it can safely be said that the wealth she and her husband have accumulated over the years can easily be explained by the industry leadership that Harmon-Kardin demonstrated in the years from Hi-Fi to Stereo to Surround Sound. When you stick with something for fifty-years, and have a product that consumers desire, you can make a lot of money.