The Daily Beast is reporting that Sidney Harman–-a 91 year old billionaire who made his fortune partially as the Harman in Harman/Kardon–purchased the magazine from the Washington Post Co., yesterday for a dollar. They’ve also gotten their hands on the 66 page sales memo that was given to prospective buyers and paints a clearer picture of the debt he assumed as well:
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 of its size.
NY Magazine’s Daily Intel does a little head scratching at the logic of buying the magazine without a way to shore up back office expenses by combining it with another magazine like the recent BusinessWeek purchase by Bloomberg.
It’s quite possible this will remain a pet project for the new owner and a radical turnaround is not in the cards, but wouldn’t it be awesome if he hired someone to implode the business model and find a new path. My previous back of the napkin calculations into running a magazine tell me that a very tiny percentage of the expenses are the actual content.