Newsweek Changes Subscription Strategy

Money-losing Newsweek hopes to break even by 2011 and plans to as much as double its subscription rate over the next two years, the magazine's top executive said Friday.

Ann McDaniel, managing director of Newsweek, which is owned by The Washington Post Co., said the magazine will aim for a "smaller base of very committed subscribers and get more money from each of them," while speaking at The Post Co.'s annual shareholders meeting at the company's D.C. headquarters.

Newsweek relaunched in May, with Editor Jon Meacham writing to readers that the weekly magazine would deemphasize breaking news in favor of "reported narrative" and "the argued essay."

Analysts suggested that the new Newsweek is modeling its editorial strategy on England's Economist, and now it appears to be doing the same thing with its business strategy. A subscription to the Economist costs $120 per year, whereas a subscription to Newsweek costs $37. That figure could rise to as much as $75 by 2011, McDaniel said. The magazine division had an operating loss of $25.4 million in the first six months of this year.

Because of declining advertising revenue and circulation, Newsweek and The Washington Post newspaper have been the two trouble spots for The Post Co., which also owns the growing Kaplan education company, Cable One cable company, six television stations and other publications, including the online magazine Slate.

"We are not at all satisfied with results at The Post and Newsweek," Post Co. Chairman Donald E. Graham told investors Friday.

By comparison, Graham said he has been thrilled with the results at Kaplan, which provides more than half of all Post Co. revenue, but he warned that the company "cannot possibly continue to grow at the rate of the past 10 years." Kaplan revenue has surged from $258 million in 1999 to more than $2 billion today. Kaplan University, the company's online college, launched in 2001 with 34 students. Today, it has more than 56,000.

Kaplan grew under former chief executive Jonathan Grayer, who left last year and was replaced by his No. 2, Andrew Rosen. Rosen said Friday that the company will start a small new unit, Kaplan Ventures, that will serve as an "incubator" for new business ideas, such as selling courses to high school students who have not succeeded in traditional high schools.

At The Post, publisher Katharine Weymouth said the ongoing losses are "material and unacceptable." The newspaper division lost $143 million through the first six months of this year.

She promised the paper will "return to sustained profitability" but did not say when. In response to a question, Weymouth said that The Post does not have a plan to start charging for its online content.

Graham said that the company has only $400 million in debt and that none of it is due in the next 10 years.