By Frank Ahrens and Howard Kurtz
Washington Post Staff Writers
Thursday, May 6, 2010; A16
The Washington Post Co. is putting Newsweek up for sale because the company can foresee no path to profitability for the money-losing magazine, The Post Co. said Wednesday.
Though no buyer is imminent, company officials said, The Post Co. hopes to execute a "rapid sale," Chairman Donald E. Graham told Newsweek employees during a Wednesday morning meeting at the magazine's office in New York.
The Post's magazine group, of which Newsweek is the biggest piece, lost $29.3 million last year after losing $16.1 million the previous year. Graham said he expects it to lose money this year.
Many newsweeklies have racked up similar losses as readers and advertisers abandon the magazines for the Internet's frequently updated news offerings. But even with the shift to the Web, online advertising revenue still represents pennies on the dollar compared with print advertising. Newsweek brought in only $8 million in online ad revenue last year, Graham said.
Newsweek, which was founded in 1933, has been part of The Post's DNA since the paper bought the magazine in 1961 at the urging of Newsweek's Washington bureau chief Benjamin C. Bradlee, who went on to a storied career as executive editor of The Post.
Bradlee said Wednesday that he hated to see any change because he was so deeply involved with Newsweek. "I loved it. It gave me my first shot," he said. "It was a great magazine. It is a great magazine." But, he added, "nobody says you have to keep a magazine that is costing an arm and a leg. I understand why Don put it on the market."
Asked if it was a difficult call to sell the magazine bought by his father, Philip L. Graham, Donald Graham said: "Yes. It was a hard decision for me, but it's a lot harder for the people who work here."
Graham told Newsweek employees he accepted responsibility "for not seeing early enough and reacting in the right way to the changes that have come to our industry."
In addition to Newsweek, The Post Co. owns Kaplan education company, small cable company CableOne, six television stations, the flagship newspaper and other small print and online publications, including Slate.
The Post Co. hired boutique investment bank Allen & Co. to seek buyers for the magazine. The Post Co. would not reveal the price it hopes Newsweek will bring, but Bloomberg's purchase of BusinessWeek magazine last October may have set the market. Though terms were not disclosed by either side, reporting at the time pegged the sale price at between $2 million and $5 million.
Post Co. Vice President Ann McDaniel told Newsweek staffers: "I suspect you might be asking yourself: What if there isn't a buyer? I believe there will be. The Philadelphia Inquirer just sold for tens of millions of dollars. But if you think my confidence is misplaced, know this: Every one of you will get a job offer" from the new owners or severance benefits.
Newsweek has a staff of about 150, a figure that is down 30 percent over the past four years, as the magazine has cut staff to slash costs.
Newsweek Editor Jon Meacham said Wednesday that he'd received calls from two wealthy individuals who heard the magazine was on the block. He said he is optimistic a buyer will step forth. Meacham said Graham has not said what will happen to Newsweek if no buyer is found.
"I want to find a way to keep Newsweek's voice alive in the conversation," Meacham said. "What that looks like, I can't say right now, but nothing would be more thrilling than for a terrific buyer to come knocking on the door."
Newsweek's best hope may be a wealthy individual who wants the magazine as a vanity publication -- one that loses money but that offers the owner a high-profile platform.
David Bradley, president of Atlantic Media Co., which owns the Atlantic magazine, National Journal and Government Executive, said on Wednesday that he would not bid for Newsweek.
"If you'd asked me five years ago, I would say I don't know anything more exciting" than owning Newsweek. "But I own three print publications and I feel that's as much print as I want to do."
Bradley said the Atlantic was losing a "fair amount of money" under previous owner Mort Zuckerman, who now owns U.S. News & World Report, and lost "a fantastic amount under me." But now the magazine is about to break even, he said, thanks to its combination of revenue streams: print advertising, online advertising and the company's conference business.
Bradley said he could think of few obvious buyers for Newsweek other than New York private-equity firms and hedge funds. He speculated that the big magazine companies -- such as Time Inc. and Conde Nast -- would not be interested.
And, he added, Newsweek "is too big to be a vanity project," he said.
Newsweek columnist Jonathan Alter, 27-year veteran, said: "I think it's sad. People need to be cautious about speculating too much about our future. I hope we have a public-spirited buyer who respects good journalism and with the right kind of Web strategy that we can start prospering again."