Thursday, July 26, 2012

What Exactly Did Barry Diller Say About Newsweek's Future?

Barry Diller's cryptic comments yesterday about Newsweek have led to much speculation, some misquoting and downright erroneous reporting by the media, and charges of "scaremongering" from editor Tina Brown.

To help clear the waters, here is exactly what Diller, chairman of IAC/InterActiveCorp (Newsweek's majority owner), said about the iconic but money-losing magazine during the company's quarterly earnings call. He was responding to an analyst's question about the expenses IAC took on in acquiring the brand and whether there was "a Plan B to make it perhaps a lighter asset like an online-only business."

Diller's response:

Yes, the consolidation does put us squarely on our heads. We knew this really shortly after Sidney Harmon died that the indication was -- though it wasn't any kind of absolute, nor is it an absolute today -- that the Harmon family didn’t think that they were going to contribute to the losses in the business.

And neither by the way are we going to contribute to the losses of the business as they have been this year. Or investment next year will be considerably less than it is this year. 

The brand Newsweek is much better, much stronger than it was when we acquired it, and, probably, over the last three or four years, there has been a true improvement in the book. Tina Brown and her editorial staff have done a superb job. And Newsweek around the world in terms of the events that we do for which we have quite large demand and events are a profitable business for us in many places in and outside the United States. So the brand is good. 

What is the problem? The problem is in manufacturing, producing a weekly news magazine, and that has to be solved. Everybody is going to face the same problem other than I think luxury brands over a period of time because advertising in this category is entirely elective, and the transition will happen, I believe. 

I'm not saying it will happen totally, but the transition to online from hard print will take place. We’re examining all of our options. Our plan is that by September or October and certainly firmly planned in place for next year is going to be different than it is this year. I can’t tell you in what ways it will be different, but it will be different.

Diller didn't say exactly what will happen to Newsweek or even whether a decision had been made, except that its manufacturing costs will be significantly lower next year. By "manufacturing", he almost certainly means not just printing but also freight, paper (probably costlier than printing for Newsweek), and postage (almost certainly more expensive for Newsweek than either paper or printing, and the only one of the Three Ps that keeps increasing).

If you've seen Newsweek lately, you'll know the cuts won't come from having fewer pages. One option is publishing less frequently. (Newsmonth, anyone?) Another is to provide incentives for people to switch to digital versions.

Jacking up print subscription prices, reducing efforts to attract or retain print subscribers, and even selling some of its subscriber list to another publisher are other ways of reducing postage, paper, and print costs.

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Anonymous said...

as it stands the magazine is such a piece of crap it doesn't really matter what happens. it's slimmer, uglier and less meaningful than it's ever been in its existence. it's an old horse that needs to be sent to the glue factory.

Anonymous said...

When an 80 year old Newsweek reader passes on, unless s/he is replaced by a 25 year old Newsweek reader, the magazine (paper version) MUST die.

And I haven't seen a twenty something or thirty something pick up a Newsweek since the Clinton Administration (and yes, that's admittedly anecdotal).

Since you cannot expand the universe of readers to elephants or puffy clouds, no readers = no subscription revenue and no single copy revenue and no readers = no advertising revenue.

No revenue = no product.

Pretty simple (BTW, I've been a Newsweek subscriber for more than 20 years).