The sale of Newsweek has people in the media industry scratching their heads. Partly because it went to California tycoon Sidney Harman (who has now media experience), and partly because of the numbers behind the deal.
According to the Columbia Journalism Review’s (CJR) analysis of Newsweek’s numbers (courtesy of The Daily Beast), the company was sold for $1 and the assumption of $70 million in debt.
CJR analyzes the oddities even further, though:
Newsweek has just 122 journalists, both print and digital. They make up just more than a third of the magazine’s total employees. We’re not told what the average Newsweek journalist makes, but the average employee there gets $123,000 in salary and benefits.
That’s probably a good number for the journalists, too. If so, its newsroom labor costs it just $15 million. Overall labor is $42 million.
The mag took in $165 million in revenue last year (to look at it one way, that’s $1.4 million per journalist).
The problem, of course, is it spent $222 million and lost $28 million (it benefited from a big pension credit). It costs a lot of money to print and distribute a magazine (not to mention to get subscribers).
But the New York Observer reports that Mr. Harman has no intention of cutting costs on his new venture by cutting staff. The Observer quoted Harman’s pep talk speech to Newsweek staff:
“The people are our primary asset,” he said. “How in the world can you pass up the opportunity to lead an organization like this? I have no thought of investing a great deal of money so I can make a great deal of money. I would be delighted over a period of some years to see Newsweek flourish and getting by on its own generated fuel. Break-even is a serious accomplishment, especially in this world, in the world of journalism.”
No matter how Harman approaches the challenge of making the company profitable, Newsweek’s fate in the coming year will be a media industry object lesson worth watching.