Inside the sad, synergy-less marriage of Newsweek and the Daily Beast

August 4, 2013

The Last Temptation of Tina Brown


On Nov. 12, 2010, Tina Brown gathered the staff of her Web site The Daily Beast in the third-floor conference room at its Chelsea offices with its commanding views of the Hudson. Brimming with the fervor she has brought to all her endeavors, she delivered some surprising news: the Web site would merge with Newsweek, a once-proud but struggling magazine brand. Ms. Brown, according to staff members who were present, spoke excitedly about the potential synergies for advertisers across platforms and promised to produce a new form of magazine journalism, where digital would drive print instead of the other way around. But after a few softball questions from the staff, Peter Lauria, the company’s media reporter, braved a more skeptical one: Given that the two publications lost more than $30 million in the previous two years, he asked, why was it a good idea to put them together? And if The Beast was on schedule to break even in 18 months, how much longer would it take now that Newsweek was part of the mix?Ms. Brown says she has no recollection of that particular meeting, but half a dozen employees who say they were present said the atmosphere immediately turned awkward. The famous editor gave no ground. The target, she said, remained 18 months.

More than two and a half years later, Ms. Brown has missed the mark. Synergies have long since slipped away. After the magazine hemorrhaged tens of millions of dollars, Barry Diller, the billionaire media mogul whose company owns both publications, publicly called the purchase of Newsweek “a mistake” and the original plan to save it “stupid.” On Saturday, the company announced that it had sold Newsweek for an undisclosed amount to the digital news company International Business Times.

It was always a quixotic project to blend a buzzy, growing Web site with the most outdated of print relics, a newsweekly. But interviews with more than two dozen former and current employees — some provided by Ms. Brown and some reached independently — suggested that she and Mr. Diller underestimated what it would take to reverse the dive of a print magazine (the two have acknowledged as much) and that there was never a credible plan to integrate the products into a better whole (an opinion they utterly contest). These people also suggest that Ms. Brown’s intensely demanding and chaotic management style, which had thrived when contained within established companies, proved a combustible combination with Newsweek’s gutted and weakened editorial and sales divisions.

Dan Lyons, Newsweek’s former technology editor, summed up the sentiment in a Facebook post when the magazine was first put up for sale: “It didn’t need to be as ugly and sad and dishonest as what’s happened under Barry and Tina.”

Ms. Brown, for her part, said that it took at least a year to assemble a team she wanted, and undoubtedly she bruised some egos along the way.

“We did a cover on the beached white male and perhaps that’s another reason for the old guard to be angry at me,” she joked during a recent interview at The Beast’s offices. But she said she had no regrets.

“It was really exhilarating,” she said. “We did great journalism.”

Ms. Brown knows great journalism, having built her reputation with her wholesale makeover of Vanity Fair and her stewardship at The New Yorker. At both magazines, she increased circulation, introduced dozens of young writers, many of whom went on to become stars, and won shelves of awards.

But, despite her reputation, she said publicly that she was happy to be away from print. “I would hate to be in the magazine world,” she told the EconWomen conference in 2008. “It’s a really tough world to have to compete in.” That was the year that Ms. Brown started working for Mr. Diller as The Daily Beast was introduced.

What pulled her back, she says, was the billionaire investor Sidney Harman — his enthusiasm, charm and generous financial resources to match — and the chance to return to long-form journalism. Although Ms. Brown does not utter the word “Talk,” her last print magazine, which ended in heartbreaking failure, she acknowledges that she missed the “rhythms” of long-form journalism and that she felt she could not do all the work she craved on the Web.

When Mr. Harman contacted Ms. Brown and Mr. Diller, it didn’t seem like a surefire deal. When Mr. Harman, a stereo executive, bought Newsweek on Aug. 2, 2010, for just $1 and the assumption of $40 million in liabilities, he found it difficult to find takers for the editor in chief job. Peter Kaplan, editorial director of Fairchild Publications, was one of those who balked. “It was a massively heavy lift and there was no philosophy involved,” he said.

Turning On the Charm

Both Mr. Diller and Ms. Brown say they turned down Mr. Harman at first, but then Ms. Brown says she weakened, tempted by the challenge. She adds that Mr. Harman was “deliciously gallant.”

Katrina Heron, who had worked with Ms. Brown at both Vanity Fair and The New Yorker before signing on for a year at the end of 2010 to help ease the merger, said that Ms. Brown, so used to charming billionaires, was the target of Mr. Harman’s charm this time around. He called her “princess,” she said.

From the beginning, Ms. Brown and Mr. Diller underestimated what it would take to revive Newsweek. When Jon Meacham, the magazine’s last editor under The Washington Post’s ownership, tried to turn Newsweek into an Economist-like ideas journal, the magazine’s decline accelerated. Between 2006 and 2010, the magazine’s total circulation shrank by half, to 1.6 million, according to the Alliance for Audited Media. Advertising pages declined 79 percent between the first three months of 2006 and the same period in 2010. It lost more than $29 million in 2009. Then, in the months between Mr. Harman’s purchase and Ms. Brown’s coming on, the place had been further vacated by name-brand writers like Howard Fineman and members of its ad staff.

“It was a dead, beached whale. There was no life in the creature,” said the writer Peter Boyer, who arrived from The New Yorker just after the merger.

Ms. Brown and Mr. Diller both say they also agreed to the merger because of optimistic sales estimates by The Daily Beast’s business side. In an interview in July, Mr. Diller said, “Our chief salesman said, you know, ‘Newsweek last year sold 950 pages of ads, you know there’s been no energy there, we’ll at least sell 1,150 ads.’ And, I said, ‘Well, you do that math, we kind of break even.’ Well we didn’t sell 11, 10 or 950, we sold 600 ads.”

Ms. Brown said she planned to save Newsweek by building a digital-age magazine driven by the beat of the Internet, with the high-quality writing found in traditional print. She argued that despite impossible conditions, she succeeded admirably, citing Newsweek’s coverage of Dominique Strauss-Kahn, the former chief of the International Monetary Fund, by landing the first print interview with the housekeeper in his sexual assault case, and the issue devoted to the killing of Osama bin Laden.

But many of her colleagues say that going back into print brought out Ms. Brown’s tendencies toward chaotic management and indecision, running the enterprise in what one former editor who asked not to be named for fear of retribution, described as a state of panic.

Employees also say that the newsrooms never really merged. Instead of using Beast writers to fill Newsweek, she turned to her Rolodex and hired expensive talent like Simon Schama, Michael Tomasky and David Frum.

Mr. Boyer, a fan of Ms. Brown, said, “There was an awful lot of frustration on the part of the young beasties who were so good, half a dozen really good writers and reporters who weren’t making it into the magazine, and that was a mistake.”

“Newsweek had an older readership,” Ms. Brown says to explain why she turned to some older writers, adding that the magazine needed more attention. “Newsweek writers had been terribly demoralized. I owed them some care.”

Spending Freely

But even longtime reporters were shocked at Ms. Brown’s extravagance in making assignments — one former editor called them “fishing expeditions” — that seemed to belong to an earlier, more flush era of publishing. The magazine sent Mr. Boyer to Japan hoping he would get an interview with Vice President Joseph R. Biden Jr., even though he had been warned in advance that it was very unlikely (and indeed it never happened). With several days’ notice, the Pulitzer Prize-winning fashion writer Robin Givhan was sent to Paris to track down the Vogue editor Anna Wintour, even though Ms. Wintour had declined to speak.

Ms. Brown also ordered high-priced photography and investment in time and money for articles that were killed or relegated to small spaces. Newsweek’s former creative director, Dirk Barnett, posted on his Tumblr a montage of the 82 different cover ideas Ms. Brown asked him to design in seven days, while also employing six other agencies and illustrators to come up with ideas. In a June 27, 2012, post on Newsweek’s Tumblr, the magazine called it “our favorite Newsweek-related post of all time.”

During the interview, at first, Ms. Brown made light of the criticism: “Only 82?” she laughed. “How hard is it to take a picture and slap a headline on it?” Then she flatly denied having ordered so many covers. She said she sought out two other agencies at most and both were free. As for assignments, she said that is what magazine editors do, and to bolster her defense, she invoked the name of Maynard Parker, a previous Newsweek editor, who famously liked to change covers at the last minute.

Criticisms of how Ms. Brown spent money rile her strongest defenders.

“If somebody is saying ‘I don’t approve of this way the $10,000 was spent and that’s the reason for this $10 million budget gap,’ that’s not very good math,” said Mr. Frum, a contributing editor. “It’s the cost to print, declining revenue, switch to a digital environment. The fact that Tina struggled so valiantly and took so many risks, that is to her credit. It just exposes a total lack of understanding of the media environment.”

Certainly, the media environment was not good — although that might have been entirely predictable. Still, Ms. Brown put the blame for Newsweek’s troubles almost entirely on factors outside her control.

She pointed out that the advertising market “went off a cliff” in 2011. She acknowledged, too, that the magazine needed more digital sales employees and the posts remained unfilled, but said that was not her responsibility since she never ran the business side. But employees on the business side said their bosses were often paralyzed by Ms. Brown’s indecision on how to proceed with various projects because they feared her wrath if they got it wrong.

Newsroom Troubles

The newsroom side was also struggling. Employees point to covers like those featuring Regis Philbin and a reimagining of an aged Princess Diana as evidence that Ms. Brown struggled to find subjects to create that most elusive but desirable of magazine outcomes: buzz. One employee said that Ms. Brown ordered up a Newsweek feature on “Breaking Bad” well after an article on the show had appeared in The Beast. Ms. Brown does not accept the idea that she did not have her finger on the popular pulse. “I was the first person to do anything on ‘Breaking Bad.’ Nobody knew what ‘Breaking Bad’ was around here at all,” she said. “We were the first to write about ‘Borgen’; I have been watching it for a year,” referring to the Danish political series.

She also ticked off a raft of measures: under her leadership Newsweek went from losing 30 percent of its ad revenue a quarter to actually gaining 5.5 percent in the last quarter in print, and digital subscriptions expanded threefold during 2012, to 60,000 (both figures were confirmed by the Publisher’s Information Bureau). She also said that subscription renewal rates were 20 percent higher in 2011 than they had been in 2010, and the rate was maintained into 2012, reversing a period of decline that had begun in 2008.

But the venture was running out of time. On April 12, 2011, Mr. Harman, the chief supporter of Newsweek, died. The Harman heirs did not announce until July 23, 2012, that they would no longer foot Newsweek’s bills. But internally it was clear from the moment of the death that the dynamic had changed now that Mr. Diller, who had expected to split the costs, would carry the whole load (Mr. Boyer mordantly joked that “the wrong billionaire died”).

On Nov. 14, 2011, Ms. Brown’s chief lieutenants, the editors Edward Felsenthal and Tom Weber, resigned. In meetings, employees said, Mr. Diller grew impatient with Ms. Brown if she spoke for too long about how many hits an article was getting. He snapped, “Enough about traffic,” as if to bring her back to the bottom line.

And the magazine’s redesign in March 2012 did not seem to help at the newsstand; sales there declined in August 2012 by 9.7 percent, according to the Alliance for Audited Media. By October, the decision to make Newsweek digital was made. By December, its total circulation had declined to 1.3 million.

Even though Mr. Diller had cut the losses from printing the magazine, he complained at dinners and social events that “Newsweek wasn’t working out,” according to Fareed Zakaria, another former Newsweek employee who had also turned down the top post. On April 29, 2013, at the Milken Institute Global Conference in Beverly Hills, Calif., Mr. Diller told Bloomberg TV, “I wish I hadn’t bought Newsweek. It was a mistake.” Although his unhappiness was well-known inside the building, his statements hurt. “Recipe for Diller’s Newsweek Pie: Take one storied print magazine; eviscerate for 2 years, then turn digital; bad-mouth said magazine; sell,” Tunku Varadarajan, Newsweek International’s recently resigned editor, posted on Twitter.

A month later when the two announced that Newsweek was up for sale, it was almost anticlimactic. The magazine, a shell of its original self, is published online once a week. The total number of employees at the combined NewsBeast has shrunk by roughly a third. Now Newsweek will be published for 30 to 60 days, and during that time, International Business Times is expected to decide on its staffing needs, the company said.

Ms. Brown still defends the idea of putting the two properties together, and the magazine she made. “The kind of the shame of it was you saw how it worked — but the economics were too much. It would have taken five more years. It could have been a great synergy.”

In the end, Ms. Brown is left with a conference business, Women in the World, and The Daily Beast. But the good news, she says, is that The Beast has been “enriched by Newsweek’s DNA” through its advertiser base, through the quality of its writers and through traffic, which she says is up 28 percent year over year.

For all her optimism about The Beast, Ms. Brown still seems a bit wistful about the state of affairs in her industry.

“It doesn’t matter how talented you are right now. You used to be judged by your performance, but now it doesn’t matter what you do,” she said. “It is quite a business.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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