The Trials and Economics of Newsweek

The Washington Post Co. said yesterday that it would seek a buyer for Newsweek. The announcement comes a year after the newsmag unveiled its redesigned book and a new strategy to shrink its subscription base to its most valuable readers and to model itself after "ideas" magazines like The Atlantic. Since Newsweek is arguably the most famous magazine brand recently put up for sale, it's worth using this opportunity to step back and ask what's happening and why.

First, the numbers. The company's magazine division (essentially, Newsweek) lost $29.3 million in 2009 even after the magazine shed over 100 staffers and reduced its circulation by more than 1 million copies, Jeff Bercovici writes. Ad revenue fell 37 percent last year, and is down more than 40 percent in the first quarter of 2010.

Newsweek is in deep trouble. Why? Part of it stems from the interplay between the Internet, falling advertising revenue and the rise of opinion journalism that has deeply impacted the magazine. I offered a rough theory yesterday, and this is my effort to clean it up a bit.

Let's think about what the Internet does to both the economics and style of journalism. First, economics. As news-reading eyeballs migrated from the printed page to the Web, newspapers and magazines have found it difficult to monetize their work. Why, you ask, if more people are reading? Part of the answer is, the Web is free. Another part of the answer is time. According to a recent Pew survey, newspaper readers spend 200X more time with an actual newspaper than with its online cousin. Moreover, the survey found that up to 40% of all news traffic is driven by search engines. In print, readers are dependable and patient. Online, we're fickle and fleeting. And advertisers reward the Web's fickle and fleeting audience with cheap ad rates.

In addition to turning reported news into a commodity, the Web's blink-of-an-eye news consumption experience gives preference to the provocative. Provocation in the news usually comes by way of opinion (but not always*). As a result, most of the heroes of online journalism are provocative opinion makers. Bloggers didn't invent opinionated analysis, or opinionated reporting. (I never meant to give that impression. Indeed, I have no doubt that if Robert Novak were born 50 years later, he would have been a compulsive, and compulsively readable, opinionated reporter/blogger.) But the Web is psychologically tailored to reward efficient, provocative, opinionated thinking because it is essentially a blink-of-an-eye medium.**

As opinionated, provocative voices thrived online, old-school publishers -- who have lost millions in the heyday of the Internet -- tried to lasso that sensibility into their pages. New York Times and the Washington Post blew out their op-ed section online and included extra pages in their weekend opinion section. Time expanded their columnist rosters in the last few years. Newsweek did the same.

In fact, Newsweek did more. Editor in Chief Jon Meacham was unambiguous about trying to create an Economist for the United States: a newsweekly that was no longer about news, but rather about analysis and opinion -- or, if you prefer, ideas. This wasn't crazy. In fact, it conveyed a keen understanding of magazine economics. As James Fallows explains, magazines of arguments are more likely to thrive at the lower level of readership to which Newsweek was already trending. Opinion magazines tend to top out around 100,000. Ideas magazines live in the mid-to-upper hundred thousands. Newsweeklies have tried to live on a couple million, but they're struggling mightily.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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