Let us explain. The hagfish is a blind, slimy, deepwater eel-like creature that darts into the orifices of its prey and devours them, alive, from the inside. Which is what Tina Brown is doing to Newsweek.
Many, many people have pointed out that the economics of the merger of The Daily Beast and Newsweek make no sense. Both properties lose money—Newsweek an estimated $28 million per year, and The Daily Beast an estimated $10 million. Business tip: You can turn two negative numbers into a positive, but only by multiplying. When you add two negative numbers, you just get a single, more negative number.
And if it's truly a 50/50 partnership, as both Newsweek owner Sidney Harman and The Daily Beast's overlord, IAC CEO Barry Diller, claim, it makes even less sense for Diller. Harman will go from losing all of $28 million next year to losing half of $38 million—a $9 million savings. Diller, on the other hand, is basically forking over an additional $9 million to Harman in exchange for a piece of a dying print magazine.
But it's only confusing if you think of Newsweek as a magazine that's not doing very well. Think of it instead as a new host for Tina Brown, a parasite, whose own host—The Daily Beast—is dying.
The Daily Beast, whatever you think of its journalism, is an obvious failure. After two years, it's still losing prodigious amounts of money with relatively anemic traffic growth (the chart below compares The Daily Beast with the Huffington Post over the past three years) and its editor thinks web sites are things that your assistant can fax to you after they close late on a Sunday night. Diller has reportedly come to the conclusion that web sites simply can't be profitable without a print component that can charge a premium for high-end pretty-looking ads. And given The Daily Beast's losses, it was highly unlikely that he was going to go to the expense of launching a print version of the site from scratch.
So what is Brown to do? Suffer an embarrassing failure? Risk being unmasked as a magazine diva of the old school whose ways have been overtaken by nimble, thrifty upstarts? Move on to the next biography of a rich lady? Of course not! She's going to find an existing print brand, scoop out its innards, replace them with her own people, and declare success.
The only way the new company makes money is if dramatically cuts costs. What happens next is fairly obvious: The person deciding who is redundant and who works for the Newsweek of the future happens to have been the person who assembled the staff of the Daily Beast, which as it is produces more than enough weekly content to fill Newsweek's pages. It's already happening with Newsweek.com, which, the new combined company's CEO told the New York Times, will be shut down posthaste. Which makes sense—why have two web sites? After Newsweek.com staffers raised some objections to that plan, Brown retreated, assuring everyone that Newsweek.com will still exist:
That shouldn't be much comfort to Newsweek.com staffers, because the two options are the same thing. "Not shutting down, combining" is the same thing as saying, "Everyone who works for Newsweek.com except for some lucky ones we like will be fired."
Same thing with the magazine, eventually. Before the merger, Brown and Diller had an editorial team, a web site, a substantial loss, and a belief that they needed a print arm to make it profitable. Here's what they have now: Two editorial teams, two web sites, two substantial losses, and one print magazine. Guess which ones will get thrown overboard?
[Photos of Brown, Harman, and Diller via Getty Images]