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BusinessWeek's Future Is Cloudy, but Better Than It Could Have Been: The Grim Non-Bloomberg Scenario

Peter Kafka — Fri, 30 Oct 2009 19:12:05 +0000

BusinessWeek employees are waiting to hear if they’ll have jobs once Bloomberg takes over the publication, and I’m told that staffers expect to hear their fate shortly after Thanksgiving. “Either you’ll get an offer or you won’t,” is the conventional wisdom among the 400 staffers, an employee tells me.

That has to be unnerving, but I can at least offer a little bit of comfort: The worst-case scenario the employees would be facing had they been purchased by private equity firm ZelnickMedia, which was also bidding for the publication.

The short version: Almost everybody gets fired.

Here’s the longer version of the plan, provided to me by a person familiar with ZelnickMedia’s bid. It sounds like a plausible idea for a PE group that specializes in turning around distressed assets–and a chilling one for anybody who draws a paycheck at BusinessWeek:

Wind down BusinessWeek’s print business “as profitably as possible”–the company would have to honor existing subscriptions and could still sell ads in the magazine. But the focus would be on building up BusinessWeek’s Web site, which has a decent-sized footprint, though not a huge one.
Dump almost all of the company’s newsgathering staff and outsource most of that work to Thomson Reuters (TRI).
Employ a small handful of editorial employees–perhaps 20, down from the 200-plus who are there now. Some of them would run a Huffington Post-style aggregation site that produces no original content, and some more expensive hires would produce a smattering of high-quality reporting and writing designed to burnish/sustain the BusinessWeek brand. “Just to give it uniqueness and sizzle,” my source tells me.
Dump most of the existing business side, as well, but overhaul and bulk up the sales force.

The insult-to-injury kicker: Under ZelnickMedia’s proposal, the buyer wouldn’t pay a dime for the publication it intended to rebuild. Instead, McGraw-Hill would pay the fund to take the publication off its hands. If that sounds implausible, consider that McGraw-Hill just announced that it will save up to $25 million next year by not owning the title.

Given the above terms, it’s easy enough to see why McGraw-Hill ended up going with Bloomberg. For starters, the winning bidder actually paid cash for the magazine, and McGraw-Hill will end up netting a $5.9 million gain, after taxes, on the deal.

Also important: McGraw-Hill won’t have to anguish as it watches one of its flagship properties get dismantled.

So what will happen to BusinessWeek now that Bloomberg owns it? Nothing nearly so drastic, at least in the short term. For now, Bloomberg is talking about bulking up the title, not shredding it, so that’s a good sign for both employees and readers.

Alas, Bloomberg can’t take on all of the magazine employees looking for jobs, and that pool is only going to get bigger.

Forbes slashed deep into its staff this week, and next week Time Warner’s (TWX) Time Inc. will lay out some of its layoff goals. I’ve heard Time Inc. employees refer to layoff plans as “tree-trimming” or “surgical,” but I think the trimming will feel much blunter to the folks who lose their jobs. The publisher’s cost-cutting plans include hundreds of layoffs–something likely similar to the cuts the publisher went through last year, I’m told.

The New York Post’s Keith Kelly reports today that Time’s News and Finance unit, which includes Time, Fortune and Sports Illustrated, will be particularly hard hit, and I’ve confirmed that myself.

UPDATE: No surprise here: BusinessWeek President Keith Fox is stepping down. Mild surprise: He’s staying on at McGraw-Hill. Here’s his memo:

When we announced that McGraw-Hill was exploring strategic options for BusinessWeek, I promised to communicate with you as openly and often as I could. In this spirit, I wanted each of you to know that I will be remaining with McGraw-Hill after the deal with Bloomberg is closed. I will continue to play a role in the integration post-close and plan to take on a new role at McGraw-Hill in 2010.

During this process, our collective goal was to find the best buyer for BusinessWeek. I am proud that I played a role in ensuring that BusinessWeek has a new home at Bloomberg, where it will thrive under the leadership of Norman Pearlstine. I am committed to the transition and helping in any way that I can.

It’s been a privilege to be the President of BusinessWeek. I thank Terry McGraw for his confidence and trust in me and Glenn Goldberg for his support, direction, clarity, and sense of humor. I’ve also been a member of an amazing team which has navigated the transformation of the media environment with agility, focus, passion, and integrity.

The team–Steve Adler, Jessica Sibley, Tania Secor, Linda Brennan, Roger Neal, and Carl Fischer–is the best in the industry. Like BusinessWeek, they have bright futures ahead of them. I will miss the daily interaction, but I am wiser (and a little grayer) because of their collaborative spirit and desire to make BusinessWeek the global leader in business that it is today.

I also have a special thanks to Patricia Hipplewith, my assistant, who juggled my calendar, protected me from solicitors, and kept me on schedule and well fed! She is the personification of commitment and integrity.

I am humbled by BusinessWeek’s 80-year history. Thank you for allowing me to play a small part in it.

Keith

Meet Maureen Dowd's Favorite Writer: Talking Points Memo's Josh Marshall

Peter Kafka — Mon, 18 May 2009 14:05:56 +0000

Today’s life lesson: Procrastination does pay off!

A few weeks ago I sat down with Josh Marshall, the journalist/entrepreneur behind Talking Points Memo, and had a great chat about news, new media and the business of running a self-funded Web site. But my notes and video have sat on my hard drive since then, for no other reason than I never got around to publishing them.

Thank you, Maureen Dowd, for the kick in the pants I needed: Over the weekend, the New York Times (NYT) columnist has given Marshall a huge, if unintended, endorsement by borrowing his work and then getting caught.

After an initial attempt by Dowd to explain away the similarity between her work and his, the Times is now running a correction on Dowd’s Sunday column, noting that she “failed to attribute a paragraph” to Marshall.

You’ll read plenty more about this on the Web over the next few days, if you’re inclined. But it would be a shame if that’s the only thing you know about Marshall’s site, which is an interesting hybrid of politically focused reporting, commentary, and aggregation/blogging.

And I do mean a mix: If you just glimpse quickly at his site, you might think it’s the same grouping of links and headlines that you can find anywhere else on the Web. But Marshall was a real reporter prior to starting the site and his 12-person staff does real reporting. Its best work, to date, was uncovering the Bush administration’s U.S. Attorneys scandal in 2007, which led to prestigious Polk Award in 2008.

Just as interesting: It’s a profitable business that has never taken outside investment and until recently, has made almost all of its money by relying on ad networks. The most effective ad network, says Marshall: Google’s AdSense. See! Google (GOOG) really does support content!

More recently, Marshall has hired Yahoo (YHOO) vet Diane Rinaldo to serve as the company’s first real ad rep, trying to translate the site’s one million (give or take) monthly unique readers into more significant revenue. That’s alleged to be a real challenge since advertisers are supposedly loath to touch political content. But then again, start-up blogs aren’t supposed to do real journalism–or act as unattributed contributors to the country’s most prestigious newspaper.

[ See post to watch video ]

Which Media Mogul Would You Rather Be Right Now: Arianna Huffington or Jim Cramer?

Peter Kafka — Tue, 02 Dec 2008 15:13:24 +0000

Doug McIntyre at 24/7 Wall Street makes a provocative point: With a new $25 million round of funding secured, Arianna Huffington’s Huffington Post is now worth about as much as Jim Cramer’s TheStreet.com.

Huffpo’s newest round values the company at about $100 million, which means its investors think it will be worth much more one day. That’s the same value, more or less, that investors place on TheStreet (TSCM), even though it generated some $65 million last year and has about $80 million in cash on hand. McIntyre:

Huffington has several important advantages over TheStreet. For starters, it does not rely on one person for most of its traffic. If Jim Cramer left TSCM, the company would be in real trouble.

Second, Huffington has diversified beyond it political news base. Over the next year or so, it will become clear whether that was a good idea or not. Adding “style” and “entertainment” sections puts it into competition with a lot of other online success stories.

Third, Huffington aggregates a lot of content from around the web. The cost of doing this is remarkably low. The company pays little if anything to most of its bloggers. TheStreet has a relatively large staff and produces most of its own content.

The final difference between the two companies is probably the most telling. At its current rate of growth, which could be hurt by the end of the 2008 election process, Huffington may double in size again over the next year or so, if its efforts to diversify its content works.

It would be hard to find analysts who believe TSCM is going to expand its audience or revenue at a rate of 100%.”

I can think of some counter-arguments to this, but they’re half-hearted: TSCM’s affluent readers should be worth more to advertisers than Huffpo’s; TSCM still has a revenue stream from subscribers to buffet it from ad market turmoil; Huffpo’s aggregation model isn’t unique and could be replicated by anyone who wants to hire some devilishly clever Web editors, etc.

But better to acknowledge that the HuffPo crew have built something very big, very fast. And that anyone who does that gets rewarded for it, even in an econalypse.