The family of late billionaire Sidney Harman announced on Monday that it will no longer invest in the ailing Newsweek magazine and the online Daily Beast website, leaving the joint company under the control of Barry Diller's IAC/InterActiveCorp.
According to a Reuters article by Peter Lauria, IAC said it will continue to subsidize Newsweek Daily Beast's operations, and as a result, its initial 50 percent interest in the joint venture will become a controlling stake.
While IAC said it will continue to subsidize the other company's operations, Jane Harman,the former Democratic congresswoman from California who has overseen the estate's interests since the death of her stereo magnate husband in April of 2011, will retain a seat on the company board.
Lauria stated that Sidney Harman purchased Newsweek from the Washington Post Company in August 2010 for $1 plus the assumption of the magazine's more than $50 million in liabilities.
Harman had made his fortune as the founder of audio equipment giant Harman International Industries. Although 91 years old at the time, he viewed owning Newsweek magazine, which had gone from earning $30 million in 2007 to losing the same amount just two years later, as more of a "philanthropic effort” than an actual business endeavor.
The billionaire's goal in buying Newsweek, he stated, was to re-establish the 79-year-old publication as a thought leader among “the elite,” particularly in the world of politics.
The Harmans have been co-owners of the so-called "NewsBeast"since 2010, when Harman agreed to merge his company with Barry Diller, whose IAC controlled The Daily Beast. The two agreed to take a 50-50 share of both companies and make Tina Brown editor of both properties.
Since then, the company has failed to make a profit.
For his part, Diller launched The Daily Beast, a free, ad-supported site, under the auspices of former New Yorker and Vanity Fair Editor Tina Brown in October 2008. The presence of Brown, coupled with an emphasis on political coverage that dovetailed with the election of U.S.President Barack Obama a month later, allowed the Beast to immediately establish a brand and build an audience.
But advertising sales “never caught up with the buzz,” the author wrote, and media reports have estimated losses at The Daily Beast at about $10 million annually.
The Harman family's pullback from the venture has prompted speculation among IAC insiders that the family felt the magazine was emphasizing the sensational over the intellectual, two sources close to the situation told Lauria.
A lawyer for the Harman family dismissed the allegation outright,saying that the family's reasons for capping its investment were"purely financial."
However, as NewsBusters previously reported,the family has had good reason to be concerned.
Newsweek's July 4, 2011,edition had a cover that used Photoshop to show what Princess Diana might have looked like at age 50. The image drew outrage from people in Great Britain and America.
About a year later, just after President Barack Obama stated that he personally supports same-sex marriage, Newsweek came out with a cover featuring Obama and a rainbow-colored halo over his head.
While several staff members have left the company, Brown continues to lure “big name writers” to replace those who have left, including most notably among her new hires prominent liberal gay blogger Andrew Sullivan,who recently scored a big scoop when Anderson Cooper confirmed in an email that he is gay.
Of course, none of this would have happened if the Washington Post Company had agreed to sell the magazine in July of 2010 to Newsmax,which promised to turn Newsweek's poor financial situation around in a matter of months.
NewsBusters reported that the "main reason" Newsmax was turned away was because the company's "conservative political ideology ... is at odds with the editorial bent of Newsweek, which strives to be apolitical in its news coverage though is often criticized as being left-leaning.”
What the future holds for the “new” Newsweek is anyone's guess. Over the past year, the circulation of the magazine fell 2 percent to 1.5 million copies. At its height, Newsweek's annual circulation totaled more than 4 million worldwide.