Newsweek Announces Digital-Only Plans

Scrutiny turns to Time magazine

Newsweek is going digital-only in 2013, a move that will be felt most immediately in the newsmagazine category but which points to challenges facing the publishing industry overall.

Ending months of speculation stirred up by unfortunate comments by IAC chairman Barry Diller, editor Tina Brown and new CEO Baba Shetty announced today that the 80-year-old Newsweek would adopt a digital-only format in 2013. That will leave Time as the last of the major newsweeklies still publishing in print as readers increasingly get their news from their desktops, tablets and mobile phones and after Mort Zuckerman’s U.S. News & World Report dropped print subscriptions two years ago.

One has to ask what this means for Time. While Time says it’s healthy and committed to print (as managing editor Rick Stengel, speaking on Morning Joe this morning, emphasized), the economics for publishing a print weekly magazine aren’t in its favor, with paper and postage costs continuing to rise. Time carried 1,370 ad pages last year, down almost 50 percent in the past five years. “Will it eventually affect Time?” one media buyer said. “It has to. They’re going to have to evolve their business model.”

Newsweek, as a newsweekly at a one-title company, is especially vulnerable to rising printing and distribution costs, changing media consumption habits, and an expensive rate base. The parent company is expected to lose $40 million this year, much of it due to Newsweek’s cost structure. These challenges are faced, even if to a lesser extent, by all publishers, though.

While other publishers cling to print revenue (maintaining big rate bases in print and protecting their legacy business by tying their digital editions to ink-on-paper subscriptions), Newsweek gets some praise for embracing a digital-only future.

“I think it’s a leadership move and progressive,” said media buyer Robin Steinberg of MediaVest. “They are following the consumers’ category consumption behavior. News is different than the many other categories that will continue to thrive in the printed format.”

In ending the print version, the Newsweek Daily Beast Co. erases a significant portion of its costs associated with printing and distributing a weekly magazine. By no longer having to manage to a rate base, the company won’t be trapped in the cycle of having to sustain its print guarantee by deeply discounting subscriptions and maintaining a costly renewal system. Going forward, Newsweek will have a built-in advantage in the Daily Beast, through which it can market subscriptions to Newsweek Global, as its new, all-digital weekly will be called.

That alone won’t erase the company’s losses, so there will be an undetermined number of people laid off. But by next year, the company is said to expect to be at a break-even point.