Looking at BusinessWeek’s Prospects

Somebody finally got a hold of the BusinessWeek sale documents, and they clarify the magazine’s prospects a bit.

The New York Times’s Stephanie Clifford gets the scoop one day before bids are due for the magazine. Expected bidders include a bunch of private-equity investors, plus Bloomberg and Morningstar. It’s seemed throughout the process that Bloomberg is the best fit for BusinessWeek, not only because it supports tough journalism, but because it oozes cash, could use a better brand name for its monthly magazine, and, most of all, needs some good editors.

But anybody taking on BusinessWeek is taking on a big money loser that needs restructuring one way or another. By the time this year is over it will have lost somewhere in the range of $80 million since the start of 2008, though BW says a good chunk of that is because its parent company charges it too much for overhead like rent.

McGraw-Hill is unhelpfully throwing in $32 million in debt, too. I’ve written skeptically about the meme that took hold, gleefully in some quarters like its competitors and the print’s-dead contingent, that BizWeek would go for $1. But it’s not hard to see why people believed it.

In that same post I asked whether the mag could go online-only, and said I’d like to see some numbers. The Times obliges, and it’s interesting.

BusinessWeek’s print magazine will take in an estimated $60 million in revenue this year, the NYT reports. That’s a crippling drop from $110 million in 2006, but it also means that the magazine’s print-to-Web ad ratio has dropped from 5.5-to-one to three-to-one (The Times doesn’t report BW’s print circulation revenue, which would make the ratio wider. The magazine has a circulation of 921,000. I have no clue what its average revenue per subscription is, but if it gets $20, say, that would be nearly $18.5 million. Boilerplate caveat: Print distribution costs are far higher than online).

Alas, the declining print/Web gap is due entirely to the collapse of print, not to any growth on the Internet. Web revenue is expected to be $21 million this year, up a piddly $1 million from three years ago.

Web-ad growth will presumably return once we come out of this recession, but it’s not going back to the 30 percent year-over-year days. And I’d imagine that there is some upselling going on with the Web ads, inflating that number (any ad industry folks want to help me out there?) So going online-only looks out for now if the new owners want to hold on to any semblance of its credibility, meaning: without wiping out much of its 190-person news staff.

Worse, its much-touted Business Exchange website has been a big money-loser. The Times reports that it lost $7 million on $7.6 million in revenue last year and is estimated to garner a trifling 1.5 million page views a month and lose $4.7 million this year. I think. Here’s what the Times says:

Last year, Business Exchange had expenses of $7.6 million, and brought in only about $600,000 in revenue. The company expects that gap to narrow significantly. Still, the project is expected to cost $4.7 million this year, excluding interest and taxes.

I can’t tell if that means how much BW will spend on it or how much it will lose on it.

(Adding: The Times’s numbers don’t make sense to me. The paper says Business Exchange took in $600,000 in revenue last year. But it was only live for three or four months. If it’s getting 1.5 million page views a month at $20 a CPM this year (as apparently it did in July), that works out to $30,000 a month or just $360,000 for all of 2009.)

I’d tell you if the Times had posted the BW document. Barring some source agreement or fear that it would expose its source, there’s not much reason not to publish it.

Also, the NYT will need to correct its assertion that the site is nearly two years old. According to the Times itself, it launched a year ago this month.

But worst is that BW has actually lost ground since 2006 on monetizing its traffic. That traffic has become less valuable, with its CPM (an ad measure meaning cost per thousand) tumbling 25 percent.

If that trend continues, or even stabilizes, it would have to increase traffic enormously to make a go of it online. That seems unlikely, at best.

Lastly, this is going to be—ahem—extremely unhelpful for its journalism, anyway:

In February, Mr. Adler and Mr. Fox called editorial employees into a meeting to announce a solution. The magazine would focus on what executives needed to know for their jobs, and shed its sports, lifestyle and politics articles. And writers needed to consider a businessperson’s point of view, rather than a consumer’s…

But other employees saw a different subtext: their role now was to help business leaders make more money. Though the investigative unit has continued its work, other staff members say their harder-hitting stories have been killed, held or edited into submission.

That’s what we call burning the village to save it.

UPDATE: The Times has corrected the Business Exchange error and one other.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.