If you want to see why the business model of the so-called legacy media is screwed, look no further than Newsweek, which sold the other day for $1 plus the assumption of $70 million or so of debt.

The Daily Beast got hold of a 66-page sales presentation on the magazine and filled in a few details that weren’t publicly known. Good on The Daily Beast for putting it online.

Newsweek has just 122 journalists, both print and digital. They make up just more than a third of the magazine’s total employees. We’re not told what the average Newsweek journalist makes, but the average employee there gets $123,000 in salary and benefits.

That’s probably a good number for the journalists, too. If so, its newsroom labor costs it just $15 million. Overall labor is $42 million.

The mag took in $165 million in revenue last year (to look at it one way, that’s $1.4 million per journalist).

The problem, of course, is it spent $222 million and lost $28 million (it benefited from a big pension credit). It costs a lot of money to print and distribute a magazine (not to mention to get subscribers).

Its revenue came almost entirely from print, and it took in more revenue from circulation than from ads: $70 million from print ads and $80 million from subscriptions and newsstand sales. It took in just $9 million online (and $6 million from “other) on a CPM of $14. Excluding “other,” print accounted for 94 percent of revenue, while online made up just 6 percent. It actually lost $5 million on its website, which cost it $14 million last year.

But what’s really interesting is where Newsweek spent its money.

The mag spent $102 million on subscription services, circulation, and production—In other words, on producing and shipping the physical product.

That’s why iPad-adoption critical mass can’t get here soon enough. Once that happens, magazines and newspapers could shut down their presses and virtually eliminate those massive production costs. If they’re able to shift subscribers and single copy purchases to e-readers, the numbers could start to look a whole lot better.

And Newsweek is paying $13 million a year in rent, which is way, way too high.

Even allowing for an extremely generous 250 square feet of office space per employee (there are 341 left there), that works out to a whopping $158 per square foot in rent. That’s nearly four times the going rate for Manhattan office space of about $42 a foot, according to Cushman & Wakefield via The Real Deal. Even accounting for the 150 or so extra employees it used to have, the number still is well above $100 a foot for a pretty big office.

To put it another way, for $13 million a year, you could get 305,000 square feet of Manhattan office space—or about 1,000 square feet per Newsweeker. That’s nuts. An organization the size of Newsweek in this day and age should have 75,000 square feet, tops. In other words, it’s paying about $10 million a year too much in rent. It will be able to downsize at some point, either when its lease is up or if it’s able to sublet part of its space to another tenant.

Fortunately, Rafat Ali reported earlier that Washington Post Company’s lucrative Kaplan division will be taking over its New York offices anyway by the end of this summer. (ADDING: And the presentation itself says that will save some $6 million a year.)

The outlandish rent is part of the magazine’s $55 million general and administrative budget last year (that doesn’t even include advertising staff, which cost $19 million). Again, that’s about twice what the magazine spent on the actual journalism that goes into the magazine (total newsroom cost, including labor, was $29 million.

Even after all that cutting, you’ve got a top-heavy business that can’t compete in the age of streamlined digital businesses where a site like Investopedia sells for $42 million today, or four times its 2010 sales.

That’s hardly news, but the numbers put it in stark relief.


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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.