Jul 26, 2022 - Economy

Newsweek execs speak out amid legal drama

Illustration: Natalie Peeples/Axios

Newsweek, the decades-old magazine company, is looking to build a digital subscription business that focuses on lifestyle and hard news content, executives told Axios.

Why it matters: The hope is that subscriptions will not only be lucrative, but also help steer the publication's reputation toward one of quality independent journalism amid a messy legal battle with its former parent company.

Driving the news: Newsweek earlier this month filed a lawsuit against IBT Media, religious leader David Jang, his church group the World Olivet Assembly, and an embattled Christian university, among others, to recover more than $35 million in damages.

  • Newsweek claims it suffered as a result of a criminal money laundering scheme, which IBT Media plead guilty to, that took place while it still owned the publication.
  • The lawsuit includes damages pertaining to IBT Media's mismanagement of Newsweek prior to their separation in 2018.

Catch up quick: Newsweek was spun out from IBT Media in 2018, and is currently co-owned by former IBT executive Dev Pragad, the CEO of Newsweek, and Johnathan Davis, who is still CEO of IBT Media.

  • The magazine was founded in 1933. It was acquired by The Washington Post in 1961 and sold in 2010 to businessman Sidney Harman, who combined the publication with The Daily Beast, albeit unsuccessfully. IBT relaunched the company in 2014, after years of business turmoil.
  • Earlier in July, IBT sued Pragad and Newsweek's holding group NW Media Holdings Corp., seeking to kill the 2018 deal to spin out ownership to Pragad.
  • Pragad used to belong the Christian sect now being sued by Newsweek, but says he has severed ties with the group.

Details: Newsweek's staff has been covering the lawsuit drama incrementally for years, but Pragad's former ties to IBT and the church complicate the story.

  • Global editor-in-chief Nancy Cooper, who has been with Newsweek for years, told Axios: "The lawsuit has nothing to do with me. That's the technical truth and the emotional truth too ... What the guys fight out on Mount Olympus — not my problem."
  • Cooper said that covering the suits is "less of a distraction" than one might think, "because we decided what to do and what we do is cover it."

Yes, but: The lawsuit is the latest in a waterfall of ethics issues that have plagued the company for years.

  • Journalists were fired for their attempt to cover investigations into the company in 2018, prompting a series of public resignations.
  • Newsweek's parent company was caught buying fraudulent traffic to boost ad sales that same year.
  • It was reported in 2019 that the outlet incentivized reporters to write clickbait stories for traffic gains.

By the numbers: Pragad said the company is profitable, and brought in $60 million in revenue in 2021.

  • That would represent a dramatic turnaround from just four years ago, when the company was losing money and getting in legal skirmishes over backdated rent.
  • Newsweek was also sued by a tech vendor for a third time in 2021 for allegedly failing to pay hundreds of thousands of dollars in backdated fees. A spokesperson said that those lawsuits are settled and the company is debt-free.
  • The company has around 250 staffers across mostly the U.S. and U.K. Roughly 80% of the staff are journalists, said chief strategy officer Dayan Candappa, who was reinstated in 2018 after being placed on a brief leave following an internal investigation into sexual harassment allegations at a previous job.

Between the lines: Most of the company's revenue comes from ads, in addition to content syndication and selling plaques for its editorial ranking lists.

  • Subscriptions, which cost $49 annually, only account for a small portion of revenue, but the hope is that they will soon become a much bigger part of Newsweek's revenue stream.
  • The company still publishes a weekly print magazine, although Cooper acknowledges "in general, newsstand is not the business it used to be."

The big picture: Newsweek has struggled to retain the same level of editorial authority in digital that it did in print years ago — a struggle shared by other print magazines as they've transitioned to digital. But its cascade of controversies has amplified the stress.

  • “In the past, our focus was grow, get scale, generate sufficient page views," Candappa said. "We’ve now transitioned away from simply getting scale to building an engaged audience. It’s not enough to get page views. We need quality page views," which will eventually lead to subscribers.
  • "The vast majority of our subscribers do print and digital," he said. "The goal we've set ourselves is 100,000 subscribers."

What's next: The company's foray into digital subscriptions will be twofold, Cooper and Candappa explain, although pricing is still being evaluated.

  • Premium content: The company will sell subscriptions for "high-impact" investigative journalism. One area of focus which Cooper said the company will continue to double down on is China.
  • Soft verticals: Newsweek will also build out series of verticals under the "Newsweek Life" brand to engage audiences on subjects like pets, health and families.

The bottom line: "The 21st century has not been kind to Newsweek in terms of ownership at all," Candappa said.

  • "Imagine what we could accomplish when all of this is gone, when the noise isn't there, when the shareholders battles aren't there, when the background noise and the problems aren't there, imagine what Newsweek would be like. That's our ambition."
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