Whoever buys BusinessWeek — OpenGate Capital, Bruce Wasserstein, Zelnick Media, etc. — will have plenty of challenges.
But a purchase of the magazine could turn out to be a profitable investment, assuming the buyer is willing to make some major changes.
Here’s one plan that might work:
- Buy the magazine for $1. The losses and subscriber liability make it hard to justify a purchase price higher than this (Other magazines, like TV Guide for example, have been sold for similar prices in the past.)
- Operate the print magazine at a loss — estimated by Piper Jaffray to be $10 million to $20 million per year — for one year, not accepting any new subscriptions.
- After a year, cut editorial and administrative costs in half and shift to a monthly publication. (Admittedly, something creative would have to be done to the BusinessWeek name.)
- Build out a stronger online business, crafting better deals with portals, creating sophisticated applications, and better playing the SEO and pageview game.
The BusinessWeek.com site currently attracts almost 5 million U.S. uniques per month while still focusing mostly on its print publication. A good management team focused on the site could likely double this traffic over time. Assuming 10 page views per visitor per month and $35 CPM per page across all the ads, the online business could generate about $40 million in U.S. revenue if the right sales force is deployed. (Any modest revenue from overseas traffic would be a bonus.)
That’s a third of the $125 million the WSJ says that BusinessWeek currently makes in revenue a year. But, with print/distribution costs being a quarter of what they once were, and half the payroll costs gone, it’s realistic for this to be a business that generates 20% to 30% profit margins.
In addition, Forbes.com reaches about 11 million monthly uniques. So if BusinessWeek’s online moves were to gain traction and it catches Forbes over a very reasonable four years, that would represent 28% annual growth.
Not bad for the likely $30 million the buyer would pay after the first year’s operating losses and severance payments.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.