24/7 Wall St.

Good thing that Barry Diller and Sidney Harman don’t work for the CIA because the two media tycoons are doing a terrible job in keeping word of the potential merger between The Daily Beast and Newsweek a secret.  What the two have been reticent about is whether the deal will ever make money, which seems unlikely, or whether that bothers them, which may not.

Media reports show that The Daily Beast is on track to lose $10 million while Newsweek is expected to lose $20 million.   A billionaire such as Diller and Harman, whose net worth around $500 million,  aren’t going to lose much sleep over these losses.  They, along with News Corp (NYSE: NWS) CEO Rupert Murdoch, are part of a new bread of media owners who view their properties like prized show horses to be looked at admired and occasionally brag about to your friends.  If this were any other type of industry, no self-respecting businessperson would ever merge two money-losing businesses unless there was a compelling reason to do so.  As they saying goes “one plus one equals zero.”  Why do it then?  Ego.

Daily Beast editor Tina Brown made a name for herself editing magazines such as Vanity Fair and the New Yorker.  Her overall track record is mixed because it includes such flops as Talk magazine.  Daily Beast also has had its share of controversies including the Gerald Posner plagiarism scandal. Clearly, she would love to bring a dying brand such as Newsweek into the digital age.   Harman, though reportedly is worried that about joining forces with two formidable egos such as Brown and Diller.  Harman, who sees Newsweek as a public trust more than an investment,  has little other choice.

Newsweek is in a tailspin. Many of the publication’s best-known writers, including Howard Fineman, who apparently got Harman to buy the business from the Washington Post (NYSE: WPO), have quit.  The fact that Harman is over 90 isn’t a confidence-builder either.   Newsweek also has been dependent on MSNBC for part of its traffic for years.  It remains unclear if that relationship will continue.

Merger or no merger,  both web sites are not going to have an easy time going in the coming years. Daily Beast attracts about 4.6 million visitors a month.  Newsweek’s monthly audience is at about 7.3 millon. Combined, they don’t equal Huffington Post, whose audience is about 30 million, or the 14 million strong audience of the website of the New York Times, according to quantcast.

In the end it will be the audience that will get to decide if the merger is viable or not, if it ever happens.  Advertisers will follow Brown if she creates the next big thing.

–Jonathan Berr