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Washington Post may put Newsweek on the block

By Jennifer Saba

NEW YORK (Reuters) - Washington Post Co said on Wednesday it is considering the sale of its money-losing Newsweek magazine, which it has owned since 1963.

The newspaper publisher and education company, best known for its daily newspaper, has been reviewing its properties because of the sharp decline in advertising revenue that has hammered the print industry, especially general-interest magazines.

Newsweek is on track to lose $20 million this year, according to a source at the magazine, despite attempts by Washington Post Co turn around the weekly, including a redesign.

"The losses at Newsweek in 2007-2009 are a matter of record. Despite heroic efforts on the part of Newsweek's management and staff, we expect it to still lose money in 2010," Washington Post Chairman Donald Graham said in a statement on Wednesday.

"We are exploring all options to fix the problem ... In the current climate it might be a better fit elsewhere."

The Washington Post hired Allen & Co as an adviser.

Newsweek's losses hamper the prospects of Washington Post being able to obtain a decent price for the weekly, particularly since recent magazine deals have drawn lukewarm interest due to years of falling circulation and fewer ad pages.

McGraw-Hill Companies sold BusinessWeek to Bloomberg LP last October for between $2 million and $5 million. The Washington Post itself sold Budget Travel magazine to Fletcher Asset Management for an undisclosed sum last December.

Valuations are at a low point for the magazine industry, said Reed Phillips, managing partner at media investment bank DeSilva + Phillips. "The problem properties are the ones that don't make money -- like Newsweek," Phillips said. "The buyer universe, when something is losing money, becomes very small."

"What you end up with are opportunistic buyers," he said, citing Politico parent Allbritton Communications, Huffington Post, and IAC/InteractiveCorp's Daily Beast among possible bidders.

"If they just shut down Newsweek, (the Washington Post) will be obligated to repay subscribers the amount they paid in advance," Phillips said, adding the estimated cost could range from $50 million to $100 million.

Newsweek Editor Jon Meacham said he is trying to track down financial partners to purchase the magazine.

"I am exploring every possibility to keep Newsweek's voice in the global conversation," he told Reuters in an interview.

Advertising revenue at Newsweek fell 30 percent in 2009 from 2008, according to rough estimates from the Publishers Information Bureau (PIB). During the first three months of this year, ad revenue at the newsweekly plunged 40 percent.

The past several years have been tough going for magazines. The recession has driven ad sales down roughly 17 percent in 2009 for magazines tracked by PIB.

Additionally, the Internet has been particularly unkind to newsweeklies as they struggle to stay relevant in an age of instant reporting and commentary.

(Reporting by Jennifer Saba; Editing by Gerald E. McCormick and Steve Orlofsky)

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