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Si Newhouse’s Dream Factory

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Si's Fantasy World: The decades of magazines.   

Truman was determined that Condé Nast launch an art magazine, and the two men tussled over the idea for months, though clearly more personal issues were at stake. “Look, you should trust me. I know what’s going on,” he told Newhouse. “That’s why you hired me. You should let me do it.” Finally, there’d been a shouting match in Newhouse’s office, an unusual blowup that surprised them both with its intensity. An art magazine had no advertising base, Newhouse pointed out. “He was right,” says Truman.

Tom Wallace, Truman’s replacement, didn’t envision his role as a guiding creative force; that era was over. He worried about the web. “He’s the protector of high-level quality,” I’m told vaguely, though few editors seem to count on him, except for occasional help in interpreting one of Newhouse’s inscrutable shrugs. “Tom is not electricity. He is steady rhythm seeking perfection,” says Harry Evans, Wallace’s former boss. To some, the new régime seems a collection of organization men, fin de l’empire types marking the decline of an enterprise once bristling with unbound and misbehaving creative energy. One former editor says, “Si has surrounded himself with people who look and sound like executives.”

As the economy has fallen apart over the past eighteen months, first gradually then all at once, Condé Nast’s biggest problem has been the newspaper empire that Sam created. Last year, the Newhouses’ Newark Star-Ledger, one of their biggest papers, may have lost as much as $40 million. No one in the family believes the newspaper business is coming back. The family’s cable business, Bright House Networks, with enterprises in several states, still tosses off tens if not hundreds of millions of dollars, keeping the Advance, which houses all of the family’s businesses, afloat, and the company is virtually debt-free; the family has always hated to borrow. But resources are now spread thinner. The company no longer has the luxury of pumping cash into a struggling title. “The family needed to save money,” Townsend explained to one executive after one magazine closed. Without profit, there’s no “distributable cash” for the family. So far this year, Condé Nast is in the red, though the closings and cuts should drive money to the bottom line. The belief around the building is that next year, if the economy recovers, Condé Nast will again turn profitable.

While the strategy by which Condé Nast will move into the future does not entirely ignore the Internet, it does not exactly embrace it either. When a subordinate worries in a meeting whether the Internet will limit the amount of profit magazines throw off, Townsend may take the person aside, according to one former executive. “Don’t be so negative,” he’ll say. “You’re upsetting the old man.

Magazines in general and Condé Nast in particular are certainly not as threatened in the short term as are newspapers. But Newhouse has been slow to get his mind around any significant brand extensions into the new medium. For nearly a decade, Newhouse opposed purchasing Wired.com. Three years ago, Donald Newhouse’s son Steve finally pulled off the deal, and the website now has sixteen times more unique visitors than the magazine has in circulation. Still other towering brands like Vogue have lain largely fallow.

As a rule, Newhouse has kept his editors away from the web. He has also rarely pushed publishers in that direction, seeing the Internet as a vehicle for selling magazine subscriptions and not much else. And the revenues are comparably minor. He can’t get excited about them—“a painting to Si,” says one cynical former executive. Only about 3 percent of Condé Nast ad revenues came from digital last year, according to Advertising Age, among the lowest in its class.

Steve Newhouse, 52, Si’s nephew, is responsible for many of the companywide web initiatives, and though he hasn’t found a partner in his uncle, some of his ventures have been prescient. He helped create Epicurious.com and Style.com, both conceived as new brands for a world that would no longer be magazine-centric. The point has been less to make a profit than to position the company for a future in which Si Newhouse is gone and the Internet is central. “Maybe an 80-year-old man isn’t the best person to figure out what the next generation of readers wants,” says one former editor.

To a surprising degree, there’s a clannish, insular, old-fashioned quality to Condé Nast and its sister businesses. Newhouse and his brother, Donald, convene regular family meetings—a kind of tribal council—just as their father did. As befits their small-town roots, they distrust the outside world. They still have never hired an outside executive to manage the vast businesses. Says one person close to the family, “Business integration is a family affair.” The meetings are attended by perhaps twenty family members. There are reports from various business heads, like Bob Miron, 71, a folksy-seeming cousin who runs the profitable cable operation from Syracuse with his son and a daughter. The family works hard for unity; at meetings, family members voice opinions but respectfully. Nothing is voted on. “At the end of day, Si and Donald lead the decisions,” says an executive who’s attended meetings. By all accounts, the brothers are incredibly close. “If you’ve talked to one, you’ve talked to the other,” says a person who talks to both.


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