Business

AT FORBES MEDIA, THE KNIVES ARE COMING

ROGER McNamee, co-founder of the investment firm Elevation Partners and one of the driving forces behind its decision to buy a big stake in Forbes Media 2½ years ago, has resigned from the Forbes board.

The resignation is the clearest sign yet that Elevation’s bet that Forbes’ Web site would more than offset the company’s declining print business and Forbes’ future growth is falling flat.

McNamee, a legendary investor from Silicon Valley, admitted as much to Media Ink.

“When we invested, we were convinced that online advertising could more than outperform any decline in print,” said McNamee in an e-mail. “That view has proved to be wrong for reasons that are no fault of Forbes.

“The deterioration in the advertising market late last year caused Forbes and Elevation to agree that we could no longer count on Forbes.com to offset declines in print. We agreed to a strategy shift from investment in the Web to aggressive cost cutting.”

As part of that shift, McNamee will be replaced by Elevation’s Bre Pearlman, who has a reputation as an aggressive cost-cutter.

Said McNamee of Pearlman’s appointment: “Elevation’s cost-cutting team happens to be in New York, so swapping Bret in and me out was an obvious play. I remain engaged in strategy and Web technology at Forbes.

“It’s clear that Forbes will take longer to succeed than we had originally hoped, but that is true of every investment in America,” he said. “The market is down 50 percent in 18 months. The value of Forbes is certainly not down any more than that.”

McNamee, along with U2 front man Bono and four other Elevation partners, in August 2006 gambled that Forbes’ online fortunes were so bright that they invested between $250 million and $300 million for a 40 percent stake in the company controlled by the Forbes family.

However, doubts arose almost from the beginning about Elevation’s wisdom in investing in Forbes.

Doug McIntyre, a stock picker who writes for investment Web site 24/7 Wall Street, called the investment “one of the worst media transactions of the past decade.”

Last year, the magazine’s ad-page count tumbled 17 percent, and so far this year ad pages are off 19 percent.

Forbes magazine has also been rapidly downsizing, forcing top editors such as Stewart Pinkerton into retirement and eliminating perks like the company’s 401(k) match, and forcing workers to take five-day, unpaid furloughs.

And the cuts haven’t stopped there.

With the ad hemorrhaging at the magazine accelerating and pressure from Elevation to cut costs, some wonder if Forbes Media Chairman Steve Forbes and Chief Operating Officer Timothy Forbes will finally abandon the mag’s fortnightly publishing schedule, which dates back to its founding by their grandfather B.C. Forbes in 1917, in favor of a monthly frequency.

A Forbes spokeswoman said, “It is not on the table. It makes no sense from an editorial point of view.”

New look

On Monday, Newsweek unveils the most dramatic overhaul in its history — one that parent Washington Post Co. hopes will take it from a money-losing position in the weekly-news category to a money-making one in the thought-leader category.

It was a plan that was hatched by Newsweek CEO Tom Ascheim and sold to Newsweek Editor — and recent Pulitzer Prize winner — Jon Meacham.

While some think it is the gamble of a lifetime, and one that could ultimately jeopardize the long-term job security of Ascheim and Meacham if it fails, others feel the prolonged ad slump and the many problems in the category make dramatic change necessary.

“You can’t keep doing the same thing, given the economic realities,” Meacham told Media Ink.

Jack Hanrahan, who publishes the insiders’ newsletter Circ Matters, agrees. “It’s a very smart thing for them to try to do,” he said.

Part of the strategy is to shed lower-paying readers, who today pay an average of only 47 cents an issue for a subscription, even though it costs Newsweek at least $1 to produce and mail. Time subscribers pay an average of 34 cents an issue, while the more upscale The New Yorker fetches 98 cents and The Economist garners $1.96.

On the circulation front, Newsweek currently promises advertisers it reaches 2.6 million, but on June 1 that will drop to 1.9 million and by January it will fall again to 1.5 million.

Newsweek hopes to double the price subscribers pay to about 80 cents a copy.

In addition to the lower circ, the mag’s content will change, moving away from chasing breaking news stories.

The new Newsweek will have four main sections. Scope will replace the old Periscope section, and The Take will feature all the magazine’s columnists.

Features will be long nar ratives, which Meacham is calling, “The First Draft of History,” and photo essays. The Culture will cover TV, movies and books each week, but with fewer reviews.

On the newsstand, consumers will see the cover price go up by $1 to $5.95.

keith.kelly@nypost.com