When a $20 billion company buys a magazine for less than $5 million, it's almost by definition not a big deal. And even if the true cost of Bloomberg's acquisition of BusinessWeek is closer to the $70 million Sharon Waxman reports, it's still barely a speck on the financial-news giant's balance sheet.

But the significance of the purchase is much larger than the numbers would suggest -- even if Bloomberg insiders aren't sure yet exactly what that significance is. One thing they do know is it signals a victory for that faction of the management hierarchy that thinks Bloomberg needs to invest more heavily in consumer media to continue growing, even if it means sustaining heavy short-term losses in those businesses.
At the head of this faction is Norman Pearlstine, the former editor in chief of Time Inc. who joined Bloomberg as chief content officer in May 2008. Since his arrival, Pearlstine has been making over Bloomberg's corporate culture, toning down the more peculiar aspects of what's known as "the Bloomberg Way" and helping to bring in high-profile outsiders like former NBC News president Andrew Lack, Wall Street Journal veteran Laurie Hays and Portfolio.com managing editor Dan Colarusso (my onetime boss). As the newly-installed chairman of BusinessWeek, Pearlstine will oversee the integration of the magazine into the company's existing businesses.

Or will he? While Pearlstine reports directly to Bloomberg LP president Dan Doctoroff in his role as chief content officer, he will defer to Matt Winkler, editor in chief of Bloomberg's news division, on matters involving the magazine's editorial direction. "Matt Winkler heads all news content," says a Bloomberg spokeswoman. "Norm will report to Matt on editorial matters."

A Bloomberg insider refers to this arrangement as "kind of hazy." "Everyone here is watching with great interest to see whether Norm runs BusinessWeek or whether it's really Matt who runs it," he adds.

To employees, Winkler represents the living embodiment of Bloomberg's traditions -- including the tradition that the company expands by developing properties, not buying them. Winkler is said to have initially opposed buying BusinessWeek, which may explain why Bloomberg was a latecomer to the bidding process. Also said to have expressed skepticism is Lex Fenwick, the former CEO of Bloomberg and current head of Bloomberg Ventures, a subsidiary created last year to generate innovative ideas. "He hates the idea of spending money trying to be a media company," says one business-news veteran who knows him. When I called Fenwick to ask him about this, he denied ever taking issue with any of the company's strategic decisions and declined to address the BusinessWeek purchase directly. "I would never comment on something that has nothing to do with me, like any responsible adult," he said. (Other Bloomberg executives weren't available for comment.)

There's a solid argument to be made that Bloomberg would be smart to forget about trying to compete with the likes of Dow Jones and CNBC and focus its energies on its hugely profitable terminal-based news and data service. Bloomberg's television, radio and internet operations are said to lose tens of millions of dollars a year -- one source pegs the figure at north of $100 million -- while the terminal business has proved remarkably resilient: Year over year, subscriptions are actually up slightly despite the carnage in the financial industry. "They're essentially a business-to-business company that's trying to be public-facing and spending all this money to do it," says the business-news veteran.

Why bother? In announcing the deal, Doctoroff suggested that owning BusinessWeek will strengthen the company's newsgathering efforts across the board: "BusinessWeek helps better serve our customers by reaching into the corporate suite and corridors of power in government, where news that affects markets and business is made by CEOs, CFOs, deal lawyers, bankers and government officials who typically are not terminal customers."

You might wonder why a news organization that already boasts the world's largest newsroom and scores interviews with the likes of Tim Geithner and Eric Schmidt covets the access of a failing weekly magazine. Does it suffer from some kind of corporate inferiority complex? Perhaps, says the insider, but not without reason. "Bloomberg is still new as a really powerful player," he says. "There are people out there who haven't gotten the message yet -- who still think it's just for bond traders."

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