Can Jeff Bezos save The Washington Post?
The newspaper has been bleeding money for years, but Bezos and his $25 billion aim to reverse that trend
Jeff Bezos, the founder of Amazon, on Monday bought the beleaguered Washington Post for $250 million, peeling off the nation's seventh-largest newspaper for just a fraction of his enormous personal net worth.
Bezos acquired the flagship Post and several other publications, but not the entirety of the Washington Post Co.'s holdings, which include the troubled Kaplan education division and Slate. Amazon had no role in the purchase.
"The Post could have survived under the company's ownership and been profitable for the foreseeable future," Donald Graham, the Post Co.'s chief executive, said Monday. "But we wanted to do more than survive. I'm not saying this guarantees success but it gives us a much greater chance of success."
The newspaper industry as a whole has been collapsing for years, fueled in large part by the rapid rise of digital media and all the free information now available online. That fact was highlighted by the Post's puny sale price. At $250 million, the newspaper went for just a quarter of the purchase price of Instagram ($1 billion), which had a grand total of 13 employees when it was sold to Facebook in 2012.
The Post Co. has fallen on hard times recently, with its newspaper division mired in an accelerating free fall, according to the company's SEC filings. Revenue for the Post Co.'s newspaper holdings have fallen by a staggering 44 percent over the past six years. The company's newspapers lost $53.7 million in 2012 alone — after losing $21.2 million the year before.
The downward trend reflects the hard times the entire industry as a whole has gone through. Newspaper revenue declined by seven percent in 2012 compared to the previous year. At the same time, print ad revenue fell by 14 percent, after declining by 11 percent in 2011 and by six percent in 2010.
In a letter to Post staffers, Bezos acknowledged the dire financial condition of the print industry and said big changes were on the horizon, though he remained vague on what those changes would look like.
"The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs," he wrote. "There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment."
In an interview last year with a German magazine, Bezos said he was convinced print newspapers would not exist in 20 years. The web sites of those newspapers, however, are another story, and that's likely where Bezos will focus the bulk of his efforts to save the Post.
While the Post's print side has been bleeding money, the web portion, which recently introduced a pay wall, has actually been improving. In 2012, revenue for the company's digital publishing operations grew by five percent, with a six percent increase in ad sales.
Digital readership is also on the rise, with traffic growing to 323 million monthly page views last year, from 267 million in 2010. Meanwhile, print circulation shrank by 80,000 daily subscribers from 2010 to 2012, to 480,000. (For comparison's sake, circulation peaked at 832,300 in 1993.)
As the man behind Amazon, Bezos has proven himself a master of dominating the new internet economy. And he has already demonstrated a willingness to invest heavily in digital media. Under his watch, Amazon helped spur the digital reader revolution with the Kindle, and he personally invested $5 million in Business Insider, allowing that site to boost its editorial operations.
He's also shown a knack for maintaining market confidence despite low profits; Amazon, in some respects, can be seen as a giant, never-ending work in progress. He's therefore a "dream owner from a journalism viewpoint," writes Slate's Matthew Yglesias, because he has "famously run Amazon as a deliberately low-margin, growth oriented firm."
Furthermore, by taking the company private, shielding it from profit-hungry investors, and backing it up with his own fortune, he may be able to prevent the kinds of mass layoffs that have gutted venerable newspapers. Here's the Post's Ezra Klein on the Grahams calculation in that regard:
They looked to the future and saw that they’d have to keep cutting. The implication is that Bezos doesn’t have to keep cutting, and won’t keep cutting, though nobody really knows. [The Washington Post]
However, some are more pessimistic about leaving the Post in Bezos' hands. Alec MacGillis at The New Republic:
More generally, Amazon has embodied, more than any other of the giants that rule our new landscape, the faster-cheaper-further mindset that scratches away daily at our communal fabric: why bother running down to the store around the block if you can buy it with a click? [The New Republic]
The Post is not as hard off as some other prominent, national papers. The Boston Globe sold days earlier for a meager $70 million, and given its terrible financial situation, will need a lot more work to get back in the black.
With some restructuring and continued growth, it's certainly possible Bezos could bring the Post back around to profitability. The New York Times, for one, has shown that newspapers can be money-makers; the New York Times Company announced this month that it had posted a profit in the second quarter of the year thanks to lower operating costs and higher revenue.
Bezos, with his $25.2 billion personal fortune, certainly has the resources to invest in his new acquisition. How he chooses to do so will be an interesting experiment not only for the Post, but for the news industry as a whole.