With Washington Post, Jeffrey Bezos has chance to overhaul newspapers
Amazon.com founder Jeffrey Bezos, who revolutionized the book business, is now aiming to do the same with one of the nation’s most storied newspapers.
The Seattle billionaire has agreed to purchase the Washington Post for $250 million, saying Monday that he was “very optimistic” about the paper’s future.
The Post, like the newspaper industry as a whole, has been beset by a rapid decline in print advertising, a loss of subscribers and challenges in building up online revenue.
In a letter to Post employees, Bezos indicated that he wouldn’t make radical changes in editorial operations and would continue to emphasize accountability journalism. But he said the paper will need to “invent” and to “experiment,” focusing on the Internet and tailored content, to address the changing habits of readers.
Bezos, 49, was on nobody’s list of likely entrants into print media.
“This is the first time a true digital native is buying a newspaper publishing company,” said Alan D. Mutter, a media consultant and former newspaper editor. “Jeff Bezos has the means, motive and opportunity to re-envision what it means to be a newspaper in the digital era.”
Bezos will own the Post outright, buying it with his own money, not Amazon’s. By taking it private, he won’t be subject to shareholders seeking quick returns.
Bezos, a Princeton University graduate, founded Amazon in 1994 as an online book seller. He quickly added other services and built it into the world’s biggest online retailer, with $61 billion in sales last year and 97,000 employees worldwide.
Over the years, he also has made some eclectic investments, including unearthing old rocket engines from the bottom of the ocean and building a futuristic clock that is supposed to keep time for 10,000 years. But generally, he has focused on new technologies.
He’s known as a patient leader who is willing to absorb losses as he builds businesses.
Amazon lost $39 million last year, despite its revenue growth. Rather than focus on profit, the company has been making huge investments in warehouses and costly entertainment ventures such as the Kindle devices and Amazon Instant Video.
“His philosophy is to invest for growth, profits be damned,” media analyst Ken Doctor said. “If you apply that to a newspaper, you see a very different perspective than just cut, cut, cut, which is what everyone else has been doing.”
Bezos has a long-standing relationship with Donald Graham, chairman and chief executive of the newspaper’s parent firm, Washington Post Co. Graham advised Amazon in the development of its Kindle e-reader and serves as a director of social media giant Facebook.
An emotional Graham, alongside his niece, Post Publisher Katharine Weymouth, broke the news of the sale late Monday. Reporters and editors gathered in the Post’s auditorium gasped.
“Our revenues had declined seven years in a row. We had innovated, and to my critical eye our innovations had been quite successful in audience and in quality, but they hadn’t made up for the revenue decline,” Graham said. “Our answer had to be cost cuts and we knew there was a limit to that.”
The paper, known for its political and investigative journalism, has won 18 Pulitzer prizes in the last decade. Its coverage of the Watergate scandal led to the resignation of President Nixon and inspired a generation of students to become journalists.
The Post has been closely held by a single family for eight decades and remains one of the most powerful media outlets in the country.
In a statement Monday, Bezos said he intends to keep current management, including Weymouth and Executive Editor Martin Baron, in place.
“I understand the critical role the Post plays in Washington, D.C., and our nation, and the Post’s values will not change,” Bezos said. “Our duty to readers will continue to be the heart of the Post, and I am very optimistic about the future.”
Tech analysts speculated that Bezos could help wean the paper off its dependence on conventional advertising, and some suggested that he might try to integrate the Post with Amazon products and services.
Bezos helped pioneer online retail and has been at the forefront of modernizing publishing through e-books and new media forms, propelled by Amazon’s Kindle e-reader and similar devices.
Faced with declining print advertising and circulation, newspaper publishers have been looking to digital advertising as a potential savior. But digital ad sales have flattened and in some cases fallen. Some newspapers, including the Post, now charge for online access.
Circulation at the Post, a unit of publicly traded Washington Post Co., was down to 447,700 as of June 30, a 7% decline from a year earlier.
Through the first six months of this year, the company’s newspaper division as a whole lost $49.3 million on an operating basis, compared with a $33.2-million loss for the same period in 2012. Print advertising revenue fell 6% for the first six months this year, according to the company.
The financial strains have taken their toll in the newsroom. In recent years, the company closed all of its national bureaus and has changed executive editors twice, recently hiring its third in five years. In 2010, it sold Newsweek magazine for just $1.
“Although it’s the namesake, the newspaper is bringing minimal value to the company,” said Liang Feng, an equity analyst at research firm Morningstar Inc. “We think the sale makes business sense.”
Investors have long pressured management to shed its newspaper division and instead focus on the company’s lucrative Kaplan educational unit, as well as its healthier television and cable TV holdings, Post-Newsweek Stations and Cable ONE.
Still, Washington Post stock has risen nearly two-thirds in the last 12 months, gaining $8.75, or 1.6%, on Monday to close at $568.70. News of the sale, which came after the markets closed, drove the stock up an additional 5% in after-hours trading.
Because he holds a supermajority of the stock, Graham alone was able to determine the company’s fate.
The sale includes a handful of small publications, including the Fairfax County Times, but not Slate.com or Foreign Policy magazine. It comes amid widespread upheaval in the newspaper industry.
In June, Rupert Murdoch’s News Corp. spun off its newspapers, including the Wall Street Journal. Last month Tribune Co. said it would follow suit, separating its eight dailies, including the Los Angeles Times and the Chicago Tribune, from its other interests. Time Warner Inc., meanwhile, plans to unload its struggling magazine division, which includes Time magazine.
The Post deal is the third media transaction in as many days involving major brand names.
On Saturday, New York Times Co. said it would sell the Boston Globe to John Henry, owner of the Boston Red Sox, for $70 million, a fraction of the $1.1 billion the Times paid for the paper two decades ago. Also on Saturday, digital news company IBT Media said it would acquire Newsweek, which now publishes only online.
“The newspaper business is going through a restructuring,” said Jay Rosen, a professor of journalism at New York University. “Fundamentally different types of ownership will be required.”
Times staff writers Kathleen Hennessey in Washington and Chad Terhune in Los Angeles contributed to this report.
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