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Jeff Bezos Buys Iconic Washington Post

Posted: August 5th, 2013 | Author: | Filed under: Business News, Digital Media, Indeep Media, Media, Print Media | Tags: , , | Comments Off on Jeff Bezos Buys Iconic Washington Post

Jeff Bezos

The iconic Washington Post newspaper has been sold for $280 million to Amazon’s chief executive and founder Jeff Bezos. The deal is chump change for Mr Bezos – less than 1 percent of his total wealth –  whose personal fortune is estimated at $31 billion.

The surprise deal follows the New York Times sale of the Boston Globe for $70 million. It is a further indication of the unprecedented challenges newspapers are facing as advertising revenue and readership declines ::::

Washington Post

Notable Events in the Post’s History

  • 1933 – Financier and former chairman of the Federal Reserve Eugene Meyer buys the Washington Post at a bankruptcy auction.
  • 1971 – Meyer’s daughter Katharine Graham takes the Washington Post Co public with the sale of Class B stock at a price of $26 per share.
  • 1972 – Post reporters Bob Woodward and Carl Bernstein begin reporting on what becomes known as ‘the Watergate scandal’ and is instrumental in President Richard Nixon’s resignation in 1974.
  • 1980 – The Post publishes Janet Cooke’s story on an 8-year-old heroin abuser that goes on to win the Pulitzer Prize. The award is later stripped after the discovery of fabricated elements.
  • 1986 – Company purchases cable systems serving 350,000 subscribers from Capital Cities/ABC for $350 million, making it the 20th largest US cable company.
  • 2008 – Katharine Weymouth, Graham’s granddaughter, takes over as publisher of The Post.
  • 2010 – The company sells Newsweek magazine to Sidney Harman for $1.
  • 2013 – Amazon.com founder Jeff Bezos agrees to buy the Washington Post for $250 million in cash.

In 1994, at the age of 30, Jeffrey Preston Jorgensen – Jeff Bezos – left the Wall Street hedge fund and broking firm that had lined his pockets with enough ambition to drive to Seattle to startup his own business, developing his business plan on-the-fly.

Pre-Amazon, Bezos had a colourfilled career. After graduating from Princeton University in 1986, Bezos worked on Wall Street in the computer science. Then he worked on building a network for international trade before moving on to Bankers Trust, where he became vice-president. Later on he also worked in computer science for D. E. Shaw & Co.

He incorporated his startup company that same year, selling his first book –  Douglas Hofstadter’s Fluid Concepts and Creative Analogies – in 1995. In 1997 Amazon Inc debuted on Nasdaq at $18 a share, although it was still losing money.

The Washington Post in 1997 made a profit of $165 million, an increase of 28 per cent on the previous year, a profit margin of 20 per cent on revenue of $815 million. The Post also launched its first website, and felt, like most newspaper companies at the time, that it had a solid handle on this new internweb thingy. The future for the Washington Post looked good.

The Washington Post’s current chairman and chief executive Donald E Graham, whose family owns the paper, said it would be better served with another owner.

“I, along with Katharine Weymouth and our board of directors, decided to sell only after years of familiar newspaper-industry challenges made us wonder if there might be another owner who would be better for the Post,” Graham said. “Jeff Bezos’s proven technology and business genius, his long-term approach and his personal decency make him a uniquely good new owner for the Post.”

Mr Bezos, who has built Seattle-based Amazon.com into a shopping and online technology behemoth over the past two decades, made a small foray into media earlier this year with a small investment in internet news site Business Insider. In a letter published on the Washington Post’s website, Mr Bezos said there would be no radical change.

“The values of The Post do not need changing,” Mr Bezos wrote. “The paper’s duty will remain to its readers and not to the private interests of its owners.”

Amazon.com is to be kept separate from the Post deal, according to the Washington Post. The transaction covers The Washington Post and other publishing businesses, including the Express newspaper, The Gazette Newspapers, Southern Maryland Newspapers, Fairfax County Times, El Tiempo Latino and Greater Washington Publishing.

In it’s latest reporting year, The Washington Post lost $US53.7 million on revenue of $US581.7 million, down from $US622.5 million the previous year.

The paper was sold for $US250 million, less than 1 percent of Mr Bezos’ total wealth of $31 billion. Amazon Inc is now worth $US137 billion; The Washington Post, now mainly an education business, is valued at a around $US4 billion.

The media world is once again swirling with speculation about whether Bezos is simply a philanthropic trophy buyer of the newspaper or whether he has the magic formula for making newspapers pay? That’s important, and interesting, but perhaps more interesting is: what happened? How come he bought The Washington Post and not the other way around?

Amusingly, The Washington Post seemed to be in a better position in 1997 to succeed in e-commerce than that single stockbroker driving from New York to Seattle. It owned great newspapers, magazines, TV stations and 637,000 cable TV subscribers, as well as a small education business.

The parallel stories of The Washington Post and Amazon have been repeated around the world in the decline of traditional publishers and the dizzying rise of digital businesses that have quickly created fortunes that are every bit as great as the old ones now being eroded.

Same Same But Different

Interestingly, the two companies are, at heart, word merchants. The Washington Post’s core product is the 500-1000 word article, at first only on newsprint once a day, for 125 years, now also digitally on computers and tablets; Amazon’s core product is the 50,000-100,000 word book, at first in print and then digital, via an electronic reader it invented.

I think the key to the difference between them – to what happened over the past 15 years – is contained in Jeff Bezos’s letter yesterday to his new employees at The Washington Post.

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. Our touchstone will be readers, understanding what they care about…”

And: “The paper’s duty will remain to its readers and not to the private interests of its owners.”

Newspaper companies have never known who their readers were: the customers were newsagents who then sold the products to their customers. It’s hard to care about people you don’t know, so newspaper executives and staff have tended to focus on themselves, and on serving society as a whole.

Also large companies labour under the tyranny of the Powerpoint: directors and owners want to be reassured that management know what the future holds, and require presentations showing five-year forecasts of revenue and profits, to which they may be held.

The internet requires constant invention and experimentation: it simply isn’t possible to know what’s going to happen. Forecasts beyond a few months are meaningless and the most important skill is coping with, and learning from, failure.

In 18 years Jeff Bezos made it up as he went along, and has grown Amazon from a small online bookstore to a giant global online retailer and computer services business that sells everything from fresh food to cloud computing, and of course, books, sold for an average of about $10 each.

He has now bought a retailer of articles, most of which are given away for free in the hope that an advertiser might want to try to catch the reader’s attention while reading them. For heavy users, the price is $180 a year. It’s losing $50 million a year.

Can he make this work as a business? Only by inventing and experimenting, and understanding the readers in same the way that Amazon understands its customers. But there’s another thing that Bezos wrote to Washington Post staff that bears repeating:

“Journalism plays a critical role in a free society, and The Washington Post – as the hometown paper of the capital city of the United States – is especially important.” Business Spectator’s Alan Kohler said. “I would highlight two kinds of courage the Grahams have shown as owners that I hope to channel. The first is the courage to say wait, be sure, slow down, get another source. Real people and their reputations, livelihoods and families are at stake. The second is the courage to say follow the story, no matter the cost. While I hope no one ever threatens to put one of my body parts through a wringer, if they do, thanks to Mrs Graham’s example, I’ll be ready.”

The great project in which everyone in daily publishing is now engaged is trying to make something that “plays a critical role in a free society” also profitable and therefore sustainable.

As Jeff Bezos says, it won’t be easy, and there’s no map.

The Washington Post is perhaps best known as the employer of Bob Woodward and Carl Bernstein, the two reporters who uncovered the Watergate scandal 40 years ago which ultimately forced president Richard Nixon out of office.

Mr Bezos is the latest US entrepreneur to get into the newspaper business. He follows Warren Buffett, who’s snatched up an empire of community newspapers in recent years.

source: reuters

source: business spectator

image source: wikipedia

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