Jeff Bezos’ purchase of The Washington Post last week was a media darling of a deal. The waning newspaper finally got a buyer and to everyone’s surprise it’s Amazon.com’s founder who paid $250M for the Pulitzer Prize winning Daily, once valued at several billion dollars. Bezos was there to catch the Post in what could have been a steep fall from grace if a buyer didn’t show. Bezos dealt with the Graham Family, the paper’s publishers and operating executives for four generations.
The year 1993 was the height of The Washington Post’s daily circulation which peaked at 843,332 daily subscribers (source: Alliance For Audited Media). In March 2013, The Post’s daily circulation was 474,767 and was down 7 percent in the first half of 2013. In 2012, the paper had 640 employees. It once had 1,000. The Washington Post Company reported that it lost $50M in revenue during the first part of the year, because of its newspaper operation. Despite its legacy and prestige, the Washington Post is now a cash drain.
Large publicly traded companies don’t want their newspaper properties any more. But small private investors do. Bezos, however, is not just any investor. If you look at his personal wealth, this $250M price was not a big purchase , a drop in the bucket for Bezos. There’s six degrees of separation and, if you read between the lines, the purchase is not that surprising.
What does Jeff Bezos, a techie entrepreneur/billionaire possibly want with a newspaper property with declining circulation and advertising? Bezos is a media mogul who changed the book publishing industry and managed to make Amazon into a brand giant and household name – and himself a billionaire in the process through Amazon’s various operating entities. Who has not bought a book from Amazon or gone shopping on the site? If Bezos hasn’t made Amazon.com consistently profitable, he has made it valuable as a brand giant, an in-your-face always-on digital media company.
Whether we can expect that The Post, which won a Pulitzer Prize for breaking a key Watergate story in 1973, has any hope for a bright future, let’s watch and see if the sale signifies, “The beginning of a phase in which this Gilded Age’s major beneficiaries reinvest in the infrastructure of our public intelligence,” as stated by The Atlantic editor James Fallows who’ said the deal put him in a ‘state of shock’, according to an August 5 story in The New York Times Dealbook column.
When a media or communications company invests in or acquires a content company or digital media property, typically a subscriber base is co-opted such that existing content and programming expands to a new audience of consumers creating revenue growth opportunities CPMs. Media conglomerates, therefore, are one of the most heavily regulated sectors. Their ownership of the airwaves and broadcast networks monopolized access and control of public communication to serve their own commercial interests. Aside from broadband and cable, where are new audiences to be found? Where will those 474,767 Post subscribers go, along with those of their sister properties? Where will The Post’s find a new audience for its editorial content?
Look no further than behind the LDC screen of your Kindle digital reader. What better medium to deliver and promote news product. If you are one of the 22 millions owners of an Amazon Kindle devices, you may soon find yourself a subscriber to The Post and its sister publishing businesses ( also included in the $250M price). And don’t be surprised if a Post story pops-up during your online shopping experience on Amazon.com. A digital content distribution model such would not be rocket science especially for Bezos, who is credited with changing consumerism. All speculative at this point since Bezos himself (not his company) was the purchaser. But just how will Bezos leverage his new toy from an operations standpoint? How much fun is there to be had with this new toy? There could be six degrees of separation?
Now here’s another angle that was investigated by NPR’s media correspondent David Folkenflik, who looked at this deal from the standpoint of intellectual property and sales tax. This report revealed Amazon to be a major vendor of cloud storage to the CIA which paid Amazon $600M to build its cloud storage system. While it may be a large storage provider to the CIA, Amazon wants nothing to do with Wikileaks, which it booted from its web hosting service Amazon Web Services back in 2010 at the height of public interest in Wikileaks. You might think Bezos is new to Washington but his Company had no problem following the directive of Senator Joe Leiberman when he called for retaliatory action against Wikileaks. Amazon Web Services stated that Wikileaks violated its terms of service because it “doesn’t own or otherwise control all the rights to the classified content” and that the 250 classified docs that Wikilieaks was publishing was not “redacted in such a way that they were not putting innocent people in jeopardy.”
Whatever the reasons or the way the language is written, Washington may not be such an unfamiliar ground Bezos and his purchase of the Graham enterprise is more of a power shift than a good will purchase of a curious new toy.