Amazon’s Jeff Bezos acquisition of Washington Post – a compilation of reports

During my stay in the DC area for close to a decade I have read Washington Post everyday. There were other few newspapers but the obvious choice was to subscribe to Washington Post.

Amazon.com Founder & CEO Jeff Bezos bought the  prestigious signatory newspaper Washington Post from Washington Post Company [market cap of $4.38 billion at the time of writing this post] for $250 million – which translates to 0.5 times the annual revenue. A bargain indeed.

Bezos Entrepreneurial DNA

As of August 2013 Jeff Bezos is worth about $26 billion. Forbes ranks him as the 19th most wealthy man in the world, just ahead of Google’s Larry Page.
jeff bezos buys washington post. Image source http://www.empowernetwork.com/carlosramos/2013/08/06/jeff-bezos-acquires-the-washington-post-for-250m/
Bezoz is seen as a visionary. He founded Amazon in 1994 and defined ecommerce. In 2012 he predicted it was too late to persuade people to pay for news on the web.

Bezos is obsessed with building projects to survive over centuries. He builds for the sake of future scale. He has patience. All these qualities will come handy with Washington Post.

Jeff Bezos also has interest in Business Insider [source geekwire.com].

Falling Ad Revenue For Print

Print newspapers in the US are struggling to survive, ad revenues fell 55% between 2007 and 2012 as ad dollars have shifted to the web. Waiting to see that kind of shift in India!

Washington Post’s circulation had fallen from 769,000 in 2002 to 472,000 in 2012. For the same period the revenue fell by 31% to $582 million. While the revenue sounds big but the newspaper made a loss of $53.7 million in 2012 (against a profit of $109 million in 2002).

Bezos could absorb $100 million a year losses for 250 years before going broke!

Acquisition Of Newspapers In The US

New York Times sold Boston Globe for $70 million which it had bought for $1.1 billion in 1993.

Few of the other acquisitions in the print media in the US,

PaperPrice AcquirerDate
Washington Post$250 millionJeff BezosAugust 2013
Boston Globe$70 millionJohn Henry2013
Philadelphia Inquirer; Philadelphia Daily News$55 millionLocal Investors2012
Omaha World-Herald$200 millionWarren Buffett2011
Newsday$650 millionCablevision2008
Minneapolis Star Tribune$530 millionAvista Capital Partners2006

What Assets Did Washington Post Company Sell

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.

Slate magazine, TheRoot.com and Foreign Policy are not part of the transaction and will remain with The Washington Post Company, as will the WaPo Labs and SocialCode businesses, the Company’s interest in Classified Ventures and certain real estate assets, including the headquarters building in downtown Washington, DC [source geekwire.com].

The Washington Post Company, which also owns Kaplan, Post–Newsweek Stations and Cable ONE, will be changing its name in connection with the transaction; no new name has yet been announced.

In 2010 Washington Post Co had already sold the famous weekly magazine Newsweek.

Short Messages Make Deals

Bezos wrote an email to Washington Post Co Chairman Don E. Graham “If you’re interested, I am”.

This reminds me of the famous one word SMS Gujarat Chief Minister Narendra Modi sent to Ratan Tata inviting him to shift the Nano car project from West Bengal to Gujarat – the SMS read “Swagatam

 Why Did Jeff Bezos Buy Washington Post?

  • Newspapers are the new sports teams for the billionaire set
  • Bezos believes the internet is transforming almost every element of the news business.
  • This will be uncharted terrain and it will require experimentation. I don’t have a plan
  • Has placed a big bet on disrupting what he calls the old gatekeepers. Now he has acquired the most well-known gatekeepers out there.
  • He understands the business of production and delivery in a digital age.
  • Bezos is buying influence in Washington. He may see it as a plus but it can prove to be a minus based on the editorial positions the newspaper takes.
  • Bezos wanted to have more clout in D.C. This is a quick way to do just that. But, it’s hard to believe this would be the primary motivation.
  • Newspapers provide a great way to shelter income from immediate taxes, because of how subscription acquisition costs are allowed to be recognized versus subscription income.
  • It’s called superior entrepreneurship. Sellers want to quickly get rid of what they saw as losing operations, yet the buyer saw ways to significantly increase income immediately.
  • He may not know everything he is going to do with WaPo, but it is very likely he sees dangling revenue streams there for the taking.

And one of the articles said “Jeff Bezos may want to run for President!”

What Could Jeff Bezos Do With Washington Post?

Will the delivery of Washington Post stop at my friend's house?

Will the delivery of Washington Post stop at my friend’s house?

  • He will try to go all digital with Washington Post, porting it with its Kindle readers.
  • Completely change the website: No ads, rebuild from scratch,  integrate with Kindle, personalize content and SHUT the print version.
  • Already announced that he will take the company private, so no more scrutiny of quarterly results.
  • Amazon’s “physical delivery system” is wonderfully efficient. Imagine a sampling exercise in which a free Post arrives with every Amazon book purchase.
  • Instead of a “one size fits all” general purpose daily paper, packaging news into more fitting targeted products.  Sports stories on sports sites.  Business stories on business sites.
  • Increased use of bloggers and ad hoc writers to supplement staff in order to offer opinions and insights quickly, but at lower cost.
  • Changes in compensation linked to page views and readership, just as revenue is linked to same (journalists won’t like this one!)

Will Digital Buy Print in India?

It is almost unthinkable for any digital property to buy a successful newspaper in India. Not happening in the near future. The revenues of print is far greater than online revenue in India.

Another interesting read is the views of Anant Goenka of Indian Express Group. Just today I came across the views of various players in media in India.

Articles ‘Post’ The Washington Post Acquisition

Comments

  1. I think *all* journalists are missing the hidden, but deeper opportunity — because by definition, they are focussed on immediate news. There is a mysteriously hidden treasure — nobody has yet figured it out — but the truth remains that there is TREMENDOUS APPETITE FOR NEWS all over the world and the FIRST ONE to FIGURE IT OUT — whether it is Apple, Google, NewYork Times or Bezos (potential contenders to crack the nut) will reap untold harvests. But you have to be a player now, because the window of opportunity is closing or has already closed. It makes sense to invest $100M for anybody (FoxNews, CNN, Yahoo) to be a player.

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