Why Jeff Bezos Will Revitalize
$250 million. That’s all Amazon CEO Jeffrey Bezos paid for the Washington Post, which was once worth several billion dollars.
$70 million. That’s all John Henry paid on Friday for the Boston Globe, a paper the New York Times acquired for $1.1 billion in 1993.
Next to nothing. That’s what IBT Media paid to buy Newsweek over the weekend from IAC, which itself had paid only $1 plus $40 million in pension obligations to buy it two years ago.
Some billionaires like cars, yachts and private jets. Others like newspapers.
Figuring the math, it’s hard to justify even a $250 million valuation for the Post. The company reported that it lost nearly $50 million for the first half of the year on newspaper operations that generated $138.4 million in revenue. Of that $50 million loss, nearly $40 million was in non-cash pension expense. So you could argue that the company lost only $10 million on operations. But it lost $33 million in the first half of 2012, too, also including pension costs. Circulation fell about 7 percent in the first half of 2013. At the end of last year, the company valued its newspaper assets at $293.6 million. That turned out to be too optimistic.
Listening to the Bezos buzz has been fun following his announcement that he intends to buy — and save — the Post. Of course, pundits have explored every angle, from his political agenda and desire to keep the Post producing quality content to his wanting to take a step toward creating a media empire. What I find most entertaining, however, are the “Internet generation” people laughing at how an Internet pioneer is buying old school “dead-tree” media like newspapers. As if it’s a stupid move. Jeff Bezos is not stupid.
Rob Curley, who formerly headed the online division at the Washington Post, once told me a story about the reason the paper was failing. He suggested that the Post’s downfall was that it was being operated by newspaper people who were not willing to let go of their preconceived notions about the way things had to be done. It’s a curse we all have when we’ve grown up in an industry.
The Post had hired Curley, the most brilliant online newspaper specialist in the world (now at the Orange County Register). Yet Curley was handcuffed because the newspaper had to run stories first, before they could be put online. Rob would have stories within moments of their happening but was told not to post them until after the newspaper had been delivered the following morning. If it seems silly, well, it was. But there are stories like that at just about every newspaper in the world, and in some places it’s probably still going on. When we have always done things a certain way, it’s nearly impossible to let go of the way we feel “things should be done” and be willing to cannibalize our own products.
So why will Bezos win? Simply put, he does not think like a newspaperman, he thinks like an Internet mogul. Rather than a newspaper doing Internet, the Post will become an online company that happens to do news very well. The Post has a giant brand, and Bezos understands how to turn that giant brand into a giant Internet business. Will he even continue to print the paper? Probably, but my guess is that he will rethink the print portion, how it is used, and how it can be linked to and rooted in everything online. Perhaps Jeff will give each subscriber a Kindle Fire, which he can provide for less than fulfilling print to all subscribers’ homes for a year. He then cuts his print distribution costs, sells the presses for scrap metal, and benefits by having more Kindles in market.
The most broken part of the newspaper model isn’t the news, it’s the paper — the cost of paper, the cost of press, and the antiquated distribution model. But the most valuable asset the Post possesses is not its subscriber base or the remaining 50 percent of its former readership, its strength is the trust it has earned worldwide. The Post will become a giant news source for America, much like the New York Times.
Jeff Bezos and others like him understand that brands are valuable consumer assets and that those brands can be maximized with smart technology. Imagine the power of owning the top news brand in every town in America. Imagine being able to buy every paper in America that matters from owners who, in many cases, will be glad to take fire-sale prices. Though Bezos may not need smaller local brands, it would make sense to own the major markets where local trust lies.
If it’s not Bezos, some other Internet mogul would be smart to consider the strategy. Maybe Craig Newmark of Craigslist, who singlehandedly brought down newspapers’ biggest income stream.
Those of us in the radio industry are still struggling with how radio will remove itself from its debt mess and recover in the future. Perhaps we should look at what is happening to the Post and consider what our future may look like. Everyone seems to be wondering how Bob Pittman will save Clear Channel from its giant debt, yet Pittman, like Bezos, is not a radio man running a radio group. Though he started in radio, he is an Internet mogul running a radio group and thus he sees opportunity differently than most of us do.
Though I don’t think Pittman’s plan is to make Clear Channel an Internet-only company, he certainly has laid the foundation with iHeart if it’s ever needed. Clear Channel is on the path to becoming a media giant, and it will look very different five years from now.
Will Bezos or others like him set foot in radio? I think it’s a strong possibility. When every online radio company — Pandora, Slacker, and others — craves our audience loyalty and our ad revenues, someone with vision will see how they can transform radio, just by not thinking like radio people.
And if newspapers, radio stations, cable operators, and others from “traditional media” would stop thinking like traditional media, we might be able to turn that to our advantage on our own. Though we all possess tremendous experience and resources, it is that same experience that often prevents us from thinking like Jeff Bezos.