Jeff Bezos’s pet projects tend to be expensive and eclectic. Bezos has used his vast personal fortune to invest in everything from sexy tech startups to ideas that sound downright whimsical. There is, for example, the project to recover the F-1 engines used in the historic Apollo 11 mission from their resting place 14,000 feet deep in the Atlantic Ocean. Then there’s the building of a clock designed to tick for 10,000 years, in which Bezos has invested at least $42 million.
Now add The Washington Post to that list. In a move that shocked the media establishment, the Washington Post Co. announced Monday that it is selling its newspaper publishing business to Bezos for $250 million. The man labeled “the ultimate disrupter” by Fortune magazine last year (not to mention businessperson of the year) is buying a newspaper that has undergone a dramatic disruption of its own in recent years.
It’s yet another huge shift for the iconic newspaper, first published in 1877 and owned for 80 years by the Graham family.
But for anyone who still cares or worries about how financially strapped newspapers – and media more broadly – will survive and thrive in a digital age, Bezos’s move may be an encouraging sign. The new owner brings exactly what the struggling newspaper and its whipsawed journalists need: deep pockets, an appreciation of the value of content and the kind of patience needed to withstand short-term pressures while focusing on long-term opportunities.
THE NERD TYCOONS
Tycoons and newspapers have long gone together: William Randolph Hearst, Rupert Murdoch, Sam Zell and many others have snapped up newspapers as their personal playthings, or as tools to influence policymakers and the public. Just on Saturday, The New York Times Company agreed to sell the Boston Globe to Red Sox owner John Henry for $70 million (the Times had bought the paper for $1.1 billion in 1993).
Bezos himself has invested in the media business before, leading a $5 million round of funding earlier this year for the website, Business Insider. But Amazon is still his baby. He founded Amazon in 1994 at the age of 30 and quickly built it into an online superstore. He then expanded it into a powerhouse in the world of digital media.
As Amazon grew, Bezos, now 49, amassed a personal fortune that Forbes estimates at $28 billion, up $3 billion just since March. The $250 million in cash he’ll pay for the newspaper represents less than 1 percent of that wealth. So Bezos can afford to steer the newspaper through whatever additional turmoil may lay ahead as its traditional print product gives way to an as-yet uncertain digital future.
Bezos said he won’t be taking a hands-on role at the Post. “I won’t be leading The Washington Post day-to-day,” he wrote in a letter to Post employees. “I am happily living in ‘the other Washington’ where I have a day job that I love.” But he has already indicated that he’s looking to let the Post innovate. “The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs,” Bezos wrote in his letter. “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.”
Experimentation requires not just new ideas but the forbearance to see them through – not something that Wall Street regularly offers to publicly held companies. Yet at Amazon, Bezos has put the long-term goals of the company ahead of short-term pressures from shareholders or Wall Street. He has prioritized growth over profits and put customers before Wall Street analysts. It took nine years, including seven as a publicly held company, for Amazon to deliver its first full-year profit to investors. Even last year, as Amazon generated revenues north of $61 billion, its investments in new warehouses and other prospective avenues for growth led to a loss of $39 million.
The Washington Post’s newspaper publishing division has lost more than that in just the first six months of 2013. The division reported an operating loss of $49.3 million, about $16 million worse than the same period in 2012. Sales have plunged in recent years as circulation has steadily dwindled and growing online revenues failed to fully replace those print losses. “Our revenues had declined seven years in a row,” Don Graham noted in his letter. “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. Our answer had to be cost cuts, and we knew there was a limit to that.”
And while investors have been willing to wait for Bezos’s long-term strategy to play out – Amazon’s shares have rocketed 650 percent over the last 10 years – the Washington Post Co.’s stock has faced far more pressure. The company, which went public in 1971, has seen it shares lose nearly 15 percent over the last decade.
Bezos has laid out his business approach often. In his most recent letter to owners of Amazon stock, he pushed back against the criticism that the company’s investments were indifferent to shareholders “or even at odds with being a for-profit company.” “Take a long-term view,” Bezos wrote, “and the interests of customers and shareholders align.”
A 2010 interview with Fortune might be even more heartening to the Washington Post’s journalists: “I strongly believe that missionaries make better products. They care more. For a missionary, it's not just about the business. There has to be a business, and the business has to make sense, but that's not why you do it. You do it because you have something meaningful that motivates you.”
Bezos echoed those sentiments in discussing his new purchase. “I don’t want to imply that I have a worked-out plan,” Bezos told his soon-to-be-employee, The Washington Post’s Paul Farhi. “This will be uncharted terrain and it will require experimentation.” In that interview, he added that, “There would be change with or without new ownership. But the key thing I hope people will take away from this is that the values of The Post do not need changing. The duty of the paper is to the readers, not the owners.”
After many years of financial struggles and constant cuts, Washington Post employees and readers are likely to welcome those words, and the new owner with the money and patience to make the newspaper business work.
