Jeff Bezos Buys The Washington Post

Grand Potentate

Supporter of Possible Sexual Deviants
How do you guys feel about this? I'm wondering if he'll lay off the staff and bring in a temp agency that uses part-time workers?
I thought he said he would be hands off the whole operation. Personally it looks like the return of the newspaper moguls until of course we get the second coming of Rupert Murdoch. Is Bezos from the east coast? Curious he would want to save this publication in particular.
Outsourcing of staff writing is to India, once again, I believe.
My hunch would be that the point of owning old media is to use the op-ed page to raise ire about sales tax on internet purchases among the geriatric readership.
I wish I knew more about the individual players in this, but I think the sum paid for what used to be a major player in a now-dying industry is very intriguing. What does he see that we don't?
I wish I knew more about the individual players in this, but I think the sum paid for what used to be a major player in a now-dying industry is very intriguing. What does he see that we don't?
A massive platform for advertisement, I suspect. Free subscriptions to Kindle owners. These types of things.
Two pieces on the acquisition that were good:
Jeff Bezos and his journalists
By Felix Salmon
August 6, 2013

I’m a huge admirer of Jeff Bezos, and the way in which he has managed to dodge the biggest pitfall facing the managers of public companies: rather than maximize short-term profits, he instead has concentrated — with enormous success — on building long-term value. Amazon is now worth about $140 billion, or more than 500 Washington Posts — more, indeed, than the combined valuation of every single newspaper in the world, put together.

Many of those newspapers, including the Washington Post, were once public companies, with stock-market listings and quarterly profit reports and the like; historically they had very fat margins, and as a result of those fat margins they had substantial stock-market valuations. When those margins imploded, taking the newspapers’ profits with them, the papers were left with almost no value: the Boston Globe was sold for essentially a negative sum, once pension obligations are taken into account, while the Washington Post was sold for the price of a nice Cézanne. Meanwhile, if Amazon were to start losing money for a few quarters, few people would blink an eye; the value of the company certainly wouldn’t plunge to less than a billion dollars.

On the face of it, then, the acquisition of the Washington Post by Jeff Bezos is very good news. If newspapers were ever suited to public stock-market listings, they’re not any more; private ownership, especially ownership by an individual benign billionaire, is a much better model for all concerned. Bezos is not the kind of man who worries about losing a few million dollars here or there: he has his eye on building long-term value and relevance, which is exactly how the best newspaper owners behave. After the Graham family bought the Washington Post in 1933, for instance, it took 20 years before the paper started making real money. Jeff Bezos, who has spent some $42 million building a clock designed to last 10,000 years, has exactly the amount of patience, and money, that a modern newspaper owner needs.

What Bezos lacks, I fear, is the kind of personal talent-management skills common to most great publishers. There’s a virtuous cycle to successful publishers: as you grow in size and prestige, both advertisers and readers flock to you, you start making lots of money, which in turn allows you to hire the best writers and editors and art directors, and to spend big money on fast, effective distribution. Those people, in turn, put out a first-rate product which is very difficult to compete with.

Until, of course, the internet comes along, and everything fragments into a million tiny pieces.

If Bezos were to look at the most successful large-scale publishing operations of the past few decades, he would see a lot of waste. Some publishers, like Condé Nast or the Time Inc of old, turned lavish profligacy into something of an artform; newer entrants into the scene, such as Bloomberg, are no slouches on that front either. Meanwhile, as journalists of all stripes find themselves converging on the same digital platforms, print journalists are increasingly direct peers and competitors of their TV counterparts, where money has always been much more abundant.

Online, it’s all too easy for such operations to be disrupted by lean and efficient upstarts. Bezos’s previous investment in the journalism space was in Business Insider, one such operation: the journalists there work very hard, in a no-slack, no-waste environment, putting out vastly more content per person than any print or TV operation would ever dream of. At places like the Huffington Post, or Gawker, or Business Insider, the goals are clearly articulated, and usually revolve around pageviews or unique visitors or some such metric. And while such outfits certainly can and do spend a lot of time working on projects which might not pay off in a narrow traffic sense, they generally do so consciously, deliberately, as a tactical departure from the hyper-efficient default mode.

At a large newspaper, the default mode cannot be hyper-efficient; the papers which have tried, which have modeled themselves on digital startups, have generally failed. A large and valuable franchise like the Washington Post generally improves the more slack there is in the system. If you have enough money that you can hire stars, treat them generously, and then leave them alone to do their thing, then they will ultimately reward you with first-rate (and very expensive) content. Your job, then, is to find a way to monetize that content.

Amazon, by contrast, is all about efficiency. It has a relatively small number of executives at its headquarters, who are paid overwhelmingly in stock; if the stock does well, they do well. It also employs, mostly indirectly, thousands of workers in warehouses around the world, picking and packaging the goods it sells; those workers are treated badly, and enjoy effectively zero slack in their working lives. What Amazon doesn’t have is paternalism, or a culture which in any way tolerates any unnecessary increase in labor costs. Its employees are cogs in the corporate machine, and they are expected to work as efficiently as possible.

The Grahams (or the Sulzbergers, or the Newhouses, or the Chandlers, or the Bancrofts) never thought of their journalists and editors that way. And the fact is that while you can achieve better profits by cutting here and maximizing there, you can never achieve long-term greatness that way. Greatness emerges mysteriously from the slack in the system, from source lunches and newsroom cross-pollination and expensive editorial whims. It emerges, ultimately, from the ability to give people time and space and money, in the certain knowledge that most of that time and space and money will end up being wasted, and embracing that waste as a good and ultimately necessary thing.

The Washington Post has not had the luxury of being able to waste time and space and money, not in many years — and as a result it is no longer a great newspaper. Maybe no newspaper can ever be great again, in that sense: the economics just don’t support it any more. But the fact is that Jeff Bezos is now an employer of journalists, and as such he is in charge of hiring and firing and paying a group of employees quite unlike any he has hired in the past. They’re not always rational, they’re not always efficient, and as a group they tend towards the skeptical and cantankerous. On top of that, they’re not entirely motivated by money.

Happy proprietors tend to like journalists — they admire what they do, and how they think. (Exhibit A: David Bradley, at Atlantic Media.) Jeff Bezos, I fear, is not going to be a happy proprietor. He’s going to keep himself occupied thousands of miles away from where his journalists will be working; he’s not going to get to know them on a personal level; he’s certainly not going to enjoy gossip-fueled lunches at the Four Seasons with Tina Brown or Arianna Huffington. If Ezra Klein is ever tempted to take Wonkblog to richer shores, or just to quit altogether to concentrate on a television career, it’s hard to imagine Bezos offering him a glass of whisky and promising to make whatever changes would be necessary to get him to stay.

To put it another way: the best proprietors are only happy when their journalists are happy. They throw resources at those journalists, and then the journalists smile, in their grumbly way, and waste a bunch of what they’ve been given, and ultimately produce wonderful content, which the proprietor can then turn around and monetize in one way or another. Bezos isn’t going to be like that, or at least I don’t think he will be. Still, I hope I’m wrong. Because if he does take an avuncular interest in whatever makes his journalists happy, then a man with his skills, and his resources, could yet turn out to be one of the most interesting and successful newspaper proprietors of all time.

'What if you could Amazon the news?' Why Jeff Bezos invested in The Washington Post
People begin to ask the important questions

By Greg Sandoval on August 6, 2013 02:38 pm

Jeffrey Preston Bezos is one of tech's most far-sighted thinkers, an entrepreneur who has helped pioneer internet retail and a visionary who is trying to ferry civilians into outer space. So, why would he want to buy into a crumbling industry like newspapers?

Bezos' investment company on Monday announced that it would acquire The Washington Post for $250 million. The Washington, DC-based newspaper has a proud journalism history, and for decades was a highly profitable business. But for newspapers, the internet era has been marked by declining revenue, layoffs and a loss of influence. That's why so many are wondering why the CEO made the investment and what he has planned.

many are wondering why Bezos made the investment and what he has planned

"I remember when we used to talk about what if Amazon got into the newspaper business," said Jim Brady, executive editor of the Post's digital unit from 2004 to 2009. "We used to wonder 'What if you could Amazon the news?' Well, I guess we're going to find out now."

Bezos has his work cut out for him. Newspapers are in bad shape. Craigslist and eBay have snatched away their classified ads business. A legion of blogs, which don't have to pay the high printing costs, have competed with them for readers. Insiders and analysts agree that the Post's most valuable asset is its name, and some say the paper is undervalued because management hasn't cashed in on that. Allen Weiner, a research analyst with Gartner, said the Post's brand is forever linked to exceptional political coverage. According to him, the internet could have helped expand that brand and the paper's readership far beyond the beltway, but the Post so far has missed the opportunity.

"I've always considered them a national newspaper," Weiner said. "Right up there with USA Today and The New York Times. Think about it: the lifecycle of politics is no longer just election periods. It's now pretty omnipresent. Politics is clearly a topic that people can't get enough of. The Daily Kos, The Huffington Post have done a good job of providing non-stop political coverage, but the Post has not capitalized on its investments in high-quality political reporting."

Weiner said he believes Bezos will want to target a much broader audience. He also thinks he should overhaul the the Post's existing technological infrastructure. Multiple sources within the Post who spoke to The Verge say that the paper is in need of new content management systems. Publishing stories at the paper is still too clunky and time-consuming process.

Brady and Weiner anticipate that Bezos will come up with technological solutions to help reporters and editors be speedier and more efficiently because that's what he has done at Amazon so well. By creating an online store, he avoided having to open brick-and-mortar stores and paying the associated real estate and warehousing costs. His Kindle e-reader fueled the growth of ebooks, helped him cut the expense of warehousing and shipping bound books, and enabled him to offer lower prices than competitors.

When it comes to technology, he won't find the cupboards totally bare. Emilio Garcia-Ruiz, the newspaper's managing editor in charge of digital, was already leading an initiative to bring more web developers and computer engineers into the newsroom so its web and print operations would be better integrated. In the blogosphere, this may sound quaint, but we're talking about a 136-year-old newspaper. Change hasn't always come easily to management or the rank-and-file reporters.

For a long time in newsrooms across the country, reporters looked down their noses at writing for the web. The Post wasn't any different. Reporters went there to win Pulitzers, not to blog, said Brady. He said that by 2009, attitudes had shifted and most reporters understood the importance of the web. They might want to continue that trend.

Bezos has already said that he personally favors email newsletters and brief reports. Some at the paper are wondering if Bezos plans to make the newspaper more efficient by requiring reporters to write shorter stories, and more of them. It's what's happening all over in journalism, even at The Wall Street Journal.

The other thing occurring in journalism is staff reductions. At Monday's meeting to announce the sale to employees, the paper's management told workers that they had concluded their financial projections only showed one thing: that more staff reductions would be necessary in the future. In the past, the Grahams typically cut back on staff through buyouts. After the meeting, some people said it was obvious that the question on everybody's mind was whether Bezos would come in and start cutting the headcount.

Brady, for one, said Bezos knows that the publication, like the Times, is part of the Mt. Olympus of journalism. He doesn't think Bezos wants to undermine its reputation and brand by further reducing coverage or dumbing down the copy. Nonetheless, he predicts there are bound to be a few bumps as the Bezos era at the Post begins.

There are bound to be a few bumps as the Bezos era at the Post begins

"The trend is to write shorter and more often," Brady said. "But there's no shortage of long form journalism online. There's no doubt though, that there's going to be a huge collision between classic journalism and stunning technology."
He's a billionaire and wants to have some fun. Personally, I'd go the trip to space route, but what he does with his money is his business.
Agree. He is worth appr 29 billion. Spending that much is a drop in the bucket for him...
Great piece by Felix Salmon on the economics of the sale and what the paper's actually worth:
Content economics, part 3: costs
  • Aug. 19, 2013
When I wrote last week about Jeff Bezos and his journalists, I said that “the Boston Globe was sold for essentially a negative sum, once pension obligations are taken into account, while the Washington Post was sold for the price of a nice Cézanne.” It turns out that I was comparing apples with oranges: the Washington Post, just as much as the Boston Globe, was sold for less than the value of its pension obligations. Bezos might have paid $250 million for the paper, but he was also given $333 million to help him meet its pension obligations.

Make no mistake: this does mean that the Washington Post is worth substantially less than zero; you can’t just separate out the pension obligations and declare that somehow they don’t matter. What Bezos paid for the Post was not $250 million, it was negative $88 million.

To be sure, Bezos is $250 million out of pocket: the $333 million in the pension fund is ring-fenced for the Post‘s pensioners. But think about it this way: what Bezos bought was the institution of the Washington Post, the brand which the Graham family spent decades investing in and building up. Bezos bought an established property, because it was an established property. If he didn’t want an established property, he could have invested $250 million to create a brand-new journalistic outlet. To put that sum in context, the total amount of money raised by Business Insider, since inception, is $21.6 million; Vox Media has raised $23.5 million; BuzzFeed is on $46.3 million; and Huffington Post raised $37 million before it was acquired by AOL. Throw in Gawker Media, Mashable, Politico, Pando Daily, Breaking Media, Weblogs Inc, and just about any other new journalism company you can think of, up to and including Bustle; you’re still nowhere near $250 million.

Why does it makes sense to buy the Washington Post for $250 million, rather than spending $250 million creating an awesome journalistic product from scratch? Because the Washington Post is already established — and while it’s easy to buy journalism, and even traffic, for $250 million, it’s harder to guarantee yourself the kind of name recognition and national reputation enjoyed by the Washington Post. That reputation is built on hard-won promises: promises to readers that they can trust what they’re reading, and promises to writers too. The deal that the Washington Post made with its writers — the deal which helped to cement its reputation — involved not only paying them a present salary, but also promising them a decent pension. That promise helped to build the brand, and it was attached to a fully-funded and very well managed pension fund. The pension fund is, in all senses of the word, an important part of the value of the Washington Post. And Bezos just managed to acquire a $333 million pension fund, which only has about $283 million of liabilities, for $250 million. Which says to me that the value of the newspaper itself is clearly negative.

When any institution has a negative value, that’s because it’s likely to lose money over the long term. And there’s a good reason why the Washington Post is likely to lose money over the long term: it’s a large journalistic organization. And the internet has turned the economics of journalism on its head: once upon a time, profits and size went hand in hand, with the biggest outfits making the most money. Today, it’s the other way around: small, lean companies make modest profits, while bigger outfits generally see ever-increasing losses.

Part of the reason is related to revenues. I argued in part 2 of this series that if you want your readers to pay you, it often helps to be small and personal rather than big and corporate. And I argued in part 1 that the economics of advertising were not favorable to news sites — while advertisers, once upon a time, might have felt as though they had no choice but to appear in a big publication like Time or the Washington Post, nowadays the sites with the biggest traffic aren’t journalistic at all.

But there’s a key part of the economics of journalism which I haven’t covered yet — and that’s the question of costs, specifically the costs of producing the stuff. On its face, journalism is a classic scalable commodity: once I’ve written this post, for instance, it can be read by a million people as easily as it can be read by ten. And so if it’s published by a big journalistic organization with wide reach, ideally one where a substantial and talented business team can help build lots of pageviews which they then sell to deep-pocketed advertisers, then a fixed cost (me) should be able to support lots more revenue than I could at a smaller site.

Certainly this is true narrowly, at the margin: the economics of online publishing involve fixed costs and variable revenues, with the result that all things being equal, any given site will make more money as it gets more pageviews. But all things are not equal. And if you start looking up the spectrum from smaller sites to larger, more established organizations, instead of simply looking at what happens to any given site over a relatively short time frame, you find a very different pattern.

If you look at the media world as a snapshot, instead of a single site over time, it turns out that editorial costs rise steadily as sites get bigger and more professional. They rise in absolute terms, of course. But they also rise in per-editorial-employee terms, and they tend to rise even in terms of editorial costs per pageview. The lowest costs come where everything is written and published by individual bloggers — think any number of unpaid blogs, or, perhaps, think of the blog network that is Glam Media. The highest costs, meanwhile, come at the large outfits which employ hundreds or even, in some cases, more than a thousand journalists.

Back in Henry Luce’s glory days, big publishers could easily absorb spiraling editorial costs because there was so much money at the end of the rainbow: once you achieved a certain level of circulation, you basically became a license to print money. The online world, by contrast, has no magical rainbows: no matter how big a news site becomes, it will never be so big that advertisers will clamor to appear on it, whatever the cost.

The result is that the journalistic outlets seeing the biggest profits are the ones where costs are kept incredibly low. At one extreme lies the Bleacher Report, which was sold for a reported $180 million; it consists primarily of stories written by unpaid contributors, expertly optimized to maximize pageviews at the expense of accuracy or quality. Or look at Summly, which Yahoo bought for $30 million: it produces news summaries entirely by algorithm, with no editorial costs at all.

And if you look at most new journalistic websites, you’ll see they have a few things in common, many of them very admirable. They move fast, they publish in very high quantity, their staff journalists are extremely prolific, there’s relatively little editing, and they’re happy to rely in large part on reporting done elsewhere. That’s the kind of thing the web does very well — and it’s cheap to produce. Most online journalistic organizations were founded after blogging tools became available online for free around 2002; the few which predate that, like Salon, Slate, and The Street, have tended to struggle with their costs and profitability.

This is not to say that the web doesn’t have wonderful expensive content. Investigative work, longform narrative journalism, beautiful immersive multimedia experiences — we’re seeing it all. But that kind of stuff costs real money: ProPublica, for instance, spends about $10 million per year to support 19 reporters, plus roughly the same number of editors, executives, developers, and support staff. That’s over half a million dollars per working reporter per year, in a place where stars like Jesse Eisinger make more than $200,000 just in salary. That’s not the kind of thing you’ll ever see at, say, Gothamist, where the editor of DCist, who was recently fired for writing a freelance piece for BuzzFeed, was being paid $40,000 per year.

There’s a good reason why Eisinger is being paid so much money at ProPublica: it’s easily what he’s worth, on the open market. His skills and expertise are in high demand among ambitious, high-quality news organizations — and not because he drives millions of pageviews. At the same time, those skills also require diligent editors with many years of experience: investigative reports are, always, an expensive, time-consuming team effort, and an effort which sometimes needs to be aborted after many months and enormous investment.

Here’s a statistic worth dwelling on: “A senior editor at The Washington Post recently told me that he killed an average of three advanced investigations a year, usually over the protests of the reporters, who couldn’t see that they didn’t have the goods.” Outside ProPublica — and even inside it — how many online-only organizations can say the same?

The stat comes from the enormous meta-investigation by NPR’s ombudsman into an investigative piece about Native American adoptions. The amount of time, effort and money that NPR invested both into the original report and then into the ombudsman’s report is a good indication of just how expensive journalism becomes, when it takes itself seriously and has the highest ambitions. When Jeff Bezos bought the Washington Post, he bought an organization which spikes three advanced investigations per year. That’s not efficient, or cost-effective, but, whether he knows it or not, it’s part of the reason why he liked the Post enough to buy it.

When I say that “greatness emerges mysteriously from the slack in the system”, this part of what I’m talking about — a system where expensive projects regularly get the green light, even if they’re not shoot-the-moon ambitious. The lower you set the bar, the more failures you get — but also, the more serendipitous successes you find.

Last month, for instance, the New York Times published Kate Taylor’s story about sex on campus — an article which was met with much derision in the blogosphere, and which seemed to add little to what the NYT had already published on the subject. This article, like its predecessor, appeared in the Styles section of the newspaper, and the “Fashion & Style” section of the website. These are sections which exist only because of advertiser demand, and are not taken particularly seriously within the newsroom. And yet, it turns out, Taylor worked on the piece exclusively for five full months from September through January — and then “on and off” between February and July. At the NYT, even the Styles section is willing to invest what must have been close to an entire person-year, once you include the time of the other people who worked on the piece, into a single 4,800-word article. Whatever you think about Taylor’s piece, that speaks volumes about the internal culture of the NYT, and the costs involved in producing it.

In her open letter to Jeff Bezos, Kara Swisher applauds the fact that the Post‘s new owner has “the gazillions of dollars needed to pull the Post through to the other side and allow it to maintain its top-notch standards in a world still unwilling to pay for some of those standards and the fine journalism that results.” The alternative can be seen at Forbes, where Lewis DVorkin, who revels in the title of “Chief Product Officer, Forbes Media”, recently announced that he had reached a big milestone — 50 million unique visitors in one month. This was reached by using a small number of editors to oversee a network of 1,100 contributors, only 25 of whom (2.3%) made more than $35,000, and only two of whom (0.2%) made more than $100,000. That model, he said, needs to “evolve”:

The digital space continues to move fast. Programmatic buying of ads continues to put downward pressure on ad rates. Soaring mobile usage creates its own challenges. Nearly 35% of our audience accessed through smartphones and tablets last month, up from 25% a year earlier and 10% a year before that. Mobile screens don’t produce the same revenue as desktop screens, nor does international traffic. We’ll continue to work with contributors as our partners to adjust the payment model to meet the economics of the marketplace.

Translation: We were paying very little before, and we’ll be paying even less going forwards.

The Forbes model is what happens when you take a legacy media brand and try to make it work in the context of the pitiless economics of the web. That’s clearly not what Bezos is going to want for the Washington Post — if it was, I doubt very much that the Graham family would ever have sold him the newspaper at all. But the alternative, given the size and journalistic importance of the franchise he just bought, is going to be much, much more expensive.

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