In a surprise Monday afternoon announcement, Amazon CEO Jeff Bezos has struck a deal with the Washington Post Company to buy its namesake newspaper for $250 million. Read the release.
The purchase comes just a few days after WaPo's Q2 earnings demonstrated some slight income and revenue gains, though, as usual, that was due to its Kaplan education holdings and not to its weak publishing unit. In selling off the paper to Bezos -- the release makes it clear that it's being sold to the executive as an "individual" and not to Amazon, the company -- WaPo appears to have done better than the New York Times Co., which last week sold the Boston Globe and affiliated properties for $70 million to Red Sox owner John Henry; two decades ago, the NYTCo paid over $1 billion for the New England newspaper.
For all his digital focus, Bezos is leaving the paper's online-only siblings behind as Slate, The Root, WaPo Labs and SocialCode businesses will remain.
Given the small fortune he's spending for the Post, Bezos almost assuredly could have gotten the company's other digital holdings for a relative pittance. That he didn't snap up them up is a reminder that publisher-driven experiments in digital advertising -- at publishers like Gannett, Hearst, and Meredith -- are not necessarily integral to their businesses.
And then there's the larger question, why WaPo? Is it a sentimental move by Bezos to own the paper that still has the halo of "All The President's Men"? Probably not for $250 million. Is it the chance to influence regulation in Post's hometown of Washington DC? Given the money Amazon probably spends on lobbyists, again, not very likely. Is it because Bezos believes that owning a high profile news outlet, albeit an aging one, provides a sense of challenge and the possibility of proving that there's money to be made in producing daily news content in new ways? That seems more like Bezos.
Clearly, reinvention will wait. The initial message Bezos is sending by taking a number of the newspaper's top executives with him is that he is looking for continuity as opposed to a wholesale overhaul. In particular, Katharine Weymouth will remain as CEO and publisher of The Washington Post newspaper under Bezos. Weymouth is the niece of Donald Graham, the CEO and Chairman of the Washington Post Co.
In a statement, Graham, praised Bezos’ "proven technology and business genius, his long-term approach and his personal decency make him a uniquely good new owner for the Post."
Certainly, Bezos' largess can keep the newspaper afloat for the time being. But while digital revenues at the paper and its soon-to-be former related properties have steadily improved in recent years, it's still not enough to offset print losses that have plagued newspapers industrywide for the better part of the past decade.
In its Q2 earnings, combined digital publishing dollars for washingtonpost.com and Slate grew by 15% to $29.8 million. Online display advertising revenue increased 25% and 21% for the second quarter and first six months of 2013, respectively, whole online classified advertising revenue declined 7% for both the second quarter and first six months of 2013. Overall, the newspaper publishing division operating losses widened to $14.8 million in Q2 from a loss of $12.6 million the same period the year before.
Immediate reaction to the purchase was positive, especially considering the dire position of print properties lately. In addition to the poor showing for the Boston Globe, News Corp. earlier this year decided to split the company in two, so that results for the soaring entertainment division would cease to be dragged down by its newspaper holdings, which include The Wall St. Journal, NY Post and British tabloid The Sun.
"Good for the Graham family and best of luck to Bezos," said Peter Horan, president and COO of Answers.com. "He's proven to be one of the great visionaries around content and platforms. He also has demonstrated tremendous personal integrity and talent for brand-building at Amazon. It's hard to imagine a better steward for one of America's most important journalistic institutions. Our great newspapers are typically the product of a profound sense of mission... They have often been bad investments and are terribly hard to run the way that management consultants would prefer, but in the end, we need great newspapers. The Graham family has done an amazing job for the past 80 years. It's hard to imagine anyone better than Bezos to carry it forward."
Time will tell if even an executive as deep-pocketed and inventive Bezos can pull off a turnaround as newspapers run the clock for digital pennies and dimes to become dollars.