Innovator meets icon: Jeff Bezos buys The Washington Post
The Amazon chief executive spends his own money to buy one of the nation’s most prestigious news publications.
Seattle Times business reporter
Amazon.com Chief Executive Jeff Bezos’ acquisition of The Washington Post for $250 million in cash gives the Seattle billionaire a marquee media outlet and an opportunity to bring his Internet innovation to an industry that has struggled to adapt to the digital world.
The surprising acquisition, announced Monday, will be Bezos’ personally, and includes no money from Amazon.
Bezos will not buy the publicly traded Washington Post Co. He will take over the company’s flagship newspaper, putting it in a privately held entity. The remainder of The Post Co., which will retain several other assets, including Kaplan test-preparation company, will remain a publicly traded company.
The deal is expected to close in 60 days.
Through an Amazon spokesman, Bezos declined an interview request. But he made clear in a letter to The Post staff that he intends to bring change to the 136-year-old paper, one legendary for its pathbreaking coverage of Watergate. Bezos wrote that the power of the Web to disrupt the news media makes it inevitable.
“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 newsgathering costs,” Bezos wrote. “There is no map, and charting a path ahead will not be easy.”
No map, perhaps, but Bezos’ history suggests that he won’t let the paper languish. He said as much in his note to The Post’s staff.
“We will need to invent, which means we will need to experiment,” Bezos said. “Our touchstone will be readers, understanding what they care about — government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports — and working backwards from there.”
There’s more than a bit of Amazon’s guiding philosophy in there. The company has disrupted business models in publishing, giving authors tools, for example, to bypass publishers and reach readers directly. The strategy of “working backwards” from the customer to the product or service is the same mantra he uses to guide Amazon.
That said, Bezos’ career has been defined by disrupting old industries, not embracing struggling businesses. His company didn’t acquire Barnes & Noble or another bookstore at its dawn, but rather started a book-selling business of its own. The company could have bought his way into streaming media, grocery delivery and Web storage and services. Instead, Amazon built Amazon Prime Instant Video, Amazon Fresh, Amazon Web Services as well as a host of other businesses from scratch.
Bezos, who has no journalism background, has always been a reticent public figure. He recognized that his ownership of one of the most storied newspapers in American journalism would no doubt provoke apprehension among the staff.
“[L]et me start with something critical,” Bezos wrote. “The values of The Post do not need changing. The paper’s duty will remain to its readers and not to the private interests of its owners. We will continue to follow the truth wherever it leads, and we’ll work hard not to make mistakes.”
While Bezos didn’t attend a staff meeting at The Post announcing the deal, he told employees in his memo that he would not be leading the newspaper on a day-to-day basis. He noted that the paper “already has an excellent leadership team that knows much more about the news business than I do.” And he said those leaders have agreed to continue with the paper.
For its part, the family that has controlled The Post acknowledged the vexing problems that face newspaper owners, recognizing Bezos’ track record of managing Web disruption as well as his deep pockets.
“As the newspaper business continued to bring up questions to which we have no answers, Katharine [Post Publisher and Chief Executive Katharine Weymouth] and I began to ask ourselves if our small public company was still the best home for the newspaper,” Washington Post Co. Chairman Don E. Graham told the staff in announcing the deal.
Seven years of revenue decline led to cost cutting that Graham said needed to stop. In the first six months of 2013, newspaper-division revenue at The Washington Post Co. fell 2 percent to $265.7 million. What’s more, print advertising in the first half slid 6 percent to $103.1 million. Operating losses widened 48 percent to $49.3 million.
Graham told the staff that Bezos’ ownership gives the media organization the opportunity to not just survive, but succeed.
In a note to readers, Weymouth expressed something approaching surprise at the deal.
“This is a day that my family and I never expected to come,” Weymouth wrote.
She noted that the board agreed to the sale with “a heavy heart but with an absolute conviction that Mr. Bezos’ ownership represents a unique and extraordinary opportunity.”
Bezos didn’t commit publicly to investing in the paper beyond the purchase price. But Weymouth made clear that the Graham family, which has long managed the company, expects Bezos to support efforts to improve The Post.
“Mr. Bezos knows as well as anyone the opportunities that come with revolutionary technology when we understand how to make the most of it,” wrote Weymouth, who will continue as publisher and chief executive. “Under his ownership and with his management savvy, we will be able to accelerate the pace and quality of innovation.”
The acquisition is the second in as many weeks of a major metropolitan newspaper by a corporate titan. Last week, John W. Henry, principal owner of the Boston Red Sox, agreed to buy the New England Media Group, which includes The Boston Globe, for $70 million from The New York Times Co.
In addition to buying The Post, Bezos is acquiring a handful of smaller papers owned by The Washington Post Co., including the Southern Maryland Newspapers, the Fairfax County Times and El Tiempo Latino. He will not pick up Slate magazine, TheRoot.com or Foreign Policy. Those will remain with The Washington Post Co., as well as Kaplan, the company’s broadcasting unit and some of its real-estate assets, such as The Post’s headquarters building in downtown Washington, D.C. The Post Co. will change its name after the deal closes.
Bezos’ motivations for owning The Post remain murky. He never addressed the issue in his note to The Post staff.
Like Henry at The Boston Globe, Bezos has the financial wherewithal to “invest additional money and forgo profits,” a luxury publicly traded companies don’t have, said Rick Edmonds, media-business analyst for The Poynter Institute, a journalism think tank in St. Petersburg, Fla.
“I think he would be very happy to save a great journalism institution and keep it going,” Edmonds said. “I think that’s probably at the heart of it.”
There’s little doubt that owning The Post also boosts Bezos’ power in the nation’s capital. Bezos is largely quiet politically, having contributed to handful of candidates in both parties over the years. He and his wife, MacKenzie, gave $2.5 million to defend Washington state’s gay-marriage law.
Amazon, though, has become a greater lobbying force in Washington, focusing on issues such as an Internet sales tax.
Now, Bezos “will own the most powerful D.C.-centered news institution,” said Ken Doctor, a media analyst who runs the Newsonomics.com website. “And Bezos is not afraid to throw around his influence, business or otherwise.”