Can Bezos add web savvy to Post?

2013-08-07 11:01
(File, AP)

(File, AP)

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San Francisco — CEO Jeff Bezos is revered as one of the brightest minds in corporate America, but even he is still puzzling over how to reverse the financial slide threatening The Washington Post and other major US newspapers.

Nevertheless, Bezos is determined to face the challenge, raising hope that his $250m purchase of The Washington Post announced on Monday will provide the newspaper industry a template for making the leap from the printed page to digital devices.

"The marriage between the newspaper industry and technology has never been consummated, but it could happen at The Washington Post now," said media analyst Ken Doctor of Outsell.

Although Bezos bought The Post with his own money, most experts believe he is likely to tether the newspaper to's products. He might also infuse the newspaper with some of the concepts that helped turn the Seattle company from an online book store into a multi-dimensional business that sells a multitude of merchandise and runs data centres that power other websites around the world.

"Just having his brain in the room will force people to confront digital in a way they haven't before," predicted Jerry Ceppos, a former newspaper editor who is now dean of mass communications at Louisiana State University.

Bezos, 49, made it clear that he has no magic formula for turning The Post around. The newspaper is the anchor of a division that lost $54m at The Washington Post last year while generating revenue of $582m — 39% less than it did in 2005.

Breaking tradition

"There is no map, and charting a path ahead will not be easy," Bezos wrote in a Monday letter sent to Post employees after his surprise acquisition was announced. "We will need to invent, which means we will need to experiment."

According to an Amazon spokesperson, Bezos wasn't available to be interviewed on Tuesday about his plans for the Post.

Amazon's nearly two-decade history under Bezos' leadership suggests the Post is likely to try things that other newspapers steeped in tradition have never dared to attempt.

"Ever since he was a little kid, it got deeply ingrained into Jeff that experimentation is the answer to everything," said Hal Gregerson, who interviewed Bezos for his 2011 book, The Innovator's DNA. ''Exploring the edges is one of Jeff's counter-intuitive skills. If you go back to when he started Amazon, he was paying attention to something out of the corner of his eye and turned it into something that others didn't see."

It's impossible to predict the bright ideas Bezos might explore, partly because reviving the Post would probably take years to pull off. Experts are floating a host of ideas. Bezos could, for instance, deploy the technology that Amazon uses to recommend books, movies and music to consumers to enable the Post to automatically tailor digital news packages to each reader's interests. He might impose more fees to read the Post's content online. At the same time, he might bundle free subscriptions as part of Amazon's Kindle Fire tablet or for consumers who buy Amazon's "Prime" service for free shipping. He could even include special offers in the printed edition for discounted or free deliveries.

The Post and other newspapers might not be around that much longer, unless radical changes are made. Some of the biggest newspapers already have had to seek refuge in bankruptcy court to reshuffle their finances during the past five years and the outlook still looks grim. Based on his recent conversations with publishers, analyst Doctor believes revenue is likely to continue to slip for the next five years, too.

Ad revenues

Newspapers have been suffering because their main source of revenue — advertising sold in their print editions — has been falling sharply during the past eight years as marketers discovered they could target their messages at prospective customers more effectively through Google's search engine, Yahoo, Facebook, Twitter and a variety of other digital outlets.

Most newspapers have intensified their focus on their own digital editions during the past few years, but still haven't been able to overcome this fundamental problem: Digital ads typically sell for 10% to 50% less than print ads.

That gap is the chief reason that the annual print ad revenue at US newspapers has plummeted 60% in just seven years, dropping from $47.4bn in 2005 to $18.9bn last year, according to the Newspaper Association of America. Over the same stretch, the industry's digital ad revenue has climbed from $2bn in 2005 to $3.4bn last year.

The financial hole is so deep that it will be difficult for even a savvy internet executive like Bezos to find a workable solution at The Post, said Christopher Harper, a journalism professor at Temple University.

"It's not really a business deal, it's almost an investment in a nonprofit," Harper said.

It's one Bezos can easily afford to make. The purchase price works out to just 1% of Bezos' estimated $25bn fortune. In the US, the median charitable contribution works out to nearly 5% of annual discretionary income, according to the Chronicle of Philanthropy.

Private ownership

Bezos is also in a better position to absorb ongoing losses at The Washington Post than the newspaper would have been had it remained part of a publicly held company under pressure to deliver better returns for a larger pool of shareholders.

"One of the smartest things is moving toward private ownership," said Ellen Shearer, a journalism professor at Northwestern University. "I think that's what a lot of papers need right now, particularly The Post."

It's likely that some of his ideas will fail, but that probably won't bother Bezos. In his inaugural letter to Amazon shareholders in 1997, Bezos emphasised, "It's all about the long term." He has attached that proclamation to each annual letter he's written since.

Indeed, it took Amazon nearly a decade before it turned its first annual profit. Even now, the company doesn't make as much money as most analysts think it should, partly because Bezos is continually investing in new ideas and equipment that he believes will make the business even more lucrative. After subtracting the $3bn of losses sustained during its early years, Amazon has earned a combined $2bn since its inception. In comparison, Google — a company born four years later than Amazon — is now earning more than $3bn every three months.

The strategy has worked well so far, gracing with a market value of $137bn.

"One thing that Bezos seems to be is patient," said Jeff South, a former newspaper editor and reporter who is now a journalism professor at Virginia Commonwealth University. "He was with Amazon, losing money quarter after quarter. He seemed to say 'we know what we're doing, it's going to take time'. Hopefully, that can transfer to newspapers."

Read more on:    amazon  |  washington post  |  jeff bezos  |  us  |  media

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