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2013-08-15 09:33:19
Tycoons with a keen eye for a bargain are buying up print newspapers
MAYBE Jeff Bezos believes in karma. Bibliophiles and authors have cursed
Amazon, the online retailer he founded, for undermining the books business. On
August 5th, however, Mr Bezos recast himself as old media s saviour, dipping
into his own pockets to buy the Washington Post and the other local papers in
its stable, for $250m.
The Graham family has controlled the Post since 1933, when Eugene Meyer, a Wall
Street financier, bought it out of bankruptcy for $825,000 (about $15m in today
s money). But in recent years Donald Graham, a grandson of Meyer, and
Katharine Weymouth, Mr Graham s niece, have struggled to halt falls in revenues
and print circulation. Last year the Post and the group s other papers lost
$54m. When the family discussed selling them their first call was to Warren
Buffett, whose Berkshire Hathaway conglomerate is a long-term shareholder in
the Washington Post Company. You can intuit he didn t think it was a wretched
idea, says Mr Graham.
The company will keep its other businesses, including Kaplan, an education
firm: these will no longer have the newspapers soaking up their profits. As
well as safeguarding their family fortune and protecting the interests of the
outsiders who own 15% of their firm, the Grahams may also have given the Post a
decent shot at long-term survival by selling it to Mr Bezos. He is one of
Silicon Valley s most admired entrepreneurs and a man with deep enough pockets
to bear continued losses while the Post experiments with new features and
business models.
Mr Bezos s reputation should help the Post attract the managers and technology
specialists it will need to help turn it around, and to retain its star
journalists. His own expertise will also be handy. Clearly, he takes a strong
interest in how and what people read. Amazon popularised e-books with its
Kindle, an electronic reading device, and Mr Bezos himself has already pumped
money into Business Insider, a news website.
It is fitting that Mr Bezos, who has made a fortune by catering to consumers,
is buying into the newspaper business now. Papers are becoming more focused on
their readers rather than advertisers, which have historically accounted for
around 80% of their revenue. Last year American newspapers got around 27% of
their sales on average from readers; some, like the New York Times, now make
the majority of their money from them. In pursuit of this trend, Mr Bezos may
push the Post to have more of a direct relationship with readers, through
personalised content and cleverly targeted special offers (think of Amazon s
recommended purchases ).
The sale of the Post is the latest in a string of recent deals in which
businessmen from non-media industries have snapped up print newspapers. Two
days before the Post announcement, the New York Times Company said it would
sell the Boston Globe to John Henry, the owner of the Boston Red Sox baseball
team and Liverpool Football Club. Mr Henry is paying $70m, leaving the New York
Times Company with a huge loss on the $1.1 billion it paid for the Boston paper
in 1993.
Mr Buffett s company has recently bought dozens of American local newspapers.
Charles Koch, one of two billionaire brothers who own Koch Industries, a
sprawling industrial group, has also expressed an interest in buying a paper as
long as it could stand on its own and have good economics . There has been
speculation that he may buy the Los Angeles Times and Chicago Tribune, whose
parent company was recently spun off from the larger media group that owned it.
Broadsheets will always attract those thirsting for political influence, or the
prestige of owning their hometown paper. But some buyers may reckon they have
now become so cheap that they are once again worthwhile investments. Ken
Doctor, an analyst, estimates that newspapers are worth a tenth of what they
were ten years ago. If bought along with the property they occupy (as was the
case with Mr Buffett s papers but not with Mr Bezos s purchase of the Post),
that provides some degree of hedge against a further decline in the newspaper
business itself.
Newspapers economics are also looking less dire. Last year their circulation
revenue in America was up by 5%. It was the first time this had grown since
2003. Overall revenues fell but by just 2%; they may soon level out. It is a
better environment for buyers than it was even a year ago, says Gordon Crovitz
of Press+, a company that erects paywalls for newspapers. After years of
selling cheap goods to others Mr Bezos may have found his own bargain.