Jeff Bezos is clearly not your typical guy. Valedictorian of his high school class, summa cum laude in electrical engineering from Princeton, ex-hedge fund manager. Starts online bookstore, but then grows it into the largest online retailer. Takes Amazon.com public in 1995, knowing it will not be profitable for many more years. Somehow convinces investors to be patient with the company until it turns a profit in 2001, six years later.
Why is Bezos buying a newspaper? At first glance, this does not make much sense. Why would Bezos, founder of Amazon, one of the online titans responsible for disrupting (some argue destroying) print media do this? What is the king of eBooks doing spending $250 million of his own money for a newspaper on the other side of the country?
A few reasons come to mind:
1. Investment. He sees it as a good value. Newspaper revenue declines are slowing. (Things are getting worse, less slowly) Far from a rosy outlook, but Berkshire Hathaway recently invested $140 million+ in newspapers. Also, the owner of the Red Sox is buying the Boston Globe for $70 million, which is only 4% of what it sold for in 1993.
2. Journalism. Bezos likes to read. PowerPoint is essentially banned at Amazon. Senior executive meetings start with quiet time to read 5-6 pages of printed memos. In an interview with Fortune, you learn that this can last up to 30 minutes.
Bezos says the act of communal reading guarantees the group’s undivided attention. Writing a memo is an even more important skill to master. “Full sentences are harder to write,” he says. “They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking.”
Bezos wrote a letter to the Washington Post employees here and you can tell that he has an intellectual interest for journalism, and respect for rigor of the Washington Post.
So, let me start with something critical. 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. When we do, we will own up to them quickly and completely. Journalism plays a critical role in a free society, and The Washington Post — as the hometown paper of the capital city of the United States — is especially important.
Great reply from one of the Pulitzer Prize-winning journalists to Jeff Bezos here.
3. Vanity. You cannot underestimate people’s ego. Wealthy people have all kinds of pet projects, and he is no exception. Let’s remember that Bezos has all kinds of interests including a space travel company called Blue Origin.
The Washington Post (WPO) is losing about $50 million a year, and while he will want to stem those losses, he probably does not have a concrete plan yet. The investment bankers – Allen & Co – just started shopping WPO to prospective buyers this year. He is buying it for $250 million which is approximately 1% of his net worth.
4. Business model. Amazon has disrupted more than a dozen industries. You can see the breadth of their services by just scrolling to the bottom of www.amazon.com and looking at their websites. Everything from Zappos, to IMDB, to Cloud services.Bezos is a strategic thinker, a patient investor, and a calculated risk taker. Think about Amazon’s decision to manufacture the kindle and price it with a $5 loss with the intention to fend off the competition and sell eBooks.
Since he will be taking WPO private, it will allow some breathing room for the management and editorial team to make good, longer-term decisions. Make the right investments, and make the tough decisions. In an interview with Forbes, Bezos remarked that Wall Street is too short-sighted, only looking for increasing earnings without a vision for the long-game. What he said bodes well for how he will likely treat “WaPo”:
“The three big ideas at Amazon are long-term thinking, customer obsession, and willingness to invent.”
5. Tie in with Amazon. With so many content distributors (Comcast, Netflix, HBO) getting into the content business, it makes sense that Amazon would consider ways to differentiate itself. How to stand out from Apple, YouTube, and Netflix? Giving kindle readers exclusive access to the Washington Post would be added-value.
6. Lobby Power. The Washington Post is the newspaper of the capitol. The main legislative item that might affect Amazon.com is the mandatory levying of state taxes by retailers (on behalf of the consumer). Basically, Amazon does not collect state taxes on sales in most states. A bit of conspiracy theory, but the WaPo wrote about it today here. Glad to see they are keeping their feisty spirit, in spite of the ownership change.
Surprise is good, looks like leadership. The fact that this surprised me – so few surprises now a days, right? – gives me the hint that this could be a leadership moment. Completely unexpected. Kind of brave. Kind of cool.