Amazon.com Inc (AMZN.O) founder Jeff Bezos will buy the Washington Post newspaper for $250 million in a surprise deal that ends the Graham family’s 80-year ownership and hands one of the country’s most influential publications to the tech entrepreneur.
Bezos, hailed by many as a visionary who helped transform Internet retail, called his acquisition a personal endeavor and reassured Post employees and readers he will preserve the paper’s journalistic tradition, while driving innovation.
The acquisition, the latest in a flurry of recent media deals including the New York Times Co’s (NYT.N) sale of the Boston Globe for $70 million, is a further indication of the unprecedented challenges newspapers face as advertising revenue and readership decline.
Shares of the Washington Post Co (WPO.N) climbed more than 5 percent to $599.85 after hours – their highest level in almost five years.
“I understand the critical role the Post plays in Washington, DC and our nation, and the Post’s values will not change,” Bezos said in a letter addressed to employees and published on the newspaper’s website.
“There will of course be change at the Post over the coming years. That’s essential and would have happened with or without new ownership,” he added. “We will need to invent, which means we will need to experiment.”
Bezos, who has built Seattle-based Amazon.com into a shopping and online technology force over the last two decades, made a small foray into media earlier this year with a small investment in Internet news site Business Insider.
The Washington Post, home to journalists as the “Watergate” team of Bob Woodward and Carl Bernstein, is among the rapidly dwindling number of U.S. newspapers with a profitable business – a function of the rapid migration of readers to Internet and other digital media sources.
Warren Buffett owns a slice of its parent company, Washington Post Co, whose operating income has plummeted almost 40 percent since 2008, to $146.2 million in 2012.
“I doubt it is a financially oriented investment for him as much as a chance to play a more important role as a steward of an important public trust/asset,” said James Barksdale, President of Atlanta investment firm Equity Investment Corp.
Barksdale said his firm did not own Washington Post shares because he thought they traded higher than he thought justified, “probably due to the Buffett halo,” he added.
Bezos will buy the Post along with other newspaper assets from the Washington Post Co. Amazon.com is to be kept separate from the Post deal, according to the Washington Post.
The deal, which caught many industry watchers by surprise, was arranged in private by Allen & Co. It comes on the heels of near-unprecedented media deal activity this year, with the Globe transaction announced just over the weekend, the Tribune Co hiving off its publishing and broadcasting businesses and the Los Angeles Times reportedly up for sale. …
Bezos is the world’s 19th richest person with a fortune of $25.2 billion, according to Forbes magazine. His other major personal project is called Blue Origin, which aims to be one of the first non-government funded ventures to send people and cargo into space, potentially winning lucrative contracts that were once fulfilled by NASA.
Bezos has already spent millions of dollars on this project, with millions more in the pipeline.
He did not elaborate in great detail on his motivations behind his latest deal on Monday. But in 2009, when asked at the debut of the Kindle 2 whether the electronic-reader could help print media, Bezos said he thought there were “genuine opportunities” to save journalism.
It comes as many newspapers are struggling to survive. Print newspaper ad revenues fell 55% between 2007 and 2012, according to the Newspaper Association of America, as advertisers and readers have defected to the Web. Some newspapers have been forced to slash costs and in some cases file for bankruptcy. Just three days ago the New York Times Co. sold the Boston Globe for $70 million, having paid $1.1 billion for it in 1993.
I was interested to watch a recent interview of Jeff Bezos, who similarly bought the Washington Post in 2013. In the course of the discussion, Bezos articulated the thought process that motivated his purchasing decision, a decision he broke into a two-part framework. …
Bezos drew his optimism from one simple fact. The internet destroyed most advantages newspapers had built. But it did offer “one gift: free global distribution.”
With Bezos’s help, The Post developed a new strategy to “take advantage of that gift.” They implemented a new business model. The old model relied on generating a high revenue per reader. Their new focus would forego revenue per reader in favor of acquiring more readers. In other words, a volume play.
How is the Washington Post doing in 2017? Not bad, it seems:
The Washington Post, as a private company, does not publish its financial results, but the company’s chief revenue officer said in a recent New York Times article that 2017 would be “our third straight year of double-digit revenue growth.”