Can Bezos Save the Washington Post From Print's Dismal Economics?

Amazon CEO Jeff Bezos unveils new Kindle reading devices in Santa Monica, California. Photograph by David McNew/Getty Images Close

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Amazon CEO Jeff Bezos unveils new Kindle reading devices in Santa Monica, California. Photograph by David McNew/Getty Images

It’s certainly been a news-filled week for journalists: Newsweek, my former employer, was sold to two guys you've never heard of for an undisclosed sum; the New York Times sold the Boston Globe to Red Sox owner John Henry at a billion-dollar loss; and just an hour ago, it was announced that Jeff Bezos, the billionaire founder of Amazon.com, is buying the Washington Post for $250 million.

Amazon CEO Jeff Bezos unveils new Kindle reading devices in Santa Monica, California. Photograph by David McNew/Getty Images

Amazon CEO Jeff Bezos unveils new Kindle reading devices in Santa Monica, California. Photograph by David McNew/Getty Images

Should we be worried that soon billionaires will own all our major news outlets?

It may come to that, but I don’t find that idea worrisome. (And yes, I know whose name is on our website.) Or at least, I don’t find it as worrisome as the likely alternative, because it’s looking less likely that most print media companies are going to survive the next decade or so as profit-making ventures.

Observe this incredibly depressing graph from Pew:

That trend has only contined. Here’s print magazine ad pages for the first half of 2013, compared with the same period last year, also from Pew:

Traditional media is what’s known as a “two-sided market”: you have two customers for your product. Think of a shopping mall which needs to draw in both consumers, and vendors, or a job search site, which needs both employers and job-seekers. Newspapers and magazines had two products: journalism, which they sold to readers; and readers, whom they sold to advertisers. Subscription fees in most cases don’t even cover the cost of printing the thing and delivering it to your door, or a newsstand. The advertisers paid for all the journalism.

When the Internet came along, there was a bunch of idle chatter about how blogs would do away with old media. That fundamentally misunderstood the problem that old media companies faced. (In fairness, the old media companies misunderstood it too.) The big threat that old media faced from web journalism was mostly that it would make old media reporters work harder and faster. That was annoying, but not actually very threatening. No, the real problem for media came from an entirely different quarter: The web destroyed print advertising. Old media right now is like a camel, living off stored fat. But that can’t go on forever, and it won’t.

The new line on old media is that they brought this upon themselves by reacting to their advertising declines in exactly the wrong way -- cutting staff, which generally means cutting quality and depth of reporting. As product quality declined, they had fewer readers to sell to advertisers. That’s a bit of the problem, but in the end it’s irrelevant, because there’s just not a great business case for print advertising. Classifieds, which used to be something like half of ad revenues, have been just destroyed by Craigslist and Monster.com. In 1986, a classified ad was the best way to find a job or a used car. Now there are loads of better ways to do those things, and mostly, people do.

Full-page ads are slowly following suit, and unfortunately, for good reason. Macy’s doesn’t need an ad to tell New Yorkers there’s a sale on; they have a website and a vast email list of most of the people who have ever visited their stores. Car companies have their own websites where they can not only show you a picture of the car, but let you play around with option packages to see exactly how it would look and what it would cost. And those brand building ads? The ones where Chevron tells you what a bunch of swell people work at Chevron doing some awfully keen stuff to make your life even peachier? They can deliver their message cheaper and more effectively over YouTube, Facebook and Twitter.

At one point, we thought web advertising would eventually make up for this, but the consensus in the industry now is that digital advertising will never get there. For one thing, there’s just too much inventory. Paper is expensive, but pixels are cheap, and every high school freshman with a webpage is selling ad space. That drives down the revenue for the sellers of ad space. It’s driven down still further by the fact that people rarely notice digital advertising, and if they do, it’s usually because you’ve done something to make them actively hate it. Worse still, there are readily available browser plug-ins that will let people block the ads. For all of these reasons, advertisers simply won't pay for digital ads what they did for print, no matter how lovingly the salesman explains the possibilities for targeting a specific and highly desirable demographic.

The only saving grace of digital is that it’s much cheaper to deliver. Grinding up trees into woody pulp, drying the pulp in thin sheets, printing news stories on the sheets and then bundling up all the sheets and delivering them to someone’s house is a very expensive proposition. If digital properties can manage a reasonable combination of subscription and ad revenue, that lower cost may keep them viable in the new Internet era.

But that’s a pretty big “if.” The New York Times is widely believed to have the most successful paywall in the business, with three-quarters of a million paid digital subscribers. But they’re through the early rapid-growth phase of digital subscriber acquisition, and the cost of getting new subscribers is starting to rise, while ad revenue is still declining. It’s going to take a good bit of luck for all those numbers to add up to the New York Times continuing in its current incarnation, with a big, expensive newsroom and lots of bureaus. And the New York Times is doing the best of all the (non-financial) papers.

Given all this grim arithmetic, it’s going to be hard to keep up the kind of high-quality journalism that these outlets put out -- and please save your snark about liberal media bias or Style-section trend stories, because whatever you think of various sections, these outlets put enormous resources into gathering and reporting news that you otherwise wouldn’t know about. You may not like individual stories, but you’d probably like the world even less if there were no local papers to go poking around City Hall, or national papers to ask Congresscritters what they were getting up to.

For struggling outlets that provide a valuable public service, billionaires are the answer to a citizen’s prayer. They don’t need the newsroom to deliver a massive profit every quarter in order to keep paying everyone’s trust fund. They don’t need any profit at all.

Is there a risk that the stories will start to match the interests of their billionaires owners? Of course. But that has ever been the case -- the Times and the Post are owned by the Sulzbergers and the Grahams, not the Spocks. And at this point, the alternative to “local paper as pet project of billionaire” is probably no local paper at all.

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