Whether for profit, vanity or philanthropy, new media keeps snapping up old.
Jeff Bezos, founder and chief executive officer of Amazon.com Inc. (AMZN), became the latest technology executive to jump into the print media business, announcing yesterday the purchase of the Washington Post for $250 million. Newsweek magazine and the New Republic have gone a similar route in recent years, while technology investors have started publications such as the Bay Citizen and the Texas Tribune.
The track record so far isn’t convincing. Newsweek has foundered under multiple owners and other deals have yet to show returns. Bezos, who over 18 years has built Amazon into the world’s largest Web retailer and provider of cloud servers, is now responsible for finding a working business model for a struggling 136-year-old newspaper.
“He’s somebody who’s incredibly inventive and thinking far into the future,” Amy Webb, CEO of Webbmedia Group LLC, a digital media consultancy in Baltimore, said in an interview. “There’s a very strong bond between the tech community and the media community.”
Bezos, independent of Amazon, is buying the Washington Post as well as other papers from the parent company, including the Express, the Gazette Newspapers and Southern Maryland Newspapers. The Washington Post Co. (WPO), which will be changing its name, is keeping Slate magazine, TheRoot.com, Foreign Policy and other non-newspaper assets including the Kaplan education division.
Making old media work has thus far been a challenge for industry newcomers. Newsweek has had several owners in recent years, including the late Sidney Harman, an entrepreneur in the audio-equipment market, and Barry Diller, the billionaire chairman of IAC/InteractiveCorp. (IACI) Unable to curb losses, Newsweek published its final print issue in December, becoming a digital-only publication, and last week was sold again to IBT Media, owner of the International Business Times.
Facebook Inc. (FB) co-founder Chris Hughes bought a majority stake in the New Republic in March 2012. In January of this year, he announced the redesign of the website and emphasized that the publication “can no longer be just a magazine.” It will also produce live events and focus on social media, as well as mobile and tablet applications.
Bezos is getting something more influential, said John Morton, a former newspaper reporter and president of consulting firm Morton Research Inc. in Jessup, Maryland. Even with a 35 percent drop in newspaper revenue in the past five years, the Post sells almost half a million print editions a day and more than that on Sundays.
“It’s read by everyone in the federal government from the president on down,” said Morton. “It’s really an enormous presence in the Washington market. There aren’t very many newspapers that have that kind of standing.”
Katharine Weymouth, publisher of the Post, is staying on, as are top editors, Bezos said yesterday. Drew Herdener, a spokesman for Bezos, declined to comment beyond the statement.
Technology executives aren’t alone in their bargain hunting. The Boston Globe was purchased last week by John Henry, owner of the Boston Red Sox, from the New York Times Co. for $70 million, a fraction of the $1.1 billion the Times paid for the newspaper in 1993.
Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), the biggest Washington Post shareholder, bought the Roanoke Times in May, adding to its roster of more than 60 publications, which includes the Buffalo News and Richmond Times-Dispatch.
Buffett has said his Omaha, Nebraska-based company can generate a return of at least 10 percent on newspapers after tax by buying at the right price.
For other financiers, journalism is a philanthropic endeavor, with little prospect of making the kind of money they’re used to. Warren Hellman, the private-equity pioneer who died two years ago, provided $5 million in 2009 to start the nonprofit Bay Area News Project after Hearst Corp. threatened to close or sell the San Francisco Chronicle. The project, now called the Bay Citizen, merged last year with the nonprofit Center for Investigative Reporting.
John Thornton, a venture capitalist in Austin, Texas, started the Web-only Texas Tribune in 2009 with more than $1 million of his own money. Thornton said the publication now operates on a budget of over $4.5 million a year, with two-thirds of its revenue coming from sponsorships, events and content, and the rest from philanthropy.
While newspapers can still generate cash, there are many more profitable businesses and Bezos knows that as well as anyone, Thornton said. Bezos’s net worth is close to $28 billion, according to the Bloomberg Billionaires Index.
“If his main objective was to get richer, he’d probably buy Amazon stock,” Thornton, a general partner at Austin Ventures, said in an interview. “It’s a recognition on Bezos’s part that this is worthy of his public service in a fairly serious way.”
Washington Post Co. shares climbed 4.3 percent to $593 at the close in New York, the highest level since September 2008. The stock has gained 62 percent this year.
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