Bezos Buys Washington Post: Bloomberg West (08/05)

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Aug. 5 (Bloomberg) -- On today's "Bloomberg West" the focus is on innovation, technology, media and the future of business. Hosted by Emily Chang with Editor-at-Large Cory Johnson and Senior Correspondent Jon Erlichman from Bloomberg's San Francisco studio, it showcases the personalities, companies and trends that are transforming the global economy. (Source: Bloomberg)

? live from pier three in san francisco, welcome to the late edition of "bloomberg west," following the technology companies reshaping our world.

I'm cory johnson in for emily chang focusing on the future of his nest.

Let's get straight to the rundown.

Amazon founder jeff agreeing to buy "the washington post" and a struggling industry but he says the value will not change.

Apple creating the tablet market when they built the first ipad but the share of that market is dropping fast.

Rivals like samsung and amazon gaining ground.

With cbs blacked out on time warner cable, the cable system proposes letting viewers decide how much they are worth by offering the network a la carte.

Jeff bezos jumping into the struggling newspaper business to buy one of the nation's most famous newspapers.

The tech billionaire is buying the washington post and the rest of its assets for $250 million.

He is making this personally and not as a part of amazon.

"our duty to the readers will be part of the post." for more on this deal, let's bring in admin leave from new york.

-- bring in edmond lee.

We all knew the washington post was not doing so well financially.

Nobody thought someone like bezos would come in and to be the white knight.

Not too long ago, he did make a small investment in "business insider," a business blog.

It's a lot more money.

Given his own personal wealth, it is still a but it's still a lot of money.

I don't know if you saw my e- mail but it went through the annual reports for the washington post and this is a money-losing industry.

This presumably leaves all the debt behind but he has the right to lose $50 million per year.

It's a huge privilege.

The washington post has had operating losses the last two years or so.

It's a nice chunk of change for "the washington post" shareholders but you have to wonder how this deal went down, who talk to first.

Bezos is probably one of the best owners you can get.

He is famously not shy about worrying about profits.

He does not worry about a media profits.

They do not have many at all.

What is the warren buffett role in all of this?

He is the single biggest outsider on the board.

He has ties to silicon valley.

He knows everybody.

He looks up to buffett.

He sees himself as an son.

Buffett advised him on how to sell it or if you should given the fact it was losing money year-over-year, quarter to quarter.

Bezos look like one of the best possible buyer is given that he does not care about a media profits would seems to be a win for both the board and shareholders.

A foreign buffett did not buy it it's because he did not want to.

-- if warrenn buffett didn't buy it.

Edmund lee, thanks.

They are also making a big transition.

Amazon has beefed up its video offerings with prime.

Last week, they said they would be producing islet episodes for five kids tv shows in the group -- and the growth for their video business has been big.

It's great to have you on the show today.

Who knew the timing would be so interesting?

Certainly a coincidence.

You know jeff bezos as well as a lot of people.

I wonder if he has shown a long- term interest in old world media.

This is his personal investment, just to make it clear.

This is not amazon.

It has always been very interested and supportive of people who create things including books, tv, video, so forth.

He has been trying to reach an audience without a lot of intermediaries.

They have complained about but authors have not complained.

Is there something about him that likes this old world media thing?

It is not just a washington, d.c., institution but international with some of the finest journalists ever.

He likes the written word.

For example, he likes the longform book.

Even though you have a lot of short-term snippets now even in publishing, he's a big believer in the power of language and words.

I've heard the stories about the way they conduct meetings at amazon.

Senior executives will walk into a room with a long article or report.

Not powerpoint slides.

Is it a similar thing for the spurs?

-- board of directors?

A five or six page single spacing memo.

Powerpoint are not favored.

Sometimes you would have study hall.

He had not gotten the memo ahead of time, you would have 15 or 20 minutes to read the memo so everyone is up to date.

I suspect a lot of people at "the washington post" and the readers will worry one some billionaire comes in that they might have ideas, political or otherwise.

Is there any notion jeff thinks in that way?

Is valuable that someone is thinking long-term and it does not require quarterly earnings.

I think he is going to apply some of the same principles i think he does in his business.

You start with the customer and you try to satisfy the customers needs.

In this case, readers and others who rely on the news a for four things and the other is to bring in some innovation.

Everyone recognizes that newspapers are challenged and more innovation is needed.

We don't know what it will involve.

I don't think it's going to change the fundamental role of a newspaper.

A lot of people, not withstanding the short forms, feel there is a big need for newspapers and there is a danger that longform, investigative journalism that "the washington post" is famous for will disappear.

I want to take this back a little bit.

You found amazon and its very earliest days.

Many look at the company then and jeff a's is then, i can't think you would predict this.

What do these kind of companies look like at their earliest stages?

He's a very smart fellow so you're immediately impressed with that it is like his genetic system is that he thinks about the customer.

He believes that if he satisfies the customer it will a off for the company and the long-term.

Decisions are made at amazon based on how we think it will affect the customers.

Let's give priority to projects that will make the customers life's better.

It is long-term as opposed to a short term view.

Is this something typical for seattle?

You are focused in seattle and you came halfway down to us.

When i think of companies up there, i do not think of microsoft as customer focused but costco, starbucks.

What is it about seattle that is so customer focused?

You have these innovative interests in chicago -- in seattle but these customer- focused business have been that way, nordstrom and costco, have an very slow to innovate in technology.

They are now starting to catch up.

There is this tradition of directly dealing with the customer.

Costco gets criticism because they will not raise their prices and it hurts earnings.

They pay more on benefits so that hurts earnings.

Nordstrom's has been famous for customer service for years.

I do not think just picked that up but it was more of a coincidence.

When i first met with him, one was the internet and innovation and the second was satisfying customers.

Thinking about amazon in its earliest days and its focus on technology, on the first netscape browser and so on, and now the growth of amazon web services, and i expect we will start to see these real numbers and i wonder if we're going to look at amazon 10 years from now as an i.t. company and not just a retailer.

Is that a notion within amazon, technology and not just customer focus?

Clearly it's both.

He goes back to the beginning.

Even today, amazon web services, they started with polling my customers needs.

They started with smaller customers and are working their way up to enterprise.

Looking forward to the future, they will apply the same kind of principles.

There is no question that amazon web services will be large.

They have a competitors, and good ones.

There is a huge emphasis also on the consumer-retail business that i think would continue.

Who knew that it would take us all the way to d.c. today?

Thank you very much.

Are you waiting for the next ipad?

You may not be alone.

That is coming up next.

? ? this is "bloomberg west." i'm cory johnson.

Tablet sales down but that could be because apple has not released a new ipad.

It is down from 19.5 million the prior quarter.

Are consumers playing the waiting game?

Our next guest manages global shipments and joins me here in san francisco.

These are second-quarter numbers.

How important is the second quarter to the tablet market?

Traditionally we have seen a big bump that it was driven, more often than not, buy a new release from apple.

That did not happen this quarter.

Numbers are down, as we expected.

The totals are close to what we predicted that the mix was different.

That sort of the headline.

Apple always gaining share.

It did not happen this quarter.

Who was?

Android operating system gaining share against ios.

From a vendor perspective, samsung and a few others went up . let's break it down.

The android could be any flavor and we are just talking about amazon.

How important is the candle -- kindle?

The numbers weren't great for this quarter.

Amazon typically launches a new product in time for the holiday season.

Apple is actually following suit now and launching in the fourth quarter so we will see new amazon rodda and the fourth quarter as well as our old.

We think a lot of the shipments have moved to the fourth quarter.

Is amazon still the dominant maker of android tablets?

In the u.s., they have a huge market share.

Worldwide, they did not make the top five this quarter.

Is that the first time?

They typically have a big fourth quarter and slower during the middle part of the year.

We look at the fourth quarter number from last year, i'm sure they were in the top five.

Not terribly shocking they were not there, but i would ask xm to reassert themselves later in the year.

I just saw asus.

I do not think of them much because i do not follow the chinese market.

Are they seeing success in the tablet market because of china?

They have a partnership with google in the nexus 7. that has been a popular device.


It's relative.

It is not ipad-like successful but it is one of the best- performing android tablets on the market.

Maybe it is because they break up the numbers, but we can say what they are like in terms of trailing revenue.

We have $39 billion in trailing revenue, really big numbers and units shipped, percentage gain, although it slows down without new devices, but we still have the percentage gains and it's an important part of the overall business.

What you'll see is companies like lenovo and asus who are big pc vendors.

The pc market has been having a tough time but some of these guys are starting to turn around a little bit having a little bit more success in the pc loss and they're starting to get a little bit of traction with windows 8. we're looking at a one quarter snapshot which you say is skewed.

Do we know about those things?

When they are touting statistics, they look at usage.


We have some data on that.

Ipad tablet users tended to be more engaged overall man android.

They are on the web more.

They buy more applications.

A lot of people are buying cheap android tablets and maybe all they do is check their e-mail or browse the web on occasion and they don't download a lot of apps.

There's a vast spectrum of users.

They are heavy users, and some are not.

Maybe they're not as valuable to the company.

Rom m ainelli, research director, good stuff.

"and them achieve -- "an empty gesture" what sbcscbs is calling time warner's deal to pay al la carte.

That's next.

? on "bloomberg west." ? ? i'm cory johnson.

This is "bloomberg west"o on bloomberg television, streaming on your ipad, and on

Today, the fight got a little more fierce.

Time warner says bureau should choose how much they pay for cbs proposing to make it all apart -- a la carte.

Today, cbs called it "a sham.

" as said that they are not -- they said that they are not negotiating in good faith.

For the latest, i want to bring in jon erlichman who has been following negotiations closely.

What's the latest?

The willingness to put forward a proposal for an a la carte version of cbs is opening a very interesting door.

For cbs to react the way it did is not a surprise.

For the consumer to this and decide if they want it or not, if you think about the potential for a la carte for cable and content companies it's huge.

You see pricing on everything in a grocery store and you can make the decision on buying something across the street if you want.

The mystery of the cable world, not knowing the pricing of every channel, is dangerous for every side.

There is a sports channel that costs five dollars, six dollars per user per month, if you are the user to find out that on your run you might not be happy but you not be happy if the cable, he is going to give you fewer channels instead of 200 and still get you up to whatever it is they charge over the course of the month, $80, to protect their margins.

I think just to start this conversation is a fascinating development.

I was watching golf this weekend in tiger woods holed up ratings 138% year-over-year for the bridgestone tournament.

I wonder how sports will drive resolving this whole thing?

Cbs has a strong argument in saying that in prime time, there are a lot of people watching the shows, not just sporting events, compared to what the cable providers have been willing to pay.

On top of that and to your point, cbs pays a lot of money for sports even though it's not seen as a sports player like a cbn -- espn or fox sports.

Maybe this is the line in the sand.

Interesting stuff.

Jon erlichman.

First "the boston globe." then ""the washington post"." that and more when "request" returns.

? you are watching "bloomberg west." on cory johnson and for emily chang.

Activist investor carl icahn got another 4 million additional shares of dell and continues the fight michael dell for control of the company.

He filed a brief in a delaware court trying to expedite his lawsuit against dell and the board trying to stop them from changing the rules on who can vote in the buyout.

Last week, they agreed to change the rules as they increase their offer.

All in missions from one of the warehouses -- all of the emissions.

This is a government investigation.

Ibtv media is buying "newsweek" from barry diller, who bought the magazine less than two years ago.

The purchase was "a mistake." under his control, it went to an all-digital format format.

Jeff bezos agreeing to buy the washington post, a personal investment not part of amazon.

Red sox owner and billionaire john henry has agreed to by "the boston globe" from "the new york times." for more, let's turn it over to jon erlichman in los angeles.

It's pretty remarkable that they had acquired "the global e" back in 1993, but our next guest argues the investment group was actually willing to pay more than what john henry ended up paying.

John lynch is a longtime media media executive and currently the ceo of uc san diego and best known from "the san diego union- tribune." thanks for joining us today.

I wanted to talk about the amazing development of jeff bezos acquiring "the washington post." what was your reaction?

It underscores our belief that people see newspapers as a declining medium.

It reaches five times more people through the digital properties and circulation than any other medium and every metro.

If you could channel those people into your manny offerings -- manny offerings, that is a tremendous business.

We acquired the san diego union- tribune and we came in on the first day and announced it was her last day as a newspaper but it will become part of a media, and he.

Are a media company.

As a consequence, we are the number one generator in newspaper business year-over- year.

We think it's a terrific business.

Bezos's acquisition underscores it.

I think it really makes "the new york times" is silly when you compare the $250 million versus the $70 million they secured on behalf of ""the new york times"." let's stay on that for a second.

You raised your concerns about the sale price.

As we look at "the washington post" example, they saw someone in jeff bezos who they thought they could trust to go with a long-term.

"the new york times," "the boston globe," and john henry had a comfortable relationship.

Having an ownership group you're comfortable with is just as important.

Are they comfortable with who the leader is going to be apart from from the exact dollars and cents of the bill you go-- of the bill?

March 18, we were assured that it was a public company looking to secure a return for their investors and that there would be no political philosophies or comfort issues involved.

Price, certainty, and speed to close.

We were the winner in all three of those and ultimately, we were misled and they can sell to whomever they wish.

Clearly, they did not secure the best return for their shareholders.

Secondly, we wasted a lot of time and money.

We think it's unfair.

We have better things to do than chase down things we have no hope of securing at the end of the day.

I get the sense that you're still looking for potential newspapers to acquire.

What is the best way to make those businesses work?

Even if they are working into larger group, we talk a lot about pay walls and the advertising model.

What is the number one way to make newspapers work today?

The most important thing is to approach it as a media company.

Change the dynamics.

Newspaper, used to sit around and wait for bloomingdale's to tell us how many pages there are going going to buy and/or month was made or destroyed based upon their decisions.

We go to local advertisers and we offer them 10 or 11 different channels with which we can serve them and we asked what their budget is and we then meet their needs and overdeliver by a significant amount.

From the new standpoint, we have the largest newsroom in every city, each metro, so you utilize that content across all of your plot warms and you can be extremely successful.

We have reinvested in the newspaper because we have been successful in television, digital, mobile, spanish, all of our other offerings.

John, interesting perspective.

John lynch, ceo of uc san diego,, joining us from san diego on skype.

Facebook ceo mark zuckerberg helping launch forward u.s. to push for immigration reform and he will be making his first public comments on it.

We have a preview coming up.

? this is "bloomberg west ." i'm cory johnson.

We now turn to our partnership with george washington university.

After the fukushima disaster, many have worried about building a new reactors in the united states.

This could spark further building.

How would you like to have one of these in your neighborhood?

What if you could shrink a whole power plants, nuclear power, down to a self contained a serviceable reactor that smaller, cheaper, and safer?

One company, new scale power, says it's all in the design and they have a loaded their idea to planet forward.

It is safe, reliable, economical, simple reactor.

Producing half electricity of of a traditional plant, the design would be 60%-70% cheaper and could include up to 12 react or is built on site and shipped anywhere in the world.

We wanted to learn more and meet the band behind it -- the man behind it who was working at the nuclear regulatory commission when the infamous three mile island incident occurred in 30 years later, he hopes to lead a safe nuclear renaissance.

When i left the nrc, i went to oregon state to become a professor and there i taught my students the importance of safety.

Is developed a redundant safety system that can cool down a plant automatically in the event of an accident.

It could cool small modular reactors, a program with department of energy grants.

Our design can safely shut itself down.

The candle itself for an indefinite.

Of time without any action, and he aac or d.c. power, no in the configuration and without any additional power.

The next step, they are aiming for a plant online by 2024. if we could come up with a design that was safer and simpler, it would help not just the industry but mankind.

He thinks he can reduce the size, cost, and risk of nuclear energy and maybe move the planet forward.

Frank joins us now from washington.

You say the smaller design could he safer, but i say a smaller blown up nuclear plant is still a nuclear plant.

How could this be safer?

He has this passive safety design.

Unlike fukushima, you don't need an outside current, batteries.

The default is efficient, the failure position of the valve is to shut off and reroute some of this superheated steam we saw causing problems at fukushima into a tooling pool.

It's the size of a refrigerator in the reactors put underground.


This is not operational.

This only exists in theory but your hearing him say that it could survive earthquake, what happened in fukushima and it is smaller, cheaper, and essentially portable nuclear power.

What that would mean for greenhouse gases and other things, that could be chairman this, but still problems with nuclear waste from these kinds of devices, so clearly a lot of work to be done, but you know what?

To mix my metaphors, it seems to be in the pipeline.

It's the kind of idea that could really blow up.

I love it.

Frank, thanks very much.

If you have an idea you would like to submit, visit planetfor

Check out more on /sustainability.

One of the places time warner is telling cbs to look for the signal is a ereo.

Could this push more people to cut the cord faster you go that is a topic at george gilder fund management looking at in his new book "knowledge and power." you talk about how technology is changing and you said this is going to happen a long time ago, the basic infrastructure around network tv and cable falling apart.

It's true.

Television is done.

If you have the best conduit, you want everybody's content.

If you have the best content, you wanted on everyone's conduit.

Combining the broadcasting function with particular channels is just going to die.

Yet it's part of the business model for the cable tv business.

We will let you have hbo, pay us for that, but you have to take tbs, tnt, seven versions of cnn because that's going to support the whole enterprise.

You think that falls apart.

But that falls apart with youtube, on the internet.

It falls apart with a whole array of new technologies that allow you to transmit more effect of leave, more timely, in 3-d, on any browser.

There is a company that can do that today.

Why you would want to be tied to some specific cable channel in a world of 3-d anorak did gaming capabilities on any browser, your iphone , any other android.

At the expense of the best content, whether it is "the washington post," "true blood" on hbo, you need a certain scale to paper those kinds of things.

That's right.

What you're seeing is a vast expansion of the sale and the multiplicity of the use of all of these forms of content.

I think this is a golden age for contents.

It's a golden age for technology.

As a result of the digital resident -- a revolution, this is the consummation of profitable contents.

Why is it happening now?

It sort of amazing this is happening on the recent months where you have area oh, cbs -- aereo.

There telling their customers not to go there to watch something.

It is just bandwidth.

I overestimated how fast the bandwidth could be rolled out, but as soon as you have essentially infinite and with, ties between specific conduits in specific sources of content breaks down.

Wave division multiplex.

George gilder, thank you very much, chairman, george gilder fund.

Stick around for the b-west byte, the one number that reveals a whole lot.

? this is "bloomberg west." i'm cory johnson.

He joined from google's motorola mobility and he worked at ebay being responsible for building facebook's brand appeal as well as promoting new products.

Shares of the company closing up 3% today, above $39 for the first time.

Facebook ceo mark zuckerberg expected to make his first public remarks on immigration reform tonight at a film premiere here on san francisco.

His focus on immigration issues and they will be attending the film tonight and i asked him about his involvement in this issue.

I think it's about time that mark started branching out from his own selfish needs and started looking at good for the world.

You were just talking about the fact that his growing up.

What he's doing is great.

These undocumented children have done nothing wrong.

This is a sign of maturity and growing up.

One of the venture capitalists involved said that he has actually volunteered quietly to teach at east palo alto school district and the in contact with some of these kids.

That may be what woke him up.

Why are they being left out?

Why are we discriminating against them?

I canceled all of my appointments to go to this screening.

I don't know the issues myself.

This is going to be eye-opening for all of us.

What are some of the codewords going to be?

I accept what he is going to say is going to be very plain vanilla.

I'm wondering if there are certain codewords that might come out such as "comprehensive immigration reform" versus anything specific/ it is all or nothing.

They want to not have everything together unless we get everything passed.

Maybe he will say let's just do the dream act for now and have it the a down payment on the bigger issue.

I don't know how he will lean on that but it will be interesting to see whether he is aligning himself with the republicans who will happily do this piecemeal or the democrats who want all or nothing.

There are too many obstacles to it.

Now it's time for the b-west byte.

Jon, what do you have?

985 million and nine dollars.

-- the total box office drop for the top four disney movies -- "oz," "iron man 3," "lone ranger," and "monster university." the box office total still comes a little bit ahead and do could be a very interesting thing to watch tomorrow when disney reports quarterly results and some are wondering if "the lone ranger," which underperformed, will result in weankess kness or a write down.

They have a huge business and it does not include the rides at the theme parks.

The oz ride that takes you somewhere else?

Looking at the business break down , coming from the cable tv part of the business, espn of being the engine there, the park is about one third of the revenue and studio entertainment is still about 14% of but 10% operating profit.

Characters from the film are very important to feeding the rest of the business, but as far as the heavy lifting its come a long way from the cable television business.

Ceo bob geiger has also agreed to stay on longer since the last time they have reported -- bob iger has agreed to stay.

That's always present.

One reason why they wanted to keep him in the ceo job is because there will be some transitions happening.

If you think about the fact that they are just getting lucasfilm under the bill right now and "star wars" will be so giant and even introducing some of the less tested marvel characters, it's something to watch for sure.

Jon erlichman, thank you.

Get the latest headlines on the top of the hour on bloomberg radio and all the time on

We'll see you tomorrow.


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