There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment.” - Jeff Bezos after buying Washington Post Company
The wittiest piece on Jeff Bezos’ $250-million buyout of the WaPo Company is in the New Yorker. It is claimed that the Amazon founder was doodling on the WaPo site for the first time and he accidentally pressed the ‘purchase’ button!
Unsure of what he had done, Bezos spent a few minutes trying to ‘reverse’ the charge on his card! But he ultimately gave up. Thank goodness!
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Jokes apart, the Post’s publishing arm has red ink on the balance sheet for the last seven years, $50 million burnt last year. Donald Graham, chairman and CEO, has been candid that innovations and cost cuts haven’t been good enough.
Therefore, money can’t be the reason why Bezos, 49, is shredding $250 million.My own theory is that $250 million is worth only 1 per cent of the man’s $25-billion warchest. So, WaPo proved too a cool trophy for him to resist!
Sure, the buy out gives him titles like the Express newspaper, The Gazette Newspapers, Southern Maryland Newspapers, Fairfax County Times, El Tiempo latino and Greater Washington Publishing, and some nice property, including the Washington Post headquarters I happened to peep in three winters back via Raju Narisetti. Then there are warehouses, and online ventures such as Slate, the Root, and Foreign Policy. But these aren’t Bezos’ driving factors.
Coincidentally, - and as The Financial Times reports - the Washington Post Company valued its newspaper-publishing division at $255.6m in a May filing. It’s obvious enough that Bezos didn’t bargain more than $5.6 million, a pretty generous rounding off!
(NB: A certain Tan Sri Anthony Francis “Tony” Fernandes bought AirAsia for One Ringgit!)
For consumers, WaPO has a good guy on the saddle.
He rests his reputation on patience and the long term. Also, he’s a compulsive ‘reinvester.’ Even would-be profits today go into bets that might pay off tomorrow.
Add to this the halo that when he is the high priest, the marriage of publishing and e-commerce just might happen. Not that WaPo will start batting for Amazon. Far from it.
But just as every return visitor to Amazon sees a different front page, should we expect every return visitor to Bezos’ news sites presented with a different story selectionIJ
A rugged explanation of the deal lies in businessinsider.com, where Bezos is invested:
1. Amazon is already in the content production and distribution business--and news is just another kind of content. Amazon distributes massive amounts of print and digital media. The content WaPo publishes and distributes could be bundled or distributed with that content. And, similarly, the content that Amazon produces--mainly commerce-related, but increasingly media--could be integrated with the WaPo’s content, offering more choices for customers and consumers.
2. Amazon is already in the subscription and media-gadget businesses. Subscribers to Amazon’s “Prime” delivery service already get to watch free movies and TV shows. Amazon Kindle buyers already have access to free books. It’s easy to imagine that Prime subscribers and Kindle buyers will soon have convenient, free access to the WaPo--and that this access might make a Prime subscription or Kindle membership more valuable. Washington Post reporters, meanwhile, could produce an endless supply of ebooks and Kindle Singles.
3. “News” is the digital equivalent of a high-traffic intersection: As people pass through to consume information they might also stop to do some shopping. Content and commerce companies have long dabbled with combining the two experiences, but no one has really nailed it. Given Amazon’s expertise in affiliate marketing and advertising, it’s not hard to imagine that the WaPo could quickly become a laboratory for the next generation of integrated content and commerce.
4. Amazon is getting into the local physical delivery business--a business that the Washington Post is already in. Could stuff ordered from Amazon be delivered with your morning newspaper and your daily newspaper--or parts of it--could certainly be delivered in a box with your Amazon stuffIJ
In short, there are lots of synergies that Bezos and Amazon might want to experiment with.
Also, Bezos appears is buying the Post for 0.5X revenue, or 2.5X digital revenue if you treat the print business as worthless. The digital revenue, is growing. Given that the Post is currently losing about $50 million a year, Bezos’ ultimate price tag may be considerably higher.
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The interesting bit is that Warren Buffett’s Berkshire Hathaway is the largest outside investor in the WaPo Co. Berkshire holds just over 1.7 million shares. Bezos’ buy out pushed Buffett’s holding in the company up by $45 million.
Buffett first began buying these shares back in 1973. But even he never thought of doing a Bezos!
Tail Piece: Via Amazon.in, Bezos walked into India earlier this year.
(The columnist is CEO & Co-Founder, India Strategy Group, Hammurabi & Solomon Consulting. Tweets @therohitbansal).