Monday, August 12, 2013

Bezos, Buffett and the Sagging Newspaper Industry [Infographic]

What exactly does Jeff Bezos have up his sleeve with the purchase of The Washington Post? Time will tell, but the newspaper industry Bezos is entering is certainly in need of change. With continued downward trends, the newspaper business could use a little of the magic that has made Amazon #13 on the Fortune 500 list and Bezos the 19th wealthiest person in the world. (The $250 million that Bezos spent on The Post represents roughly one percent of the Amazon founder's personal net worth.)

Jeff Bezos isn't alone in buying a newspaper--fellow billionaire Warren Buffett has been on a newspaper buying spree himself, acquiring 28 daily newspapers in the past two years. Buffett's strategy has been to go local. In his words, "Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents." So, although he expects "Berkshire’s cash earnings from its papers will almost certainly trend downward over time," Buffett also predicts, "these papers will meet or exceed our economic test for acquisitions."

For his part, Bezos hasn't said much about his strategy. In an inspirational letter to The Washington Post's employees, he noted the following about the need for change at The Post:

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. The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. 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. Our touchstone will be readers, understanding what they care about – government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports – and working backwards from there. I’m excited and optimistic about the opportunity for invention.

What might Bezos do with The Post? He has implied he will be a hands-off owner, saying "I won’t be leading The Washington Post day-to-day. I am happily living in 'the other Washington." That strikes me as unlikely for a CEO know for his "hands-on" style. Perhaps there are hints in Bezos' Amazon past that suggest what is next for The Post:

  • A better user experience: Bezos has often said that his key to success was not simply knowing technology but focusing on the user experience. With Kindle and The Post, he has an opportunity to reframe what it means to read, consume, share and participate in the news.
  • A strong voice for the reader: Amazon was an early leader in giving consumers' the chance to rate products and each other, something we all take for granted today. There is no place where online news can more improve--and no better way to make news sites "sticky"--than to improve the commenting functionality. Today, most news sites are vast wastelands of trolls and partisan flamers; a new approach could draw more reasonable readers into the dialog and connect them more strongly both to the news and news provider.
  • Not a news site; a news platform: Amazon is no longer simply a site that sells stuff; it is now a powerful cloud platform used by other companies. A recent Forrester survey found that Amazon Web services is the most common choice for enterprise cloud development among software developers, and Amazon recently announced that "other revenue"--which largely consists of Amazon Web Services--was up 59% from a year ago. How could Bezos spark not just innovation for The Post but create a platform that could be sold to (and help) other news organizations?
  • Local classifieds make a return?  Almost two decades ago, eBay, Craigslist and (to a lesser extent) Amazon put newspapers out of the classifieds business. Newspaper classified ad revenue--once a vital source of revenue for newspapers--is down 75% in the past twelve years. Could Amazon bring peer-to-peer business back to news organizations? With the growth of the sharing economy, it seems a terrific time for the local newspaper to attempt to reassert itself in the neighbor-to-neighbor commerce business by bringing to market new, innovative P2P offerings. 

Bezos and Buffett are entering a troubled business. As noted in the infographic below, the newspaper industry has seen declines in everything from circulation to ad revenue to consumer trust. But there are brighter signs, as well, with circulation revenue stabilizing and online newspaper visitors, reach and time trending upwards (ever so slightly).

It will be interesting to see what newspapers do differently under the leadership of Bezos and Buffet. Both have a knack for making the right financial decisions, although they are also known for taking a longer view on ROI than is typical in business today. Don't expect any changes overnight, but watch for the newspaper industry to get more innovative and even more digital in the years to come.


Unknown said...

The Graham's understandable resistance to giving control of the ownership of The Washington Post was parallel to the paper's reluctance to cede control to users on digital and social platforms. That they continued to insist that their paper remain a standard-bearer of deep, thought-provoking journalism, however, should be highly commended.

The four ways you cite Bezos may boost the Post's fortunes do not need to be accompanied by a HuffPo-ing of the content. I hope Bezos asked himself, "If a journalist came to me with a story that could take down the presidency, would I run it?"

Augie Ray said...

Neil, great comment. I particularly went in search of four ways Bezos's past may suggest a future for The POST *without* having go cheapen content. That said, I think there may be ways to keep the same journalistic integrity while making some of that info easier to consume for a generation accustomed to tweets and Vine. That's the real challenge, I suppose.