Billionaires swoop in to buy US newspapers
Sure, the flight of readers to online competitors hurt America's newspapers, but it was the prostitutes that really crippled them, and this probably takes some explaining.
Many newspapers these days have more readers than ever before due to their websites. But only recently have some papers, including The Washington Post, started charging online readers for their news. Though that revenue is a blessed relief, it is nothing like the flood of cash that used to slosh about in the old days.
That money used to gush in from the classified pages. But as the internet rose, classified advertisers no longer needed papers. In America, the website Craigslist let them advertise their jobs or houses or cars for free. And how does Craigslist make a profit? It charges to place sex ads, and it was worth the prostitutes' dime because all the other ads ensure high traffic on the site.
The newspaper division of The Washington Post Company reported operating losses the last three years, including a $53.7 million loss in 2012. Over those three years, daily paid circulation for The Washington Post declined 14 per cent to just over 480,000, while Sunday circulation dropped 11 per cent to just over 697,000.
The carnage in the industry has been so extraordinary that many of the nation's great papers have been sold and some resold over the past few years and a new breed of owner has begun to emerge.
According to Ken Doctor, an analyst at Outsell, a research and consulting firm for the publishing industry, public companies, with their demand for constant and increasing revenue, are no longer suitable owners for newspapers, and the industry is already returning to the era of family or individual control.
The new breed of billionaire owners, Doctor says, have a range of motivations for getting into the business. They are drawn to the cultural cachet of owning some of the nation's most significant cultural institutions. They want the political clout that the newspapers retain despite their straitened circumstances. Some are so driven they love the challenge inherent in newspaper publishing. Some believe that the industry has been hit so hard that in real estate terms, they may be buying at the bottom of the market. This group notes that major papers that have introduced paywalls have proved many will pay for news and are seeing revenues stabilise.
The legendary investor Warren Buffett, who has bought 28 local newspapers for $344 million over recent months falls mostly into the first and last categories, saying in a recent interview, "Charlie and I love newspapers and, if their economics make sense, [we'll] buy them even when they fall far short of the size threshold we would require for the purchase of, say, a widget company."
It is believed that the industrialist Koch brothers, the Tea Party backers circling the Tribune Company, which owns the Chicago Tribune, the Los Angeles Times and the Baltimore Sun, are keen for a political mouthpiece.
Which of these motivations is driving Jeff Bezos will decide the future of The Washington Post, and according to most early analysis, there is reason for optimism.
Bezos founded Amazon.com in 1994 when he saw the potential of emerging digital technology and a recent court decision freed it from state sales tax obligations where the company had no physical presence. He has since built Amazon into the largest electronic retailer on earth, amassing a personal fortune of $25 billion, from which he purchased the Post for $250 million.
In business he has built a reputation for perfectionism and a fanatical attention to detail, as well as a willingness to spend years testing and developing his products. Both attributes could prove crucial to the future of the Post, Doctor says.
If Bezos manages to find a new newspaper business model it will take time and patience and money, but Doctor believes immediate improvements could be made in the way the Post presents and sells its news online, and Bezos is almost uniquely well equipped for that. Amazon's user interface is far better than the average newspaper website and Bezos is meticulous in the way he removes "friction" in the sales process, making it easier for the customer to buy news or other services from the company.
In its own reporting of the sale the Post quoted technology analysts who predicted that Amazon's advanced predictive analysis of its customers' habits could be well suited to creating personalised news feeds for subscribers.
Although there is little speculation that Bezos plans to use the Post as a political mouthpiece, he does have clear interests in the current political debate. Amazon's business model depends on mining the sea of personal information it collects at a time when privacy is becoming a hot-button issue, and he is known as a libertarian advocate of tax reform and tax cuts.
"You might see some of that reflected on the paper's editorial page, but that is the owner's prerogative," Doctor says.
In its own analysis of the sale the Post has reported that its publisher, Katharine Weymouth, held a grim meeting with the company's chief executive, her uncle, Don Graham, last year. She told him the paper was facing its seventh straight year of losses and the family had three choices: it could continue to preside over the Post's decline; cut even more savagely, effectively swapping quality for longevity; or it could sell to someone who had a chance of rebuilding it, ending four generations of family control.
Bezos, already a family friend, sprang to mind as a person who could be trusted to protect the paper's journalistic integrity, who had the drive to try to reimagine the business and the deep pockets to pay a premium price without needing to slash costs for quick returns.
Last week, similarly positive noises were made about John Henry, the financier and Boston Red Sox owner who has just bought The Boston Globe for $70 million - or as some put it, with his pocket change.
"The Boston Globe could not have found a better buyer than John Henry: He's rich, he's local, he's independent, and he's willing to take risks," reported a Boston radio website.