I have a different view from what’s out there thus far re where this acquisition will lead. Much of the discussion to date about this very interesting acquisition is focused on the content and the risk it will change for the worse. One would expect this from the media since that is what they focus on. The discussion also seems to bring in the idea of Bezos wanting this property because of the leverage it will give him in Washington. I don’t buy that. Wired.com equated it to Bezos’ other “quixotic” ventures. Everyone, naturally, also keeps trying to tie this to Amazon. I think that is only valid in looking at Bezos’ managerial approach, not what Amazon itself is. Bezos has said the focus is on the reader–understanding what he/she is looking for and providing it. That is consistent with understanding what the customers at Amazon are doing and providing them with more of what they most likely want. The Post is not going to look like Amazon, though. The tie-in to Amazon represents a narrow focus on what he can do and, in my view, is likely to do. I think Bezos is interested in learning who the readers are and their behaviors and is prepared to do that with the high quality content of the Post.
I am not so sure he really wanted to buy the other paper properties, but I doubt that the Post Company wanted to be left with any. I think his initial focus will be on reducing costs of the back office and not touching the content side. He can do a better job than the current management was doing. He certainly runs a lean shop at Amazon. I think people are missing that the Post’s digital revenues must be running close to $100mm. Graham does deserve some credit for that. Bezos is buying a digital stream at 2 1/2 to 3 times revenues if you give no value to the $400mm of off-line revenues. That’s pretty cheap. Henry Blodget pointed this out in his very well written piece on the acquisition. I also think the Post is closer to breakeven than the last 12 months indicated, given the costs included on the pension side and termination costs. The management didn’t have a solution how to get the profits up, was trapped by the experience of the last 7 years and the board didn’t have the patience. The Post has been firing content creators without looking hard enough at other ways to reduce costs making use of technology that exists on that end. As a public company the Post Company couldn’t risk more losses. In an interview on the Post’s own digital website Graham said there were twelve bidders and Bezos was the highest bidder. It will be interesting to see who the other bidders were, which is info that will likely make its way out over time. Graham would likely have had to sell to the next highest bidder and who knows who that was. He got lucky with it being Bezos, who I think is prepared to preserve the content and figure out how to monetize it better. I wonder if he would have been able to say that another buyer was as attuned to the “values” at the Post. Interesting that the journalist employees were “sad.” They should have been sad if there weren’t a sale. If I were there I would be excited about what could happen. I think their job security has just gone up.
Bezos wrote to the employees about inventing and experimenting. This is the classic approach to trying to figure out what the right business model is. As a private company the Post can do this without as much worry about the short term impact. But, as I said, I don’t think the road to profitability is that long. I believe the Post will likely be providing even higher quality content than it has been for a while. I also think it will likely expand from the very specific approach to its local environs to something more global, which would move it toward a bigger audience. This will be interesting and fun to watch, and, of course, it will be well covered. The media industry is the most self referential of any I know. Anything related to media is always a big story. I am looking forward to following this one.