Eugene Meyer bought The Washington Post in 1933 at a bankruptcy auction for $825,000; by the time of the Watergate / Meyer Graham heyday, the paper was large and profitable, with newspapers operating as effective distribution monopolies for individuals or firms placing classified ads, movie showtimes, event listings, and short-term sales (1). Fast-forwarding to the Internet Age, Craigslist et al disrupted classified ad revenue, and new digital ad revenue only slightly tempered the decline in circulation and print ad revenue. For the Post, seven lean years of declining revenues culminated in its sale to Amazon.com founder, Jeff Bezos, in August 2013 for $250 million. Ten years after a one-time peak circulation of 832,332, daily circulation had dropped to 474,767, and Bezos’ had on his hands a loss making machine (2).
What is The Washington Post’s business & operating model?
The Washington Post is in part a subscription based business model, whereby people are allowed to view a limited number of articles online before purchasing an online or in-print subscription. Revenues are generated by online and in-print advertisement, as well. It is a business model under significant duress due to the following: (i) the internet disrupted classified ad revenues, and (ii) digital advertisement did not recoup declines in print advertising given advertisers can measure the efficacy of the digital ads through clicks, and using that metric, drove down the advertising price per click paid.
Operationally, the Post employs 700 people and has been at crossroads for some time now – struggling with questions like whether to focus on regional DC politics versus National News, and whether to passively source stories from other institutions or maintain the hard hitting journalism epitomized by the Watergate reporting. Newspapers can break a story or generate an article lead, but they do not own the content – and the story can quickly be rearticulated by another news feed. Former Chairman Donald Graham sums up the Post’s inability to sustain a competitive advantage from its operating model with the following, “Is there any kind of a plus to a news organization in having really high-quality reporting and editing? I’m pretty sure the answer to that is yes, but we have not figured it out” (3). No longer does the Post have the benefit of outsized third party and classified advertising revenue streams to subsidize its reporting and editorial content.
At current assessment, it stands that the Post is the Biggest Loser – fundamentally unable to profitably monetize its journalistic operations. So what is Jeff Bezos up to? What is Bezos’ plan to fix the Post?
- Relevant Content: In September 2014, Bezos poached Politico founder Fred Ryan to become publisher. The newspaper launched this summer “PowerPost”, a direct competitor to Politico and a vehicle to attract the DC elite/influencer subscribers/readers with higher willingness to pay
- Focus on Tech and R&D: Bezos is focused on increasing web traffic and collecting customer information to create a customizable content and web page experience. Post streamlined its website and reduced the time it takes a page to appear complete to readers to 1.7 seconds, an improvement of over 85 percent (4). Furthermore, the company has reportedly hired engineers to develop its own ad-server and pay-meter technologies as well as technology and content-management system for text and videos to license to other businesses (5).
- Increase the Distribution: Now distribution includes Kindle apps, Flipboard, and MSN and the Post is bundled on Amazon’s Prime application. Bezos also created a free newspaper network, The Washington Post partner program, where local newspapers sign up to offer the Post’s digital suite – another strategy focused on building sheer customer volume (6).
Will Bezos’ growth focused playbook (a la Amazon) work?
In October 2015, the monthly unique visitor count surpassed the New York Times for the first time ever; in comparison, the monthly visitor count was 60% that of the Times at the time of Bezos’ acquisition (7).
The complete answer as to how The Washington Post will monetize this viewership, and if, more broadly, the newspaper is a viable standalone, commercial entity is not yet ready to print; but for an institution that ousted a President, it’s an important, First Amendment worthy, question to ask.