Jeff Bezos' Plan to Save The Washington Post

When it comes to the newspaper business, Amazon.com (NASDAQ: AMZN  ) CEO Jeff Bezos says that he's playing tee ball compared with the major leaguers at The Washington Post. And in a memo to his new employees at the paper, he admitted, "there is no map, and charting a path ahead will not be easy."

This sort of humility from one of America's greatest business leaders is refreshing. It's also not entirely accurate.

Jeff Bezos has talked a lot about his vision for The Washington Post recently, and I believe he has a very clear sense of where he'd like the paper to go. With the finalization of the sale earlier this week, I'm extremely confident that The Post will be successful in the coming years.

The road to irrelevance?
A look at the current state of The Washington Post doesn't inspire much confidence in its future. Here's a look at some of the numbers for just the newspaper segment from the Washington Post Co.'s (NYSE: GHC  ) most recent quarterly filing:

In the first six months of 2013, revenues declined, and the paper reported losing $49 million; $40 million of that loss was a result of a pension expense, so the newspaper lost approximately $9 million from operations. Over the past year, the average weekday circulation has declined by 8.4% to 484,385. Circulation is down over 40% since the early 1990s.

There is a glimpse of promise in the recent online revenue numbers. For the first six months of 2013, online revenues have increased 12% to $55.6 million.

But don't get too excited. Online revenues only account for roughly 20% of the paper's overall revenues. One of the biggest challenges facing the newspaper industry, of course, is that the online business hasn't been able to come close to making up for the huge declines in print circulation and advertising.

Beauty is in the eye of the beholder
Despite the grim condition of the paper, Bezos told some newsroom staffers recently that he spent a lot of time thinking about its possibilities, and concluded that things weren't hopeless. Instead, he "was actually very optimistic about the future of The Post."

One thing I learned from Bezos' remarks to his employees, which were posted in audio form by Washington City Paper, is that he isn't interested in a declining business, even if it somehow managed to turn a profit. At one point he told reporters and editors that "making money isn't enough. It has to be growing."

That point was underlined when he laid out his vision for the paper. Here's what he said to the newsroom team,

My point is pretty simple, that we can't be in survival mode. We have to be in growth mode. We have to be reader-focused, not self-focused or advertiser-focused, and that we need to also figure out how to use the gifts that the Internet gives us, at the same time that we are acknowledging that there are many things the Internet has disrupted in this business.

Later, he added that The Post is a challenged business, and that "no business can continue to shrink." A shrinking business, according to Bezos, "can only go on for so long before irrelevancy sets in."

Unpacking these comments actually tells us a lot about Bezos' thinking on newspapers. Here's an illustration.

This summer, prior to the sale, The Washington Post introduced a paywall where readers would have to pay a fee after reading 20 articles each month. This, of course, actually penalizes The Post's most-committed readers without really offering anything extra. That doesn't feel like a strategy that puts the reader first, even if logically it makes sense for heavy users to pony up for the content.

Bezos notes a much bigger problem with focusing on paywalls, however. They don't actually solve the biggest problem facing newspapers, which is that well-researched stories by The Post or The New York Times can be rewritten by the likes of Business Insider or Huffington Post in a couple of hours. Adding salt to the wound, the rewritten versions, which often have better headlines and ledes, often perform a lot better than the originals.

Bezos believes that the way to get after that is by offering readers a bundle of content that they will be willing to pay for. It's not about a paywall per se. Rather, it's about offering readers enough outstanding and exclusive content that they'd happily open their wallets for it. That's a subtle, but important distinction.

In his discussions with employees, Bezos has said that "job one is to figure out the daily habit" of readers. Once he knows that, he'll be able to create a compelling bundle. "People will buy a package," he said, "but they will not pay for a story."

He went on to say that, "there are so many knobs that can be turned and things we can experiment with that I'm confident there's something we can find that readers will love and will be engaged with – and that we can charge for."

What will be included in the bundle? Obviously, it's too early to know, though Bezos has indicated that he'd like to see more investigative reporting, and he doesn't want to aim for the lowest common denominator (bless him). Perhaps most succinctly, he said that rule number one is that The Post mustn't be boring.

Connecting the dots
Based on what I've heard and read in recent weeks, I'm pretty confident that the Bezos-led Washington Post will be more national, more digital, and will have some sort of membership model. And unsurprisingly, there will be a strong connection between The Post and Amazon.com. That relationship alone could be extraordinarily beneficial to the newspaper.

Most of these points seem straightforward. The Post is one of the few papers with a national reach, so doubling down on that is an effective way to grow readership. As someone who lives in Washington, DC -- and gets The Post delivered each day -- there doesn't appear to be a lot of room to grow the print business, even though that represents the lion's share of revenues at the moment.

Online success won't come easy. Bezos told his new employees that tablets "could offer a way of rebundling the newspaper" and confidently added, "I'm convinced that the reach of the tablet will give us a bigger paying audience."

What if – and I'm wildly speculating here – a Washington Post subscription via a Kindle or iPad included both the daily paper and books and other long-form content from The Post's talented writers and reporters. And what if members of The Washington Post received outstanding books like The Alchemists (which was written by The Post's Neil Irwin) for free? I know I'd be interested.

Bezos has said that the one thing he's forming a conviction on is that the center of The Post's universe should be the reader. Through that lens, the key will be to provide lots of amazing content and features that cannot be obtained elsewhere for free. I'm feeling pretty bullish that the guy who built a $150-billion business from scratch will be able to solve that problem. What do you think?

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Read/Post Comments (16) | Recommend This Article (30)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 05, 2013, at 10:06 AM, mso88 wrote:

    I misread the article. I thought it said Bozos to buy the Washington Post.

    The internet is already saturated with liberal propaganda machines falling all over themselves.

  • Report this Comment On October 07, 2013, at 1:40 PM, josephpporter wrote:

    I seem to recall an ex-Apple CEO who thought he could turn J.C. Penney around. He got his clock cleaned in the process, and Penney is worse off than it was before he stepped in.

    Bezos will have to learn his lesson, too. G'bye, Post!

  • Report this Comment On October 07, 2013, at 4:03 PM, ScoopHoop wrote:

    You sound a little overly bullish, because it's hard to grow revenues by selling news when there is so much free content on the Internet. I think Bezos makes an interesting point. Readers won't pay for a story, but they might pay for a bundle of content that they really want. Washington Post's bundle will probably include its topnotch investigative reports. I suspect the Post will increase specialization and concentration on its strengths, such as political reporting.

  • Report this Comment On October 07, 2013, at 4:04 PM, mdk0611 wrote:

    G'bye Post? While I may not agree with their editorial page, that would be a shame. They do some decent reporting that would not be done by anyone else if they folded.

  • Report this Comment On October 07, 2013, at 8:08 PM, Netteligent09 wrote:

    The damages at Post and similar newspapers are too deep. The bigger they are the worst it gets.

    It is your last chance to survive and turn around. We do have many talented writers and editors.

  • Report this Comment On October 07, 2013, at 8:45 PM, PuddinHead42 wrote:

    The Post, better known as Pravda.

  • Report this Comment On October 07, 2013, at 9:51 PM, colleran wrote:

    Hmm. Lots of Tea Party responses. I, for one, think that Bezos will find a way to make this work..

  • Report this Comment On October 07, 2013, at 10:59 PM, TerryHogan wrote:

    I'll say skeptically optimistic. While I have no doubt that Bezos is a visionary and good at wringing out efficiencies, and a pretty good operations man, even smart guys can get burned once in a while. Ask Warren Buffett about his airline purchases.

    Of course who would've thought you could make a pile on being a bookseller in a digital age.

    I guess I wouldn't be surprised either way, but I'm not that confident in Bezos's magic to buy WPO. I'd sooner by Amazon. I mean if Henry Ford ran a buggy whip manufacturer, it would still have been a dying business. I guess we like to think that guys like Bezos are smart enough to know a dying business when they see one. I just wonder what he sees that we don't.

  • Report this Comment On October 08, 2013, at 12:26 AM, enginear wrote:

    I wonder if he can do it, and I hope. I feel 'the news' has been hijacked by the likes of the Huffington Post, and other internet consolidators that don't gather any news, just use resources provided by others, and opinionate with it.

    I think Mr Bezos is a good man to try it, and I wish him luck. He does seem to be one of those people that sees the need to add value to society (he's not averse to taking a bit of a reward for it - nor should he be). He also seems to recognize the value the news gatherers contribute, and wants to see 'the system' pay for that added value.

    As I said, I wish him the best of luck. If there are no honest news gatherers the Huffington posts of the world will be left to their own devices and our news will be exceedingly bad after that.

  • Report this Comment On October 08, 2013, at 9:15 AM, jlssmith wrote:

    The phrase "honest news gatherers" reminded me of a comment made by a poli-sci professor I had: "to be truly educated on current events you should spend each morning reading The NY Times, Washington Post, WSJ, Financial Times, 1 or 2 foreign papers based on which language you speak - then move on to the weekly magazines..." Much easier to do if you are a professor or student at a University than I have found it to be subsequently! The bundle that I would pay for would be a service gathering news by topic and source so you could go to one place and get multi-sided coverage on an issue by issue basis, possibly providing an executive summary by article listing primary points raised? Organizing articles so the diametrically opposed are presented side by side? That would make for interesting reading!

  • Report this Comment On October 08, 2013, at 9:59 AM, tfortom wrote:

    Like the article alludes to "it's all about content." Pass this on to Bezos Motley Fool: quit "retweeting" the liberal tripe the administration puts out and start doing some real reporting like maybe the truth and people will pay for your content. Look at the success of Newsmax, Brietbart, Drudge and Fox to get a clue.

  • Report this Comment On October 08, 2013, at 6:25 PM, LeoncSATX88 wrote:

    Reader focused:

    With my 3 month subscription to Bezos' WaPo I get a new tablet of the size I want. After a year I get a new upgraded tablet or a discount on my subscription.

    The tablet comes preloaded with access to all sections of the WPost plus a unencumbered access to the rest of the internet.

    I have unrestricted access to any sources included in the WPost news stories.

    I can easily setup and remove alerts on my current subjects of interest with a Twitter like stream

    I can block an advertiser with a single click and it won't come back.

    That's all I can think of for now. :)

  • Report this Comment On October 11, 2013, at 6:24 PM, astromoody wrote:

    It's all about why anyone would want to read the Post. If it were more balanced, as it ought to be and as it thinks it is, I might be interested.

    I think Bezos needs to be careful that too much of a tie between Amazon and the Post will actually hurt Amazon as liberals keep their current habits and die-hard conservatives question the wisdom of supporting a liberal interest and go elsewhere.

  • Report this Comment On October 13, 2013, at 6:28 PM, Seanickson wrote:

    The post will have a future but bezos still paid too much for it

  • Report this Comment On October 17, 2013, at 1:21 AM, 650nm wrote:

    Is there a way for "conservatives", "Tea Partiers", or whatever else the term is to just not even be shown links to anything that can remotely invite trolling?

    Barring that, is there any automatic way for ME to not have to filter through their comments? Or them to bother reading mine?

    Leaders like Bezos have reputations for creating markets and possibilities where none previously existed. Therein is the real growth story. I fully expect some kind of mashup from him, leveraging the ubiquity of Amazon online and the Post at one's door against the falterings of current news, namely: poorly researched articles, a lack of substance, opinioneering, and click-baiting.

    Beyond low prices, what Amazon sells is a neutral, but reliable, brand. One that you can go to for... stuff. Add to that stuff a news subscription. With real news and real stories. Bundle that into Prime. Then as the postal service continues to collapse, partner with UPS for good and have them start to deliver Amazon News, Amazon packages, and Amazon returns. In short, expand their ecosystem.

  • Report this Comment On November 03, 2013, at 3:13 PM, Mathman6577 wrote:

    @mso88: great comment. Sometimes bozos succeed in business, usually when they practice crony capitalism like Amazon does.

    @650nm: if you just want a one-sided conversation go to Moscow or Tehran.

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