By Alan Mutter
When Jeff Bezos takes control of The Washington Post in a few short weeks, the Amazon founder will face five enormous decisions that will shape the future of an iconic newspaper once so powerful that it drove President Richard M. Nixon from office. They're decisions plenty of other media companies will be facing, too.
Local or global?
First and foremost, Bezos will have to decide on the scope of the Post’s mission. Will he be satisfied sustaining WaPo as the dominant newspaper it has been for years in the Washington metropolitan area? Or, will Bezos leverage the Post’s unique perch in the capital of the free world to recast the paper as a full-on competitor to such other national/global news powers as The New York Times, The Wall Street Journal, Bloomberg News, Thomson Reuters and the Associated Press?
Print or digital?
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You would think that a digital pioneer would have little regard for the legacy print business, but you would be wrong. Some 80 percent of the Post’s $265.7 million in revenues in the first six months of this year were generated by advertising and circulation sales for the print editions of the newspaper. If Bezos stopped the presses, he would stop something like half a billion bucks in annual sales, though it must be noted that average weekday circulation has slid by nearly 60 percent since 2003 to 471,800 copies per day and average Sunday circ has tumbled 51 percent in the same period to 687,200. But never say a publisher nowadays will never abandon print. With newspapers in New Orleans, Detroit and other metro markets reducing the number of days in the week that they print and/or deliver newspapers, the time eventually may come that the seven-day-a-week Post is an artifact of history.
Free or paid?
For years, the Post was the most prominent newspaper to decline to charge for access to its digital wares. But the paper in June finally decided to require Web and mobile visitors to pay for access to the news after a certain number of free views each month. While digital access payments have created a valuable and ongoing new revenue stream for papers like The New York Times, the San Francisco Chronicle – evidently concerned that its paywall was crimping traffic – just dismantled a pay system that had been in place for only four months. In weighing whether to keep or kill the Post’s paywall, Bezos will have to choose between a short-term revenue spurt and long-term audience growth. His record at Amazon in eschewing immediate profits over the prospect of long-term strategic gain suggests that the WaPo paywall could go bye-bye.
Advertising or merchandising?
While advertising for generations has been the predominant revenue source for newspapers, this venerable business model was clobbered by the arrival of the digital media, which enable consumers to choose when and where they get their news – and enable marketers to establish direct relationships with consumers through websites, Facebook pages and mobile loyalty programs. The turnabout has been fierce. Aggregate ad sales at the nation’s newspapers have fallen by half since peaking at a record $49,4 billion in 2005. The ad collapse is the main reason revenues at the Post declined from $957.1 million in 2005 to $581.7 million in 2012. Given the so-far unmitigated contraction in advertising demand, Bezos could muster fresh efforts to shore up the traditional business. Or, more radically, he could abandon it. Instead of trying to persuade increasingly reluctant retailers to buy space in his print and digital media, the ecommerce master could turn every ad position and every page view into one-click shopping opps.
Profit or loss?
Not surprisingly, the plunge in revenues at the Post has eaten away at the once enviable profitability of the franchise, turning the paper’s pre-tax operating profit of $125 million (a 13 percent margin) in 2005 to a loss of nearly $54 million in 2012. Faced with similar challenges, most newspaper publishers, including the current owners of the Post, have whacked away in recent years at staffing, news hole and other expenses to try to sustain an acceptable level of profitability. Bezos might elect to do the same, but he also might not. Since Bezos is buying the paper with 1 percent of his $25 billion personal fortune, he has the means and latitude, if so inclined, to operate at breakeven – or even a loss – for whatever period of time he thinks it is necessary to rebuild or reposition the ailing franchise. Given his legendary patience in waiting for strategic initiatives at Amazon to swing into the black, the $250 million that Bezos is paying for the Post could prove to be just the down payment on an even bigger, longer-lasting commitment to the brand. Then again, it may not.
Alan D. Mutter is a former newspaper editor, cable-television executive and high-tech CEO who today serves as a strategic consultant to both traditional and digital media companies. He teaches media economics and entrepreneurship at the Graduate School of Journalism at the University of California at Berkeley and writes about the changing media landscape at Reflections of a Newsosaur.