Buying A Paper

Jeff Bezos just bought the Washington Post for $250 million and I find this really interesting. A lot of people have been buying a lot of newspapers lately, each with different reasons. This is the first to really excite me. Let’s take a look at the possible consequences and talk about Amazon.

● Is Nothing Sacred?! To start, let me point out that there is nothing sacred about newspapers or their ownership. While I’m sure they want you to believe that somehow they are pure because some of them used to be owned by families who ran them at a loss blah blah, they’re just businesses and they don’t live by some special code. In fact, the history of newspapers is that most were “partisan rags” before they became “partisan rags pretending to be nonpartisan.” That’s why you get names like “The Arkansas Democrat”... because they were established to spread party propaganda.

● Recent Buyers: Several rich people have recently bought papers for different reasons. Most billionaire buyers of newspapers buy as a vanity project and end up losing their shirts and dumping them. Some buy them for other reasons, however. Warren Buffett bought up a bunch of newspapers. His purpose seems to have been to get them to pimp things he’s invested in. That shouldn’t work, except that Buffett bought small town papers, which don’t get scrutiny, and he fired and closed lots of them, which likely created a loyalty incentive.

The Koch Brothers are apparently attempting to buy various newspapers including the “Chicago Tribune” and the “L.A. Times.” Their purpose is ideological. They apparently aren’t planning to impose a new ideology on these papers, but instead intend that conservative/libertarian viewpoints finally be heard along with liberal ones.

I’m doubtful this will work. On the one hand, I’m glad they’re doing this as we need conservatism brought into the MSM and this might do it. On the other hand, I think this is destined to failed to reach the nonaligned public because the left will smear them. They will claim over and over that the Koch Brothers are trying to control the news and they will use the Koch Brother’s association with conservatives to make the claim – along with the claims that they want to add conservative view points. The better strategy would be to entirely disclaim ideological intent and then do it through other means. Even better would have been to set up a front owner who makes himself out as a leftist, and have him push conservatism. The left wouldn’t have a clue how to handle that and you would probably be able to get a solid reputation as unbiased.

● Amazon: So what about Bezos? Let’s start with the obvious. Amazon is an amazing company. They will dominate the world one day. I have watched as they have slowly, but sure taken over everything online and they’ve done so with incredible skill. This is a company that consumers, employees, sellers, and stockholders all love... every stakeholder in the mix. This is because they are more than fair in things like salaries and royalties, and they generate intense loyalty because of it.

Indeed, the only people who hate them are the people in the industries they invade, and that is because they come in and destroy things like monopoly margins and the need for middlemen. To give you an example, published authors earn 6% on books they sell... after expenses, which can drive profits down to around 2% in many cases. Publishers and retailers keep the rest. Agents get around 15% of what the author makes for acting as a middleman. Amazon gives 70% royalties directly to authors (or 35% depending on some things). It wipes out the need for publishers and agents. Thus, consumers benefit from way lower prices, authors benefit from massively higher profits, and Amazon benefits from a strong profit margin. Moreover, Amazon does a LOT to boost sales. They are constantly tinkering to improve marketing... there isn't a week where I don't see them test something. Amazon does the same things now with music, games, and videos, and it is expanding into every other area of retail as well. This is a company with huge long term plans and is willing to invest to make that happen. And each time it expands, it brings lower costs for consumers and higher margins for producers by wiping out the middlemen. It is WalMart circa 1985.

Anyway, back to the Washington Post. I think Bezos buying the paper will be a great thing. For one thing, Amazon is amazingly creative. They are super fast as making changes to see how consumers respond. I’ve seen them test different formats on different products and go with the one that improved sales. I’ve seen them test different forms of marketing, dumping those that failed and keeping those that worked. They play with their search algorithms constantly too. They are constantly tinkering.

Moreover, they are totally consumer oriented in their thinking, which is something no one in the media is. The entire media, from newspapers to television to magazines, sees themselves as the modern version of an ancient industry that does certain things rigidly. They see themselves as being above the market and telling the people what they need to know. Amazon isn’t like that. They embrace the public and they try to give the consumer what the consumer wants, not what Amazon thinks they should want... huge difference. They are also intensely nonpartisan. This means they don’t take sides and they happily cater to both sides.

I expect that all of this means we’re going to see a lot of innovation coming to the Post. I expect they will rethink the paper to try to provide more value to consumers, particularly online. I also expect they will broaden the ideology so they reach more people. I could be wrong, but that’s Amazon’s history... “Republicans buy sneaker too.” (Michael Jordan). If I'm right, this actually could lead to change in the entire industry, a change which may dramatically shift the ideology of the newspaper industry, away from radical liberalism to “non-aligned customer service.”

It’s going to be interesting to see if that happens. I think it will though. And if it does, this could do more to change the MSM that a dozen conservative billionaire buying news channels or newspapers. I guess we’ll see.