These are also the two worries that keep publishers of a certain size up at night these days, as they confront the technological re-wiring of their consumer markets and revenue sources.
The most interesting part of this story is not Bezos’ reasons for buying. It is the Grahams’ reasons for selling.
Washington Post Chairman Donald Graham summed up the strategic challenges facing his company in a letter to employees, which I’ve broken into five digestible bullet points:
- “As the newspaper business continued to bring up questions to which we have no answers, (we) began to ask ourselves if our small public company was still the best home for the newspaper.
- “Our revenues had declined seven years in a row.
- “We had innovated, and to my critical eye our innovations had been quite successful in audience and in quality, but they hadn’t made up for the revenue decline.
- “Our answer had to be cost cuts, and we knew there was a limit to that.
- “We were certain the paper would survive under our ownership, but we wanted it to do more than that. We wanted it to succeed.”
And to say out loud what so many connected to the news industry are thinking: If this is the mindset of a venerable brand such as the Washington Post, what does this say about the rest of our business?
To be clear, Bezos isn’t a lonely white knight riding proudly to the rescue. The Grahams actively shopped the Washington Post to at least six suitors before deciding that Bezos was the best fit for the conundrum so many legacy publishers are facing themselves: How to create scale to invest in innovation when revenues are declining or flat?
Like its peers in the United States, the Washington Post has tried mightily to capitalise on its brand and make new business models work. They invested in hyper-local, paywalls, online video, sponsored content, content marketing, international syndication, and open-source invitations, among many initiatives. They sold assets. They diversified revenue streams away from their core. In the past year, they were called a “systematic and prolific innovator.”
Yet they did all of this in the shadow of parameters – constant parameters. The Post has done a lot with a little. Much has been written about cutbacks to their famous newsroom, yet my instinct is that they pale in comparison to the cutbacks in the parts of their business charged with growing revenue, audience, brand, and engagement. These are the parts of every publisher’s business that require a lot of rope and longer timelines than publishers with severely limited capital are able to provide.
In his letter to Post employees, Bezos set the parameters for expectations, a microcosm of the transformation all news publishers face in this digitally disrupted age. Let me break down the key points, verbatim, in bullets:
- “The Internet is transforming almost every element of the news business. …
- “There is no map, and charting a path ahead will not be easy.
- “We will need to invent, which means we will need to experiment.
- “Our touchstone will be readers, understanding what they care about … and working backwards from there.
I believe that publishing companies must either reposition their strategy basis from sustainable competitive advantage to transient advantage – or, ultimately, sell to a heavily capitalised company with the right culture to make that happen.
We must change our industry culture to become companies that can generate innovations, ramp them up, monetise them, be willing to shut them down when the life cycle is complete, and continuously repeat that process. We must become agile and entrepreneurial. Yet most companies don’t have the scale to do this with consistency, and what scale they have is wasted on fighting the old editorial, sales, and production cultures clinging to yesterday.
For the more conservative elements of our industry who think the Washington Post sale is about deeper pockets to write more blank checks for irrelevant artistry, I invite you to parse the words of Don Graham and Jeff Bezos in their letters to Post employees.
Media companies need a sufficient scale and capital base to continuously innovate with new products and business models that will fund great journalism.
The Washington Post sale is a microcosm of this greater industry challenge.