Thursday 8 August 2013

Bezo's buys The Washington Post. Why?

Jeff Bezo's purchase of The Washington Post (and it seems to be him personally rather than his company Amazon) still flummoxes me.

He paid a big price - 250 million usd in cash, about 17 times the ebitda profit which is a high multiple - it would for example, give The New York Times a valuation of about 4 billion usd (way ahead of its current market cap).

Such a high price that it's hard to see it as being a straightforward financial play. He's not in it to get his money back running The Post as normal. Especially when you consider further falls in circulation and advertising.

So why?

Clearly he's bought a big brand. The Washington Post is considered erstwhile and authoritative but that being said, one wonders what does he see in newspaper publishing that justifies the price? And what does he see that the current Graham family owners couldn't?

It has been suggested that he just wanted to save an American institution - perhaps, because billionaires like to own newspapers and restaurants (vanity purchasing). The Post of course, was famed for the Woodward/Bernstein Watergate reporting and 250m is pocket money for a man worth possibly, 28 billion usd. Add to that, Bezo's comments that he won't be involved "day-to-day" would seem to indicate that vanity is not the driver.

However, he is known too as a soft hearted, decent guy and without any vanity.

Of course there's the potential for an e-paper play with great distribution potential through his Kindle business. A great newspaper delivered in a great new way. Possibly.

But fundamentally this buys him influence. Although clearly as the Amazon founder he had some of that too, but a newspaper owner gets you into the corridors of power. Papers like The Washington Post, make and break politicians. Make and break Presidents.

So I think that he doesn't have a plan just yet.... but he knows that it will bring kudos and influence - good enough for now. Then he can spend time thinking about how to change online publishing with a world class brand. At 250 million, that might be justification in itself.

Bezo's has gone from techy to establishment. With a 28 billion fortune, 250 million might represent a good investment in just that. Political influence.