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.
Interesting numbers on UK Newspapers from this month's Economist (always well worth a read by the way).
Since 2008, the UK nationals circulation (Britain has 12 nationals) has been in decline and much more when compared to the US, Japan and Europe. They're down by 25%.
UK newspapers traditionally have depended on the casual reader buying off the cover (so a new Royal baby is a great fillip for them) rather than a daily buying habit or subscriptions. Tabloid headlines consequently, are key here to attract that casual reader in the newsagent.
But it is far easier for a reader not to buy a newspaper in the shop there and then, rather than cancel a subscription which is the prominent way newspapers are sold in the US for example.
The Telegraph (superb publication), FT, Guardian, Independent and Times all are all pushing subscriptions and with some success. From December 2008 to May 2013, subscriptions have gone from 26% to 41% of overall circulation.
The Telegraph for example, are giving away a free Kindle with every subscription and others are bundling digital access with the sub. Clearly too, subs are better revenue long term and give numbers on readers profiles which can be used for targeted Ads.
9% of British readers are paying for online news (paywalls) up from 4% in 2012. Some newspapers are adding content to their digital edition such as The Sun with clips of Premier League soccer games. Creating more worthwhile content that's worth paying for rather than just, an online version of the newspaper.
All of this though, is not compensating for the loss in Advertising revenue. Newspaper Ad revenue estimated by The Economist, will be 2 billion stg, about half of its 2005 level. The Times loses money, despite its successful paywall.
Like Ireland however, Britain has too many newspapers for the number of readers - it is an over saturated market. And free-sheets, such as The Evening Standard, prosper.
So with the circulation declines and albeit the efforts to grow subs, the decline in Ads and the march of online, will mean that things will tighten up through the potential closure of some of those 12 titles. Nevermind competitive threats from other and new media. Although as someone said, newspapers are like soccer clubs....some billionaire will buy them.
Indeed. Like Ireland.
