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| Cashing In And Cashing Out, Time To Move On |
Washington Post to be sold to Jeff Bezos, the founder of Amazon
By Paul Farhi,
The Washington Post Co. agreed Monday to sell its flagship newspaper to Amazon.com founder and chief executive Jeffrey P. Bezos, ending the Graham family’s stewardship of one of America’s leading news organizations after four generations.Bezos, whose entrepreneurship has made him one of the world’s richest men, will pay $250 million in cash for The Post and affiliated publications to The Washington Post Co., which owns the newspaper and other businesses.
Seattle-based Amazon will have no role in the purchase; Bezos himself will buy the news organization and become its sole owner when the sale is completed, probably within 60 days. The Post Co. will get a new, still-undecided name and continue as a publicly traded company without The Post.
The deal represents a sudden and stunning turn of events for The Post, Washington’s leading newspaper for decades and a powerful force in shaping the nation’s politics and policy. Few people were aware that a sale was in the works for the paper, an institution that has covered local communities and presidents and gained worldwide attention for its stories about Watergate scandals and, in June, disclosures about National Security Agency surveillance programs.
Post Co. chairman and chief executive Donald Graham and his niece, Post publisher Katharine Weymouth, broke the news of the sale to a packed meeting of employees at the company’s headquarters in downtown Washington on Monday. The mood was hushed; several veteran employees cried as Graham and Weymouth took turns reading statements and answering questions. “Everyone who was in that room knows how much Don and Katharine love the paper and how hard this must have been for them,” said David Ignatius, a veteran Post columnist who was visibly moved after the meeting.
But for much of the past decade, the paper has been unable to escape the financial turmoil that has engulfed newspapers and other “legacy” media organizations. The rise of the Internet and the epochal change from print to digital technology have created a massive wave of competition for traditional news companies, scattering readers and advertisers across a radically altered news and information landscape and triggering mergers, bankruptcies and consolidation among the owners of print and broadcasting properties.
“Every member of my family started out with the same emotion — shock — in even thinking about” selling The Post, Graham said in an interview Monday. “But when the idea of a transaction with Jeff Bezos came up, it altered my feelings.”
He added: “The Post could have survived under the company’s ownership and been profitable for the foreseeable future. But we wanted to do more than survive. I’m not saying this guarantees success, but it gives us a much greater chance of success.”
Bezos, 49, will take the company private, meaning he will not have to report quarterly earnings to shareholders or be subjected to investors’ demands for ever-rising profits, as the publicly traded Washington Post Co. is obligated to do now. As such, he will be able to experiment with the paper without the pressure of showing an immediate return on any investment. Indeed, Bezos’s history of patient investment and long-term strategic thinking made him an attractive buyer, Weymouth said.
The Washington Post Co.’s newspaper division, of which the Post newspaper is the most prominent part, has suffered a 44 percent decline in operating revenue over the past six years. Although the paper is one of the most popular news sources online, print circulation has dwindled, too, falling an additional 7 percent daily and on Sundays during the first half of this year.
Ultimately, the paper’s financial challenges prompted the company’s board to consider a sale, a step once regarded as unthinkable by insiders and the Graham family.
With extraordinary secrecy, Graham hired the investment firm Allen & Co. to shop the paper, company executives said. Allen’s representatives spoke with a half-dozen potential suitors before The Post Co.’s board settled on Bezos, a legendary tech innovator who has never operated a newspaper.
Bezos, in an interview, called The Post “an important institution” and expressed optimism about its future. “I don’t want to imply that I have a worked-out plan,” he said. “This will be uncharted terrain, and it will require experimentation.”
“There would be change with or without new ownership,” he said. “But the key thing I hope people will take away from this is that the values of The Post do not need changing. The duty of the paper is to the readers, not the owners.”
Despite the end of the Graham family’s control of the newspaper after 80 years, Graham and Bezos said management and operations of the newspaper will continue without disruption after the sale.
Weymouth — who represents the fourth generation of her family involved in the newspaper — will remain as publisher and chief executive of the Bezos-owned Post; executive editor Martin Baron will continue in his job. No layoffs among the paper’s 2,000 employees are contemplated as a result of the transaction, Bezos and Graham said.
Bezos said he will maintain his home in Seattle and will delegate the paper’s daily operations to its existing management. “I have a fantastic day job that I love,” he said.
In a note to Post employees on Monday, Weymouth wrote: “This is a day that my family and I never expected to come. The Washington Post Company is selling the newspaper that it has owned and nurtured for eight decades. ”
The new owner of The Post may be as much of a surprise as the decision to sell the paper in the first place.
Throughout his storied business career, Bezos, who has a net worth of $25.2 billion, has been an empire builder, although he has never shown any evident interest in the newspaper business. He has, however, maintained a long friendship with Graham, and they have informally advised each other over the years. Graham, for example, advised Bezos about how to feature newspapers on the Kindle, Amazon’s popular e-reader.
A computer-science and electrical-engineering student at Princeton University, Bezos used his tech savvy to rise rapidly at a New York hedge fund company, becoming its youngest senior vice president.
He founded Amazon at 30 with a $300,000 loan from his parents, working out of the garage in his rented home in Bellevue, Wash. He called his creation Amazon in part to convey the breadth of its offerings; early promotions called the site “Earth’s Biggest Bookstore.”
Since Amazon’s founding, Bezos has devoted himself to building it into a retail behemoth that sells everything from diapers to garden equipment to data storage at low prices with a click of a mouse. It rung up $61 billion in sales last year.
In the process, Amazon has wreaked havoc on traditional brick-and-mortar stores. Many retailers have expressed dismay and resentment at Amazon’s ability to sell the same products at a lower price, in part because of its efficiency but also because it was not collecting sales tax in most states.
For long periods, however, Bezos frustrated investors and analysts who wanted Amazon to turn profits more quickly or more regularly. Because of heavy investments in warehouses and new businesses, Amazon did not deliver a profit until the company’s ninth year of operation, and seven years after selling shares to the public.
At times, Bezos has been openly disdainful of Wall Street’s demands for bigger quarterly profits. He told Fortune magazine last year, “The three big ideas at Amazon are long-term thinking, customer obsession, and willingness to invent.”
Under Bezos, the company’s drive into new businesses has been relentless. To supplement its line of Kindle readers and tablets, for example, Bezos pushed Amazon into book publishing itself, upsetting rivals such as Barnes & Noble and book agents alike. (Bezos is an avid newspaper reader; in addition to The Post, he said, he reads the New York Times and Wall Street Journal.)
But Amazon’s breakneck growth has also come with a few stumbles. Among other investments, Bezos bought a majority stake in Pets.com in 1999 and paid $60 million for a portion of Kozmo.com, a delivery service. Both companies went out of business. An attempt to compete with eBay in online auctions was not successful.
As a result, an investment in Amazon comes with the likelihood of erratic earnings — and sometimes no earnings at all. The company lost $39 million last year.
Ultimately, however, Amazon has rewarded patient believers. Amazon’s sales have increased almost tenfold since 2004, and its stock price has quadrupled in the past five years. “We believe in the long term,” Bezos told Fortune, “but the long term also has to come.”
Friends and competitors have described Bezos as cerebral, demanding, curious and given to asking challenging questions. He shows little tolerance for those who are poorly prepared but can be charming and quick to laugh. “If Jeff is unhappy, wait five minutes,” his wife has said of him.
Bezos’s personal ventures have also given little hint of any major interest in the news business. He started a private company called Blue Origin in 2000 to develop a space vehicle and has acquired land in west Texas as a rocket launch site, both part of a lifelong passion for space travel. He is also reportedly spending $42 million to develop a clock inside a mountain in Texas that is designed to last 10,000 years — a symbol of Bezos’s business philosophy of thinking long-term.
In naming Bezos its “Businessperson of the Year” in 2012, Fortune called him “the ultimate disrupter . . . [who] has upended the book industry and displaced electronic merchants” while pushing into new businesses, such as TV and feature-film production.
His drive and business creativity have earned him favorable comparisons to Steve Jobs, Apple’s co-founder and a confidant of Don Graham and his mother, Katharine Graham, who served as Post Co. publisher, chairman and chief executive. This year, the Harvard Business Review ranked Bezos as the second-best-performing chief executive in the world during the past decade, following only Jobs, who died in 2011.
In his announcement to employees Monday, Don Graham quoted billionaire investor Warren Buffett, a longtime adviser to The Post Co., calling Bezos “the ablest CEO in America.”
Bezos’s reputation and smarts made him attractive as a buyer of The Post, Weymouth said in an interview. “He’s everything we were looking for — a business leader with a track record of entrepreneurship who believes in our values and cares about journalism, and someone who was willing to pay a fair price to our shareholders,” she said.
Weymouth said the decision to sell The Post sprang from annual budget discussions she had with Graham, her uncle, late last year. “We talked about whether [The Washington Post Co.] was the right place to house The Post,” she said. “If journalism is the mission, given the pressures to cut costs and make profits, maybe [a publicly traded company] is not the best place for The Post.”
Any buyer, she said, “had to share our values and commitment to journalism or we wouldn’t sell it.”
The sale to Bezos involves The Post and its Web site (washingtonpost.com), along with the Express newspaper, the Gazette Newspapers and Southern Maryland Newspapers in suburban Washington, the Fairfax County Times, the Spanish-language El Tiempo Latino newspaper and the Robinson Terminal production plant in Springfield. Bezos will also purchase the Comprint printing operation in Gaithersburg, which publishes several military publications.
The deal does not include the company’s headquarters on 15th Street NW in the District (the building has been for sale since February),or Foreign Policy magazine, the Web sites Slate and The Root, the WaPo Labs digital development operation or Post-owned land along the Potomac River in Alexandria.
The Post, founded in 1877, has been controlled since 1933 by the heirs of Eugene Meyer, a Wall Street financier and former Federal Reserve official. Meyer bought the paper for $825,000 at a bankruptcy auction during the depth of the Depression.
After years of financial struggle, Meyer and his successor as publisher of The Post, son-in-law Philip L. Graham, steered the paper into a leading position among Washington’s morning newspapers. They began expanding the company, notably by acquiring TV stations and Newsweek magazine in 1963. (The company sold the magazine for a nominal fee to billionaire Sidney Harman in 2010 after years of losses.) In later years, the company added cable TV systems and the Kaplan educational division, currently the company’s largest by revenue.
Upon Graham’s death in 1963, his widow (and Meyer’s daughter) Katharine Graham took over management of the company. Despite her inexperience as a corporate executive, Mrs. Graham ably led the company through a colorful and expansive period.
The newspaper rose to national stature under Benjamin C. Bradlee, whom Katharine Graham had hired from Newsweek in 1965 as a deputy managing editor and promoted to executive editor in 1968. Bradlee oversaw the opening of new reporting bureaus across the nation and around the world, started the Style section and ignited the paper’s long run of Pulitzer Prize-winning reporting.
The Post’s and New York Times’ publication in 1971 of stories based on the Pentagon Papers — a secret government study of U.S. military and political involvement in Vietnam — led to a landmark legal case in which the Supreme Court prohibited the government from exercising “prior restraint,” or pre-publication censorship, against the newspapers.
The arrest of five men accused of breaking into the Democratic National Committee’s headquarters at the Watergate office complex in 1972 triggered the newspaper’s unearthing of a series of illegal activities orchestrated by President Richard M. Nixon and his closest advisers. The revelations eventually led to Nixon’s resignation. The events were memorialized by the movie “All the President’s Men,” which turned The Post — as well as Bradlee and reporters Bob Woodward and Carl Bernstein — into household names.
Seven years after Nixon’s resignation, however, the paper suffered one of its darkest hours. It was forced to give back a Pulitzer Prize awarded to reporter Janet Cooke in 1981 after she admitted that her story about an 8-year-old heroin addict in Washington named Jimmy was a fabrication.
Katharine Graham, who died in 2001, was succeeded as Post publisher by her son, Donald, in 1979. He also succeeded her as chief executive of The Washington Post Co. in 1991.
During the 1990s and into the new century, under Bradlee’s successor, Leonard Downie Jr., the paper enjoyed arguably its most successful run in terms of profits, circulation and journalism. With little direct competition in Washington, the newspaper division’s revenue and profit soared. The Post won 25 Pulitzers under Downie, including six in 2008, the year he retired and was succeeded by Marcus Brauchli as editor.
The Grahams are among the last of a dwindling number of multigenerational family owners of metropolitan newspapers. Most major newspapers were once owned by local families with decades-long ties to their town or city, but that ownership profile has faded with succeeding generations and has largely disappeared in the Internet era.
Many of the heirs to great newspaper fortunes have sold their holdings to corporations or wealthy investors with little connection to the regions that the newspapers helped shape or, in some instances lately, to local businesspeople whose wealth was more recently acquired.
Over the past 20 years, the list of family-owned companies that have sold their newspapers holdings include the Chandlers (owners of the Los Angeles Times, among others), the Cowles family (Minneapolis Star Tribune), the Copleys (San Diego Union-Tribune) and the Bancrofts (Wall Street Journal).
The New York Times, controlled by the Sulzberger family, is among the last major dailies still operated by descendants of its early proprietor. It acquired the Boston Globe from members of the Taylor family in 1993 for $1.1 billion; it announced last week it was selling the paper for a mere $70 million to Boston businessman John W. Henry, who owns the Boston Red Sox baseball team.
Following the sale to Bezos, the Graham family will continue to control the renamed Washington Post Co. through its closely held stock, known as Class A shares. The A shares cannot be sold on the open market but outvote a second class of public stock, called Class B shares. The New York Times Co. has a similar stock structure, ensuring the Sulzbergers’ control.
Bezos, who ranks 11th on the Forbes 400 list of wealthiest individuals in the United States, has given little indication of his ideological leanings over the years. He has not been a heavy contributor to political campaigns, although he and his wife have regularly donated to the campaign of Sen. Patty Murray (D-Wash.). In years past, they had given modest contributions to a handful of Republican and Democratic senators.
Bezos’s political profile rose suddenly and sharply when he and his wife, MacKenzie, agreed last year to donate $2.5 million to help pass a referendum measure that would legalize same-sex marriage in Washington state, catapulting them to the top ranks of financial backers of gay rights in the country. The donation doubled the money available to the initiative, which was approved in November and made Washington among the first states to pass same-sex marriage by popular vote.
Perhaps the single biggest item on Amazon’s legislative agenda is a bill that would empower all states to collect sales tax from online retailers.
Amazon is required to collect sales taxes only in states where it maintains a physical presence, such as a warehouse. But Amazon now is supporting the bill, which has passed the Senate and is pending in the House. State sales taxes no longer pose a real threat to Amazon; with an emphasis on same-day shipping, the company is building distribution warehouses across the country and would have to pay the tax anyway. Last month, the company announced it would hire 5,000 employees at these warehouses, an ambitious growth strategy that is hurting profits in the short run.
Bezos’s most notable charitable donations have been twin $10 million contributions to two Seattle-based institutions, the Museum of History and Industry and the Fred Hutchinson Cancer Research Center. The gift to the museum was for the creation of a center for innovation that would be situated a few blocks from a new Amazon headquarters campus.
Baron, the former editor of the Boston Globe who joined The Post as its editor in January, said he was surprised to learn last week that the newspaper was being sold.
But he added “I’m encouraged that the paper will be in the hands of a successful businessperson who understands the world of technology as well as anyone. He’s expressed his commitment to the organization and to its continued independence. . . . I came here because I wanted to join a great news organization, and it will continue to be one.” SOURCE
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