Washington Post to be sold to Jeff Bezos, the founder of Amazon
By Paul Farhi,
Updated: Monday, August 5, 8:12 PM
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.”
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