The new owner of the Washington Post, Jeff Bezos, has been kind enough to promise
to pay the existing salary (or better) of everyone who works there for at least a year.
After that, though, all bets are presumably off.
And one thing that is instantly clear to anyone who so much as glances at the Washington Post’s financial performance is that the company is spending way beyond its means.
How much beyond?
Well, the Post lost about $US15 million in the second quarter. If you annualize that, the company is currently losing about $US60 million a year. And the losses are growing.
Now, it’s possible that Jeff Bezos will decide to keep investing (losing) buckets of money in the Post every year. But, even if he does this, he is likely to re-allocate that investment to promising opportunities, so the money doesn’t just get incinerated the way it is today. So it’s likely that, at some point, the Post will analyse itself and figure out what investments are promising and what it can really afford.
One area that obviously costs a lot at the Post is the newsroom.
The Post still has a startling number of journalists on staff — 640, according to David Remnick at the New Yorker.
640 is considerably fewer journalists than the Post had on staff a couple of decades ago (1,000), so to long-time staffers, the newsroom probably feels emaciated and puny. But compared to most newsrooms these days, 640 is a vast number of journalists.
How much do 640 journalists cost per year?
Well, given that the Washington Post employs excellent, experienced journalists, they probably cost about $US150,000 a year apiece, when including benefits, real-estate, T&Es, and so forth.
This suggests that the Washington Post is spending about $US96 million a year on its newsroom.
Now, here’s the great news.
The great news is that, even though the overall Washington Post is shrinking and losing money, the digital version of the Post is actually doing quite well. The digital version of the Post generated $US30 million of revenue in the second quarter, an amount that increased 15% year over year. Some of that revenue came from Slate, which will now be separated from the Post. But it seems safe to assume that the digital Washington Post itself generates at least $US100 million of revenue a year.
So, how many journalists can you afford on digital revenue of $US100 million a year? (The print Washington Post is shrinking and dying, so we’ll just ignore that for now.)
Well, assuming you want to make at least a little profit–say 10%-15%–here’s what sustainable numbers might look like:
REVENUE: $US100 million
NEWSROOM COSTS: $US35 million (35% of revenue)
SALES, TECH, and MANAGEMENT COSTS: $US50 million (50% of revenue)
OPERATING PROFIT: $US15 million (15% of revenue)
With that newsroom budget–$US35 million–the Washington Post would be able to sustainably afford about 250 journalists. That’s a far cry from the 640 it employs today.
But let’s assume that Jeff Bezos is willing to invest a bit of money in the Post (i.e., not make a profit).
And let’s assume that Bezos will be smart enough to figure out how to grow the digital revenue every year.
Then how many journalists could the Washington Post afford?
Here’s what the numbers might look like:
REVENUE: $US150 million
NEWSROOM COSTS: $US75 million (50% of revenue)
SALES, TECH, and MANAGEMENT COSTS: $US75 million (50% of revenue)
OPERATING PROFIT: $US0
This operating scenario would allow the Post to have a much bigger newsroom budget–say, $US75 million a year.
(That’s a huge newsroom budget, by the way. At Business Insider, we would be over-the-moon to have a budget like that. You could produce an unbelievable amount of super-high-quality digital journalism on that budget).
A newsroom budget of $US75 million would mean a newsroom of about 500 journalists.
500 journalists is a lot of journalists.
It is fewer than 640 journalists, true, but it’s not actually that many fewer.
So even if Jeff Bezos isn’t willing to burn unlimited pots of money at the Washington Post, this suggests that the Post could ultimately sustain a newsroom that is at least close in size to the one it currently has.
That’s good news for the folks at the Post!
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.