I was minding my own business last night when I got the note below from a respected investor.
As you will see, the investor has had it with all the adulation and sympathy being showered on newspaper families like the Grahams, who are being extolled for their decades-long “stewardship” of institutions like the Washington Post and New York Times and pitied for the terrible misfortune they and society have recently endured.
In the common telling, the investor observes, the Grahams and other newspaper families are cast as victims of an unforeseeable and horrible trend–the unstoppable rise of an invasive technology that has crippled the newspaper business and threatened a profession that has held society together for decades. The Grahams have done their heroic best, this story goes, but the forces of evil have just been too numerous and overwhelming. Now, finally, the brave and intrepid Grahams have had no choice but to surrender. So the world will now go to the dogs.
The real story, the investor believes, is that the Grahams and other ‘newspaper families’ enjoyed decades of easy money and fame and then were confronted with a significant business challenge. Unlike many business owners, however, the Grahams failed to adapt to it:
I can’t take it anymore. All of this high-minded windiness on the Post, the Grahams, journalism, democracy, etc.
I took a screenshot of the Post home page the day of the big story itself [see below].
Note the big ad in the upper right of the home page.
The CPM [price per thousand views] on that was, what, 5 cents?
Slate, ironically, [a Washington Post Company company] analysed those particular ads a few days ago:
These are bottom-of-the-barrel remnant ads. They degrade the user experience, and are essentially consumer fraud on top of that.
And that’s the best they can do for the main ad on their home page.
What we have here is not a story of the decline of newspapers in America blah blah blah. What we have here is a story of basic business incompetence.
I agreed with the investor that the sympathy and adulation for the newspaper families was overblown. If there is another formerly fantastically profitable business in which the mogul owner gets to be referred to as a “steward,” for example, I haven’t heard of it. But I did point out that what’s happening to the newspaper business is classic disruption–an attack from below by cheaper, easier, and simpler services (digital delivery and advertising)–and that getting disrupted is an extremely difficult challenge for a business to overcome.
The investor was undeterred. He brought up a print media company in Germany, Burda Media, that has adapted just fine to the rise of the Internet–by quickly diversifying into many successful digital businesses:
Do a compare and contrast of the Washington Post Company (or for that matter the New York Times Company) with Burda Media.
Hubert Burda was the first media CEO to proactively visit a little Silicon Valley startup called Netscape and has built an amazing digital business since, from very similar starting points (and from Germany!). Today, Burda employs 10,000 people and is thriving.
There was nothing preventing the leadership of American newspaper/magazine companies from doing the same thing over the same period.
The investor is right about Burda. They’ve done an excellent job. And he’s right that there was nothing preventing American newspaper companies from doing the same thing.
And the Grahams actually did do the same thing, of course. They bought an education company that quickly became larger and more profitable than their newspaper. That education company, and some other assets (TV), will remain in the family portfolio now that the Washington Post has been jettisoned.
Interestingly, what the Grahams did not do was invest the quite-considerable profits from their other businesses in the future of the Post–a fact that should probably be noted in some of the Graham hagiographies. Instead, they dumped the paper the moment it stopped making them money.
It’s easy to “steward” a business when it’s also making you rich. It’s more difficult when the going gets tough.
The good news for the Post, as well as the readers who love it and most of the folks who work there, is that the Post’s new owner is perfectly willing to endure losses while investing in the future. (Amazon has been investing in the future for going on 20 years). The Post also has a perfectly healthy and growing digital business. The current digital business won’t sustain the print-paper’s high cost structure–nothing will–but it will still allow the Post to continue to produce an amazing amount of superb journalism.
And if the Post’s new owner, Jeff Bezos, is successful with his “experimentation” over the next few years, the Post’s digital business will become a healthy, vibrant, and profitable growth engine.
So, let the experimentation begin!
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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