The Post did try to act on some of Kaiser’s insights. Among other technology ventures, the paper drew up prototypes and in 1993 even launched an online product, Digital Ink, which charged for access on a proprietary AT&T platform and had about 30,000 subscribers. By late 1995 as the potential for the Web became apparent and readers turned to faster, easier-to-use Web browsers, Graham and Spoon changed gears and turned to an ad-supported Web model. As Spoon put it later, The Post was “winning the county track meet, but the Olympics lay ahead.”
Spoon, a lawyer who did his undergraduate work at the Massachusetts Institute of Technology, was anxious to keep The Post ahead. “As AOL was coming on, I’d go to the movies, there was ‘Sleepless in Seattle.’ There was the e-mail going back and forth. Everybody’s laughing. And I’m suffering,” he said in a March interview for the Riptide project.
In an interview for this article, Spoon said: “The Post was early. The board gave me and Don license to build for the Internet. We lost a lot of money on the way and thank God we did. We built a platform early.”
The Web venture brought tension with the newsroom. Graham put the Web operation in Arlington, in part to sidestep the union but mostly to let it develop outside a newsroom he felt was stuck in a different era and was antagonistic to the Web. Critics say the separation of the newsroom and Web operation impeded coordination and duplicated tasks.
One example of the difference between the immediacy of the Web and the traditions of the newsroom: During the 1998 Microsoft antitrust trial, Post reporter Rajiv Chandrasekaran was sending reports at midday and Spoon thought they should be put on the Web immediately, while Downie, then the executive editor, thought the story was incomplete and publication should wait until it was ready for the newspaper’s print edition.
The Post was also slow to hire its own technology experts and engineers. “To me, that is one of our central failures,” Graham said in the Riptide interview. As a result, much of The Post’s software was clunky or slow, frustrating people inside the company who were trying to compete in the minute-to-minute race of the Web as well as readers who, armed with high-speed broadband, wanted faster page loading times or had trouble finding articles. Each wave of new technology — most recently mobile and video — brought new challenges.
Tangled Web strategy
Nonetheless, in 2000 The Post’s Web site was up and running and the cliffhanger election between Al Gore and George W. Bush drew a surge of traffic. “After the 2000 election, a large Web audience came to The Post without a dime spent on marketing,” said then-managing editor Steve Coll, who is now dean of Columbia University’s school of journalism. “It was like a giant crowd was standing out in the street, and we were looking down on them without knowing whether we should just throw them our chicken bones or try to give them more.”
One of the defining moments in the story of The Post was the 2003 managers’ meeting at the Inn at Perry Cabin on Maryland’s Eastern Shore. Coll proposed tapping the paper’s national and international reputation and putting more resources into making The Post’s Web site into the digital world’s top news site. He believed that big-city dailies were marching like lemmings off a cliff, with the weakest going first and The Post, among the strongest, going last but still going.
“There were measurable and fairly certain risks in staying the course that would lead to the cliff’s edge and the only question was how quickly,” he said in a interview for this story. “The other course was to turn around and take a substantial risk using debt to buy things and reposition the paper and its journalism. It might fail spectacularly, but it would be noble.”
In response, Graham “dumped all over it,” said another editor who attended the session. Graham reiterated his mantra that the paper was and would remain a local business, with a still enviable local market penetration and local ads. Remember the Loudoun County fireman, he said, he’s our customer. Even if the local ads were vanishing, they were, and still are, a key revenue source for the paper. They also make up a sizable chunk of the online ads.
For a variety of reasons, Coll left the paper about a year later.
Although supporting the continued expansion of the Web site, Graham has remained committed to that local business model. While the New York Times expanded international and national bureaus, and widened its lead in online readership, The Post trimmed its foreign staff and shut down all of its domestic bureaus outside Washington. When it came to building a large national audience, the paper increasingly relied on its expertise about Washington.
To a degree, Graham associated the national ambitions of the staff with an elitism he disliked. True, his own pedigree was privileged, but he had balanced it with his stints in Vietnam and as a police officer, and a passion for improving the education of the District’s least fortunate.
“We got better and better educated, our staffs. Washington, which is a fabulously educated market, has 40 percent college graduates, but The Post newsroom is 100 percent college graduates,” he said to Huey. “We stopped being as interested, all of us, including me, in the comics, the horse racing, which used to be a big deal.”
Weymouth said, “The Times serves the 1 percent, the elite,” albeit on a national scale. By comparison, she said, Graham had decided that The Post would be “for teachers, taxi drivers, and police officers as well as the Hill.” She said, “We want to serve the real people.”
‘Don’t lose money’
At the time of the Coll debate, it looked as though cutbacks would be inevitable, but Graham and others underestimated the magnitude of the pressure to come. Coll recalls that Graham “would say in this ‘someday, my son, this will all be yours’ sort of way, that I would have to cut 2 percent a year out of newsroom for next 10 years. I thought that’s not so bad. The first five are a gimme.” So, Coll recalls: “I would say to people we have 10 or 15 years to figure this out. And I think Don thought we had 20 years. It turned out we had five years.”
In mid-2008, just after the paper won six Pulitzers for work done the year before, 231 people in the newspaper division took buyouts, creating $79.8 million in charges and contributing to the first overall operating loss since the company went public 37 years earlier.
In 2009, The Post closed a costly printing plant that had been opened only 11 years earlier.
As buyout followed buyout in the newsroom, tension rose. Hills and Weymouth absorbed a great deal of the newsroom criticism, and it didn’t help that Weymouth — and other company executives — received hefty performance bonuses that people in the newsroom felt were a reward for cutting staff. “Cutting can enforce a certain discipline. It forces you to look at what readers value,” Weymouth said. But, she added in an interview: “The mission was to cut as little as possible. The marching orders from Don and the board were ‘don’t lose money.’ ” Asked whether that was the right strategy, she deferred to her uncle.
“Don was the one pushing the budget cuts,” a onetime senior Post newsroom executive said on the condition of anonymity to protect relationships. “He always gets off easy as the avuncular figure up on the ninth floor.”
“It’s a very reasonable objective set by a very reasonable guy who just wanted to make a little money,” one senior business executive said.
Tighter budgets inflamed friction over visions of what The Post should be. How much should it generate with its own original reporting vs. piggybacking on work generated elsewhere as is done at Gawker and many other online publications? Should it aspire to be very good, or, in the words of one Post business executive, just good enough? Should it compare itself with the New York Times, a national publication, or crumbling big-city dailies whose business models were historically closer to The Post’s?
This played out in battles over newsroom budgets and control over areas such as who should control the design of applications for mobile phones. Hills tangled not only with then-executive editor Brauchli, but other senior company people, too. Hills compared The Post to the Huffington Post and the newspaper in Dayton, Ohio. He had what was supposed to be an off-the-record conversation in spring 2012 with a small group of reporters at the home of former staffer Bradley Graham, where he described a more limited vision of the paper’s ambitions and resources. The most inflammatory comments were all leaked to the publication AdWeek.
Hills believed his comments were misinterpreted, and that the newsroom needed to face the financial reality.
True, no one in the newsroom wanted to be Dayton, but even the Times offered limited comfort as a business model. It, too, has bought out some reporters as it struggles with declining revenue and a heavy debt load.
A year later, Graham was staring down The Post’s financial realities. “Don gave me numbers for the next several years’ finances,” Spoon said. “He wasn’t forecasting profits.”
The Buffett effect
Another factor in Graham’s decision: Warren Buffett. Graham repeatedly talks about his responsibility to shareholders, and there is no bigger outside shareholder than Buffett’s Berkshire Hathaway, with 27.68 percent of stock. Buffett was a director of The Post Co. for 26 years and an adviser and confidant of Don’s mother, Katharine, for even longer.
He also guided investments related to the pension fund, finding two talented managers who made it vastly overfunded — an anomaly in American business. A sizable chunk of Berkshire Hathaway stock helped. That cushion helped finance the buyouts in recent years. At the end of 2012, the fund had an excess of $605 million, more than 40 percent beyond its obligations.
Even as Graham is getting out of the business, Buffett is jumping in. Buffett continues to predict declines in ad, circulation and profits of newspapers. But over a 15-month period through March 1, he spent $344 million to buy 28 newspapers — including his hometown paper, the Omaha World-Herald. In his annual letter to shareholders, he noted that the papers were very cheap and added that while they weren’t growing they still “should be profitable for a long time to come.”
Yet Buffett’s vision of newspaper success doesn’t reflect The Post’s model. He bought mostly small newspapers from Media General, leaving behind the chain’s Tampa newspaper. He has also shut down one of the papers he did buy. In his annual report, he said that big newspapers have lost their primacy in many areas, but that they can keep that primacy in local news where people read about the mayor, taxes or high school football.
“A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end,” Buffett wrote.
But The Washington Post Co. isn’t Berkshire Hathaway. If the Graham family wanted to, it could sink more money into the newspaper instead of diversifying, as it has recently, with small acquisitions in the hospice and boiler ignition businesses. After all, with two classes of stock, A and B shares, the family holds the only votes that counted.
“The whole idea of the dual stock structure was to preserve the family’s interest,” Morton said. “The only thing that would happen to the newspaper would be what the family would have wanted to happen. The theory was that if it came to it they could thumb their nose at Wall Street. And the company in early days did.”
Over the years the company had branched out into a cable provider and half a dozen broadcast television stations. Morton believes the acquisition and growth of the Kaplan education division altered that attitude even more. “The company changed when they got hold of Kaplan. As Don acknowledged, ‘We’re no longer a newspaper company but a company that happens to own a newspaper.’ ”
The erosion of the newspaper franchise has made it less important to shareholders. In 1991, the newspaper division — then as now mostly The Post itself — was 47 percent of total company revenue; now it has shriveled to about 15 percent.
“Previous management of the newspaper (that would be me) did not see clearly the drastic changes that were coming to this business,” Graham wrote in the annual report for 2009.
Wall Street and investors seem buoyant about its sale. The Friday before the sale announcement the stock, which had risen sharply earlier in the year, was selling for $559.95 a share. On Friday the stock closed at $610.99 a share.
“There’s really only one loser in this,” said a longtime Post company executive, “and that’s Don.”
Trying to fill the gaps
In his 2012 annual report, Buffett noted that for decades newspapers made money with little effort. “As long as a newspaper was the only one in its community, its profits were certain to be extraordinary; whether it was managed well or poorly made little difference,” he wrote. “As one Southern publisher famously confessed, ‘I owe my exalted position in life to two great American institutions — nepotism and monopoly.’ ”
The Post also suffered because for years ad sales people could essentially wait for the phone to ring; sales now require a more aggressive and creative strategy. A senior Post business executive acknowledged as much, albeit with a jab at the news department. “We were monopolists in the ad department,” the executive said, “and we were monopolists as journalists.”
In the 1990s, Spoon and many others thought digital ad revenue would not only fill in the gap left by declining print ads but exceed them. That didn’t turn out to be the case because advertisers could count clicks and sought to drive down the price they paid for each one. And even though The Post tried a variety of online methods to hang on to classified ads leaving the paper, the competition for such ads remained fierce.
“The problem was the newspaper was a package and you could sell that package. People would pay a quarter and while they were at it would see a tire ad or movie review,” said another former Post executive. “And you got a tremendous return on that investment. . . . The Web means you have to compete for every click.”
“I think it’s going to be challenging for broad-based, general interest news to bring together in one place, electronic or print, what used to be the bundle that was offered because of fragmentation,” Spoon said in his March interview with Huey, before he learned that Graham was going to sell the paper. What lies ahead, he says is “personalization, user-generated content, professional- and user-sourced curation.”
“When the tiles come back together, it’s not going to look like the painting with just three colors inside a given frame. It’s going to be different for every person,” he said.
Many people at The Post mourn missed opportunities, and with the benefit of hindsight there have been many. The Post sought to invest in Facebook at an early stage, an investment that would now be worth several billion dollars. The late Christopher Ma, a Post executive whose daughter knew Facebook founder Mark Zuckerberg at Harvard, helped bring together Zuckerberg and Graham, who agreed on an investment. But Zuckerberg later opted to go with a venture capital firm with more tech experience and Graham politely bowed out.
Some critics have said that The Post erred by failing to hang on to staffers John Harris and Jim VandeHei instead of letting them go to Allbritton and start Politico, which has its own ambitions to become a Washington player and stake a claim in the political reporting niche. Graham says, however, that while reporters at The Post compete with Politico, from a business point of view Politico is not a significant competitor.
Spoon has said The Post lost out by not buying more cable networks or television stations when they were far cheaper than they are now. It looked at investing in eBay, but didn’t.
One miss that isn’t mourned: The Post’s bid for the Boston Globe. It lost to the New York Times, which paid $1.1 billion in 1993. In August, the Times sold the Globe for just $70 million.
To some analysts, greater investment success — or continued big profits at the now-struggling Kaplan education unit — would have given Graham a greater ability to subsidize losses at the newspaper.
But people who know Graham say he doesn’t think that way. “It’s each business on its own bottom,” Spoon said. “That’s the way it’s always been run.”
One senior Post Co. executive says that greater investment success wouldn’t have changed Graham’s mind. “Having a lot of money in the bank is hardly a guarantee that you will solve all these problems,” he said. “The company always had enormous borrowing capacity. But Don felt what it was going to take was not something that could be easily envisioned within the confines of a public company.”
Some longtime Post business people respect Graham’s decision but don’t necessarily agree with it. As the senior executive put it, if you had called an ad company and asked what it would cost to build the kind of reputation the paper had, the answer would have been: untold millions.
That might be one reason Bezos is investing in the paper. “I knew the quality of the people would be very high,” he said on ABC’s “Good Morning America” on Wednesday. “The business challenges in the newspaper industry have nothing to do with the quality of the people. These are big industry-wide trends.”
A sense of loss
Even people who have differed with Graham tend to feel loyalty toward him. “I love Don and would step in front of a bus for him,” Coll said. Even though Graham didn’t adopt his strategy, Coll said, “I don’t feel aggrieved about any of this.”
Meanwhile, Graham isn’t completely done with the news business. Slate and Foreign Policy were not part of the Bezos purchase. Neither was WaPo Labs, whose head, Ravindran, Graham has called “the most valuable player at The Washington Post.” Graham is also a fan of a WaPo Labs software called Trove, which gave rise to Social Reader. After the sale of the paper, the company will launch a new version of Trove, a tool for creating personalized newspapers. Although Trove failed to get traction upon its first release, Social Reader has been downloaded by nearly 25 million Facebook users, whose contacts could help jump start a new marketing drive.
The remaining company will also include Social Code, a social media marketing agency, which Graham said in the most recent annual report was the fastest-growing part of the entire company, albeit from a small base. Graham wrote that its revenue “almost doubled” and that it had “set ambitious plans for 2013 and beyond.” He also noted it is run by Laura Graham O’Shaughnessy, his daughter.
But there is still a sense of loss among some on the business side who were attracted to work for the company because of the mission and prestige of working for the paper. And unlike some families, said one business executive, there was never any question among the corporate children about which child was loved most.
In the April video, the family legacy literally hangs over Graham in the set of cartoons drawn by the late Herbert Block, who went by Herblock.
“A newspaper should serve as the conscience of its community,” said Graham’s grandfather Eugene Meyer, who bought The Post out of bankruptcy in 1933. Those words were written across a flag that towered over the Capitol and Washington Monument in the first of the Herblock cartoons hanging behind Graham in his office.
The second cartoon, inscribed to Katharine Graham, shows the desk of her late husband, Phil, with a note reading: “The Post is an independent newspaper . . . fixed with a love of liberty, capable of indignation over injustice, and aware of the destiny and responsibility of America as a world leader . . . ”
In the third, done after Katharine Graham’s death, an angel with a bugle hovers above a cloud next to a figure inscribing Kay’s name in a book. Above the caption reads: “Call Horace Greeley and Joe Pulitzer and the rest, and tell them she’s here.”
What this very public figure and very private person is feeling on the eve of the sale isn’t completely clear. Graham says he’s tired of talking about it and wants to leave the talking to Bezos, Weymouth and Baron. But it’s clear he’s leaving with a mixed sense of accomplishment and regret.
At one point in the April interview, there was this exchange:
Huey: “The truth is, we haven’t found very many stupid people going around interviewing for these things.”
Graham: “Yes you have. You’ve found plenty of people who weren’t smart enough, including me.”