Over the past decade or so, Washington Post Co. Chairman and CEO Donald Graham has watched his flagship newspaper plow through five rounds of buyouts. The strategy behind the reductions was to leverage the Washington Post Co.’s great wealth — its pension kitty — to shore up one of its great weaknesses — the balance sheet of its newspaper assets. The buyouts trimmed The Post’s expense side, while also trimming its capabilities, if not its stated ambitions.
For a guy who became publisher of The Post in 1979 — right around the time of the paper’s near-monopoly heyday — the staffing pullback and other developments have taken their toll. The newshole has shrunk, the domestic bureaus have closed and Graham has logged his share of goodbye hugs. “The downsizing was difficult for him even though he saw the financial need for it,” says Leonard Downie, who served as executive editor for 17 years under Graham. “He had personal relations with everybody … He knew everybody.”
And there’s every indication that Graham would have continued presiding over a shrinking corps of colleagues. As Executive Editor Martin Baron told the Erik Wemple Blog before taking his position early this year, “The resources we have will be dependent on the revenues of the company. That’s as true of The Washington Post as it is true of the Boston Globe,” said Baron, who jumped from the Globe to the Post. “People will know where the resources are headed when they look at the revenues. It can’t be otherwise. No institution can spend more money than it has.”
Graham’s announcement on Monday afternoon that The Post newspaper, along with other, smaller properties, will be sold to Amazon founder Jeff Bezos for $250 million marked a brave acknowledgement that he hasn’t been able to stop the newspaper’s financial difficulties. The rough times have shown up in each and every quarterly financial disclosure, which can be relied upon to report wince-worthy print circulation losses and troubles in the revenue basket. As Graham wrote yesterday, “Our revenues had declined seven years in a row.”
In a chat with the Erik Wemple Blog, Washington Post Publisher Katharine Weymouth said that the decision to search for a buyer was made late last year. That was a time of editorial turnover at the paper: Former executive editor Marcus Brauchli, it was announced, would move into a corporate position to make way for Baron. The switch came amid speculation over how much longer the paper could hold onto its still-deep newsroom staff, which stood at around 600 before the last round of buyouts.
Few were aware that the company’s ownership was also considering replacing itself. “This was part of a process and the family has always been very conscious that we hold a mission-driven business and a public trust. … We absolutely could have continued to run it for many years and could have done a good job,” says Weymouth. But the paper’s execs were looking for someone with “new resources to bear and resources that we don’t have,” she says.
Could the term “resources” be a euphemism for “subsidies”? After all, Bezos does have a net worth of some $25 billion. The Post newspaper — a smaller accounting entity than the “newspaper division” in the financial reports — has squeaked along in marginal cash-flow profitability in recent years, according to a Post source. Nothing like a billionaire to pad the ledger, right? Nah: “He expects us to remain profitable,” says Weymouth.
A stated motive for the sale was that Bezos will take the paper into a private ownership arrangement (it is he, not Amazon, that’s making the purchase). This way, says Weymouth, the property won’t be “subject to the scrutiny of shareholders.” Funny thing, though: Graham always made a point of telling investors and analysts that his company would pay whatever it took to report the news.
Graham & Co. took those same values into their search for a new owner, according to a company source. “Public-spirited, deep-pocketed, nonpolitical and long-term — and in Bezos they found someone who fit the bill,” says the source. Post staffers expressed shock on Monday that their family-controlled newspaper would ever be sold. Shock, though, is far preferable to the outrage that many Los Angeles Times staffers are expressing over the possible purchasers — the Koch brothers, for example — of their employer. If The Post absolutely had to be sold in the interests of its own prosperity, was there a better choice out there?
According to statements, there won’t be a lot that will change in the short run. Weymouth will stay in place as publisher, and the paper’s editorial leadership will remain in place. Stability in the face of upheaval, in other words: A fitting legacy for the thoroughly steady-handed Graham.
There are two ways of looking at the management carryover. One way: If Bezos is considering “experimentation,” as he insists, how does he accomplish that with the same people who made the sale so critical? Another way: The 49-year-old Bezos will need to learn as he goes, since he doesn’t have experience running a newspaper. That’s Weymouth’s take on the thing: “I don’t think that he does know anything specific that we don’t know, but he has a great track record, contacts in tech community and invests for the long term. What’s nice is he’s…open about the fact that he’s new to this business.” In any case, says Weymouth, there’s no “magic bullet” to business success in newspaper publishing.
When asked whether she had any job-security assurances in the deal, Weymouth responded that she didn’t. “There never are,” she says. “I don’t have a contract now. Although I’m obviously family, I always understand that Don was running a business and if I wasn’t doing a good job, he would put in another publisher.”
Perhaps he would have. Over the past six years, the Post Co.’s newspaper division has experienced a 44 percent decline in operating revenues. Weymouth has been battling the same beasts that have sunk or hobbled other regional newspapers, including a bottoming-out of classifieds, the dollars-for-pennies tradeoff between print and online ad revenues, a recession and more.
Here’s to hoping that Bezos has some new and exciting ideas to save a business model that shows all the signs of spiraling determinedly into extinction. In a letter to Post employees, Bezos noted: “We will need to invent, which means we will need to experiment. Our touchstone will be readers, understanding what they care about — government, local leaders, restaurant openings, scout troops, businesses, charities, governors, sports — and working backwards from there.”
If the Erik Wemple Blog had a share of Washington Post stock for every media type who said something like that, we would own the Washington Post right now. That said, Amazon has an actual track record in understanding — and meeting — the needs of its customers.
Bezos has the look of an energetic newspaper owner who’ll write clever and spot-on memos; who’ll surely bring some digital tricks to this trade; and who’ll pack along his ultra-competitive spirit, a fabulous commodity in the newspaper business.
Still, he’ll be a newspaper owner, a job that has become synonymous with downsizing and heart-wrenching compromises between profitability and public-service journalism — just the drill that has clearly exasperated Graham. A few sentences from Graham’s letter to the world yesterday capture the tensions of his work: “We had innovated, and to my critical eye our innovations had been quite successful in audience and in quality, but they hadn’t made up for the revenue decline. Our answer had to be cost cuts, and we knew there was a limit to that. We were certain the paper would survive under our ownership, but we wanted it to do more than that. We wanted it to succeed.”
Should Bezos succeed in even tweaking this sector’s vicious cycle, his contributions to retailing and e-commerce may well look like modest achievements.