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Why The Washington Post isn’t a charity case for Jeff Bezos

Picture this on a Kindle.

If Don Graham were not such a serious person, his announcement this afternoon that Jeff Bezos was purchasing his family's company might have seemed like a joke. The Post seems so very old media for the phenomenally innovative tech entrepreneur. And it's true, Jeff Bezos has a very whimsical attitude when it comes to his personal stable of acquisitions--maybe he just wanted a newspaper to even it out a bit.

But Alan Mutter, who knows the media business and the tech world better than most, thinks there are many ways in which buying a legacy newspaper makes all the sense in the world for the Seattle-based billionaire. Bezos hasn't talked yet about his future plans for the company, but from what we know, it's fair to speculate a bit.

First of all, don't be deceived by the fact that Bezos is buying it himself, rather than Amazon--there's little reason to believe this is a passion project. It just would've been tricky to make it a public takeover, because corporations don't know how to value a newspaper's future earnings. And besides, though the markets have been remarkably patient with Amazon's continued losses, a money pit like the Post would've been harder to stomach.

"If Jeff Bezos had bought it with Amazon's money, the shareholders would've killed him," Mutter says. "But if he owns it, he can use all the tools that are available to Amazon. And if he does something with the Washington Post brand that advances the story for Kindle or Amazon Prime, they aren't going to mind."

Another clue: $250 million, though less than what a lot of other things cost, is a lot of money for a company with a lot of liabilities (the Boston Globe, which serves a similarly-sized region, sold for $70 million over the weekend).

"The Grahams are probably the last people in the world who'll make money selling a newspaper," Mutter says. "He overpaid. And why would he overpay? He sees the value in a brand that far surpasses what he's looking at today."

So how's that going to happen? A few ideas.

1. The Post's website--which it's fair to expect will be overhauled--could be a major new sales and advertising platform. "Newspaper publishing companies being agents of commerce is a major new opportunity in Bezos world," Mutter says. "He invented e-commerce, you don't think there's going to be e-commerce on every page of The Washington Post?"

2. It's good to know things about your customers. Especially your readers. Most media companies watch where their readers come from, but Amazon has taken audience tracking and predictive analytics to a whole different level in order to figure out what they might want to buy. Integrating a news service, just like a book discussion site, could provide even more data.

3. Content still matters, and so does reputation. Amazon's biggest foray into content so far isn't Business Insider. It's Amazon Publishing, which has put out hundreds of books under several imprints. The problem is, it's still hard to attract the best authors to an upstart internet banner, when they can still gain the imprimatur of a Farrar Straus & Giroux or a HarperCollins. "The early adopters of a straight-to-digital publishing model are not going to the the first-rate producers. Hillary Clinton is not going to publish her memoir with Amazon," Mutter says. "There are all kinds of ways in which content will find its way to the digital marketplace, but it's going to take a lot before the creme de la creme goes digital first. And frankly, that's something that they have to work on."

4. The future is video. Amazon Instant is a draw to the company's Prime service, and The Washington Post could become a credible outlet for more original news content, which it's already started producing.

5. Amazon owns the modern means of digital distribution. "He can just make The Washington Post the default app on every Kindle," Mutter says. That would give the paper a visibility advantage few other news outlets can claim.

6. Amazon also owns the modern means of physical distribution. It's tempting to think that because Bezos created an online juggernaut that has eviscerated legacy industries, he would quickly dispatch with the Post's print product. But Amazon is also probably the most efficient physical delivery system the world has seen, and print advertisements still generate a lot of the Post's revenue. He could put a print copy in every package, and have a circulation of millions.

For all these reasons, the Post doesn't need to generate revenue like it's supposed to have done for its whole life (and largely failed, propped up by a lucrative education business). Instead, it can complement and amplify other regions of Amazonia. "We're in a post-profit era for newspapers," Mutter says, noting the not-entirely-economic reasons behind recent rich guy purchases of the Globe and the San Diego Union-Tribune, not to mention the Koch brothers' interest in the L.A. Times.

We still don't know what the Post means for Bezos. But it could very well be one piece of a much larger profit puzzle.

* This post has been updated to remove a word that offended some readers, and to more accurately characterize Kaplan, Inc.