So, uh, anything interesting happen at your office yesterday?
Wonkblog had a lot of coverage of the Bezos sale last night. Here are some facts about the sale from me, and a look at the economics from Neil Irwin, and a more elegiac meditation from Jim Tankersley.
But Lydia DePillis's late-night look at the role The Washington Post could play in augmenting Bezos's core business is, I think, particularly useful. Though there's nothing new about very rich men owning newspapers, Bezos is a bit unusual, in that the Post doesn't cover his metropolitan area, and he remains deeply involved in Amazon's vast and growing business. This is not the typical portrait of a detached media benefactor.
The idea that the Post will remain untouched by Bezos's primary business interests is, for better or worse, probably a fantasy (and if that means The Post ends up on every Kindle, it's for the better!). And with that, I'll turn the mic over to Lydia, and her clear-eyed look at some of the ways that Washington Post Prime might work.
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 could provide even more data. “Amazon is a master at this," Mutter says.
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 test prep 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 Globeand 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.
Wonkbook's Number of the Day: 24.5 percent. That's the share of external hires which come from referrals. Another major source of talent: LinkedIn, where employers search and poach talent from rivals. It's a reminder that, even in a glutted labor market, employers are being selective in favor of the already employed and against the long-term unemployed.
Wonkbook's Graph of the Day: Real interest rate on a 30-year mortgage.
Wonkbook's Top 5 Stories: 1) Bezos buys The Post; 2) Obama weighs in on housing finance; 3) when the unions hate Obamacare; 4) how the labor market is changing; and 5) unconventional ways to get guns.
1) Top story: Bezos buys The Washington Post
Washington Post to be sold to Jeff Bezos, the founder of Amazon. "The Washington Post Co. agreed Monday to sell its flagship newspaper to Amazon.com founder and chief executive Jeffrey P. Bezos, ending the Graham family’s stewardship of one of America’s leading news organizations after four generations. Bezos, whose entrepreneurship has made him one of the world’s richest men, will pay $250 million in cash for The Post and affiliated publications to The Washington Post Co., which owns the newspaper and other businesses." Paul Farhi in The Washington Post.
...And here's what that means. "The economics of news have shifted fundamentally. At one time, the great constraint was the physical ability to get information into the hands of readers. If you were a dominant big-city newspaper, you had the printing presses and the distribution network to present a package of information and advertising on every front lawn in town every morning. That was a remarkable power. It had enormous barriers to entry–a competitor couldn’t swoop in and replicate it easily. And it meant that every department store wanting to advertise a sale, every car dealer looking to move cars, and every employer looking to hire a new accountant had to place ads. Media economics have, of course reversed. Now the great constraint is not on the ability to deliver information, but on the capacity of readers to consume it." Neil Irwin in The Washington Post.
Journalism needs a business model. Can Jeff Bezos find one? "[M]y hope for the Post under the new owner from Seattle: that we will figure out a way to turn a profit on the type of journalism that everyone here believes in. I don’t know a single reporter who got into journalism for the money. I do know a lot of really talented young reporters who worry there won’t be money in journalism for much longer. I’d like to prove them wrong. I’d like to be a part of the place that figures out the business model without sacrificing the things that drew me into the business in the first place." Jim Tankersley in The Washington Post.
Some thoughts on The Post being sold to Amazon’s Jeff Bezos. "Don Graham says the decision to sell came from a simple calculation: The Washington Post is a public company, and it doesn’t have infinitely deep pockets. They looked to the future and saw that they’d have to keep cutting. The implication is that Bezos doesn’t have to keep cutting, and won’t keep cutting, though nobody really knows." Ezra Klein in The Washington Post.
Read this now: Five great articles on Jeff Bezos. Sarah Kliff in The Washington Post.
What happened when Jeff Bezos invested in Business Insider? "What does that mean for our pursuit of journalism? Taking a look at what happened to Business Insider earlier this year is a good start. Bezos joined in with the business news site’s owners to invest $5 million into building up its news and editorial operations. Since then, the brand has continued to be a grand aggregator, but has also brought on talent from other publications like Josh Barro from Bloomberg View as Politics Editor and continue to expand its actual news coverage. And it doesn’t look like they intend to slow down, based on their slew of current editorial openings." Andrea Peterson in The Washington Post.
Think Jeff Bezos is crazy? You should see his other investments. "[J]udging by his history, making a big, possibly money-losing investment, just because it seems cool, would not be at all out of character...[P]art of Bezos’ point is that we’re all worth a lot more to each other when we’re not fighting over the here and now...Investing in a newspaper might seem like a totally different endeavor. But the walls we put up between industries to talk about them as distinct activities don’t really help us here. It’s better to think of Bezos’ investments as the collective product of a certain personal attitude." Brian Fung in The Washington Post.
Bezos’s impending buy harks back to days of the wealthy at newspapers’ helms. "The Graham family’s decision to sell The Washington Post to Amazon.com founder Jeffrey P. Bezos underscores the reemergence of wealthy individuals at the helm of major metro dailies as newspapers seek a refuge from the battering they have experienced on Wall Street. The news of the impending purchase came just days after the New York Times Co. announced that it is selling the Boston Globe to John W. Henry, the principal owner of the Boston Red Sox who made a fortune as a commodities trader. And several billionaires, including the Koch brothers and Eli Broad, have been eyeing the Los Angeles Times, one of the eight newspapers that the Tribune Co. has been preparing for a possible sale." Matea Gold in The Washington Post.
And you thought you had seen it all interlude: "Postmodern geekdom as simulated ethnicity."
BERNSTEIN: The seed of obstruction. "The unified opposition to the 1993 budget — a budget that was not particularly popular — is widely viewed as helping the Republicans’ 1994 takeover of the House for the first time since 1954. Forget accountability and facts. From the perspective of the outcome that matters most — not jobs, investment or deficits, but raw political power — the Republicans’ strategy worked. Mr. Kornacki’s argument is that this was a long-lasting teaching moment...Now, I don’t know that you can accurately carbon-date 20 years ago as the day facts left the building. But I do think you can conclude that the inability of the current United States political system to absorb factual analysis and to compromise on solutions is solidly behind our dysfunction." Jared Bernstein in The Washington Post.
PONNURU: Republicans don't need to sabotage Obamacare. "I don’t believe conservatives should discourage young people, or anyone else, from buying health insurance. Conservatives and others should, however, give people all the information that’s relevant to their decision. Surely no one can argue against that?...People who are very risk-averse may still decide to buy insurance knowing all this. The law clearly reduces the incentive to get it, though, and even before it passed a significant number of people who could afford insurance opted out...I suspect that FreedomWorks is overestimating the effect of political campaigns one way or the other. If people decide that the law has made buying insurance a waste of money, they won’t do it. This law sabotages itself." Ramesh Ponnuru in Bloomberg.
BROOKS: The A-Rod problem. "One of the mysteries around Rodriguez is why the most supremely talented baseball player on the planet would risk his career to allegedly take performance-enhancing drugs? My theory would be that self-preoccupied people have trouble seeing that their natural abilities come from outside themselves and can only be developed when directed toward something else outside themselves. Enclosed in self, they come to believe that their talents come from self, are the self. They have no outside criteria that tells them what their talents are for or when they are sufficient. Locked in a cycle of insecurity and attempted self-validation, their talents are never enough, and they end up devouring what they have been given." David Brooks in The New York Times.
YGLESIAS: Why I don't trust Larry Summers's friends. "I don’t know Summers, but I have met him and can testify to his genuinely amazing intellectual skills as an on-his-feet debater about big ideas. It’s something I first experienced as a student journalist at Harvard when Summers was president of the university. While nobody who was there at the time would dispute his brilliance, another thing nobody would dispute is that he was a terrible university president. Terrible in exactly the most predictable ways. The problems were not only foreseeable, but foreseen. Until, that is, the search committee tasked with filling the vacancy received assurances from Summers’ close friends and colleagues." Matthew Yglesias in Slate.
PEARLSTEIN: The less-partisan choice for Fed chair. "We’ve heard a lot of arguments in the past two weeks about the relative merits of Janet Yellen and Larry Summers to be the next Federal Reserve chairman. It is the first time I can remember that the public and private discussions have been so open, which in general would be a good thing, particularly for an institution so steeped in a kind of “Holy-of-Holies” secrecy such as the Fed has been. What is less attractive is that it has now turned into something more like a political campaign." Steven Pearlstein in The Washington Post.
Wonkbook is big on naval science interlude: Which country has the most icebreaker ships?
2) How does Obama want to change the mortgage market?
Obama to seek limited U.S. mortgage role in speech today. "Mr. Obama will begin making the case that a limited government guarantee is needed to preserve access to the long-term, fixed-rate loans that have become a staple of the U.S. housing market. But he also will call for ending the business model of Fannie and Freddie, which took on risks that benefited private shareholders during good times and saddled taxpayers with losses when the housing market crashed in 2008." Nick Timiraos and Carol E. Lee in The Wall Street Journal.
@ylanmui: Conundrum? Mortgage rates up, but SLO survey shows bank lending is too.
Via email, from Trulia's Jed Kolko: "Citing tight credit and qualified borrowers still being denied loans, the Administration reaffirms “clarity and certainty” around mortgage rules to encourage lending, along with shorter mortgage disclosure forms and better incentives for lenders to make loans that borrowers can repay...As price, rents, and mortgage rates rise, affordability is deteriorating. The fact sheet points to “unprecedented affordability burdens” that middle-class and poor renters face, and calls for the creation of more affordable rental housing and continued lending to underserved communities."
@JedKolko: Will we get a speech on promoting homeownership and reducing government's role that takes no stand on the mortgage interest deduction?
Obama to insist market provides 30-year mortgages. "Traveling to Phoenix on Tuesday, Obama is planning to call for a new system, built in part on government backing, that will enable wide access to 30-year mortgages, which are a rarity in other countries. That will require, officials said, some form of government guarantee that means lenders will be reimbursed by taxpayers in the event of a housing catastrophe like the one that occurred several years ago." Zachary A. Goldfarb in The Washington Post.
Music recommendations interlude: Citizen Cope, "Penitentiary."
3) What you didn't know about Obamacare
A lot of unions are going to end up hating Obamacare. "In 2018, the Affordable Care Act will begin levying a tax on unusually expensive health-care plans. The tax will be 40 percent on each premium dollar over $10,200 for individual plans and $27,500 for family plans. It’s one of the most powerful cost control provisions in the bill. It’s so powerful, in fact, that there’s real evidence that it’s already working, despite the fact that it won’t go into effect for four years. But because it’s working, it’s going to make a lot of people who get good employer-based benefits really unhappy — including some of the law’s supporters, like labor unions." Ezra Klein in The Washington Post.
HHS is shielding Obamacare outreach from sequester cuts. "The agency lost $15.5 billion due to the automatic budget cuts, but has tried to shield efforts to promote enrollment from those reductions. While the sequester has made travel “more complicated,” Sebelius did not say that it has limited efforts...The White House has long expressed frustration with Congress’ decision not to provide funding for Obamacare outreach. That means that, right now, the administration is working with a budget it wished would be larger, as it tries to sign seven million people up for health insurance coverage." Sarah Kliff in The Washington Post.
Preparations for health exchanges are on a tight schedule. "With time running short before enrollment kicks off Oct. 1, the Obama administration last week cut back on training requirements for these "navigators." Officials were concerned there might not be enough time to do more-extensive training before the health-insurance exchanges open. Grants to hire and train the workers aren't expected to be released for another two weeks for the 34 states where the federal government is running all or part of the marketplaces, which will offer insurance to those who don't get it on the job or from Medicare or Medicaid. That leaves just 32 business days to hire and train thousands of helpers in these states." Amy Schatz in The Wall Street Journal.
Employers urge more clarity on Obamacare mandate delay. "A group of service-industry employers is asking the Obama administration for more clarity on the delay of ObamaCare's employer mandate, specifically how the decision will affect past guidance on the policy. The Employers for Flexibility in Healthcare (E-FLEX) Coalition wrote to three Cabinet secretaries on Monday asking for details on how previously released transition rules will apply in light of the mandate deferral. E-FLEX also asked whether employers can reasonably expect to follow existing guidance through 2015 on how to determine what constitutes a full-time employee and navigate other basic compliance issues." Elise Viebeck in The Hill.
Craftsmen interlude: The best of woodworking.
4) Labor market changes to discriminate towards currently employed
How are employers finding fresh talent? "LinkedIn has rapidly become one of recruiters’ most valued tools for identifying fresh talent. In particular, human resource professionals are flocking to the site because of its legions of “passive job seekers” — those who aren’t looking for a new position but might be convinced to jump ship for the right opportunity...Referrals accounted for 24.5 percent of external hires last year, more than any other source." Sarah Halzack in The Washington Post.
Many can't pay student loans. "Just about four in 10 borrowers with direct federal student loans are paying them back, according to a report released Monday that offers the first comprehensive snapshot of the program since the government created it in 2010. Many of the 27.8 million borrowers with these newer direct federal loans aren't yet required to make payments: About 35% are still in school or within a six-month grace period after graduation, the report said." Josh Mitchell in The Wall Street Journal.
S&P screwed up when it downgraded U.S. credit 2 years ago. Here’s proof. "It also looks, with the benefit of hindsight, like the wrong call. Yes, the U.S. government might be dysfunctional. But over the past two years, prices in bond markets look like a wholesale rejection of the S&P thesis. You would expect that if U.S. government debt was truly more risky than that of AAA rated nations, that the treasury would have to pay higher interest rates. But the verdict of the market these last two years cuts in the opposite direction." Neil Irwin in The Washington Post.
FBI finds holes in system protecting economic data. "The Federal Bureau of Investigation has discovered vulnerabilities in the government's system for preventing market-moving economic reports from leaking to traders before public release. Law-enforcement officials found "a number of operational vulnerabilities" involving "black boxes" used by several departments to control the release of sensitive economic data such as the monthly unemployment rate, according to a report by the inspector general at the Commerce Department." Brody Mullins and Devlin Barrett in The Wall Street Journal.
Interview: Stephen King’s latest horror tale: The future of the global economy. Neil Irwin in The Washington Post.
‘Uncertainty’ isn’t a problem anymore. "Another month, another dive in the Stanford/University of Chicago Economic Policy Uncertainty Index. It’s now down to its lowest level since 2008. And the hiring boom that was supposed to follow? Well…" Jim Tankersley in The Washington Post.
Why hedge funds run by idiots can do well. For awhile. "A hedge fund like the one these frat boys are starting is particularly likely to follow that trajectory. After all, the way to get noticed is to deliver returns way in excess of the rest of the market...But you know what’s not that hard? Thinking up some investment maneuver the rest of the market has already rejected as too dumb and/or risky and/or illegal. Maneuvers like that can work for a year or two — which is more than long enough to get your dad’s friends to invest. But they don’t work for very long." Ezra Klein in The Washington Post.
Distant future interlude: The inside story of the greatest congressional Web prank ever.
5) The eBay guns, the 3d-printer guns
Study finds vast online marketplace for guns without background checks. "The marketplace for firearms on the Internet, where buyers are not required to undergo background checks, is so vast that advocates for stricter regulations now consider online sales a greater threat than the gun-show loophole. A new study by Third Way , a center-left think tank with close ties to the Obama administration, found that thousands of guns, including so-called assault weapons, are for sale online and that many prospective buyers were shopping online specifically to avoid background checks." Philip Rucker in The Washington Post.
Is it really so easy to buy a gun over the Internet? "I can check out an ad posted online by a private seller and then go meet up to buy the gun in person...That would be a private sale and federal law wouldn’t require a background check — although some states would. California and Rhode Island require background checks for all private sales, while 12 states mandate checks for private handgun sales." Brad Plumer in The Washington Post.
Reading material interlude: The best sentences Wonkblog read today.
We’ve tried securing embassies to fight terrorism. It doesn’t work. Dylan Matthews.
The inside story of the greatest congressional Web prank ever. Dylan Matthews.
Why The Washington Post isn’t a charity case for Jeff Bezos. Lydia DePillis.
Read this now: Five great articles on Jeff Bezos. Sarah Kliff.
Journalism needs a business model. Can Jeff Bezos find one? Jim Tankersley.
Is it really so easy to buy a gun over the Internet? Brad Plumer.
Chinese ports operate around the clock. Why don’t America’s? Lydia DePillis.
‘Uncertainty’ isn’t a problem anymore. Jim Tankersley.
HHS is shielding Obamacare outreach from sequester cuts. Sarah Kliff.
A lot of unions are going to end up hating Obamacare. Ezra Klein.
Could a test-tube burger save the planet? Ezra Klein.
DOMA decision triggers federal retirement policy changes. Eric Yoder in The Washington Post.
The NSA is giving your phone records to the DEA. And the DEA is covering it up. Brian Fung in The Washington Post.
Senators introduce amendment to make commercial buildings energy efficient. Ramsey Cox in The Hill.
House GOP plans anti-Washington push in August. The Associated Press.
Wonkbook is produced with help from Michelle Williams.