Bezo’s Washington Post


Source: Bloomberg BusinessWeek | URL:

Why Jeff Bezos Bought the Washington Post

Over the past two decades, Jeff Bezos has assembled what appears to be an inexplicable collection of unrelated businesses. There’s’s (AMZN)traditional retail website and its 50 massive fulfillment centers around the U.S., designed to get books, clothes, garden gnomes—whatever—to customers within days or even hours; the Kindle; movie streaming; music streaming; and Amazon Web Services, a rapidly growing enterprise business that runs the computer operations of other companies. The only similarity between these tributaries of the mighty Amazon—or for that matter his space company, Blue Origin—is that they tackle incredibly difficult logistical and computational problems. Bezos, it turns out, loves a grand challenge.

Now he’s got another one. Bezos stunned the world on Aug. 5 by buying the storied but troubled Washington Post. Woodward and Bernstein’s old stomping ground has suffered a 44 percent drop in revenue over the past six years. In his public apology tour last week, Donald Graham, the family scion who sold the newspaper and related assets to Bezos, said he could not in good conscience continue to lose his shareholders’ money. Nor could he stomach further diminishing the reputational value of the Post. Something had to give, or in this case, someone: Bezos ponied up $250 million for the rights to Graham’s paradox. That price is 17 times adjusted profit, or about four times what major metro dailies usually fetch.

Bezos has always loved the written word. As a child he devoured a library full of science fiction novels near his grandparents’ ranch in Cotulla, Tex., and he’s still a voracious reader who tackles several newspapers a day on his Kindle. Books inspired many of his most important strategic decisions, from Amazon’s origins as an online bookstore to the creation of the Kindle and Amazon Web Services to his cultivation of a frugal, action-oriented corporate culture—principles he plucked right from the autobiography of Sam Walton, the legendary founder of Wal-Mart Stores (WMT).

A decade ago, frustrated with the pace of meetings at his company, Bezos banished PowerPoint and proclaimed that all future Amazon meetings would begin with the presenter passing out a narrative document that outlined the topic being discussed. The first papers were endless, spanning dozens of pages, so Bezos decreed a six-page limit. Many of his colleagues still thought this managing-by-writing approach would fade. It didn’t. “The truth is that Jeff deeply respects the power of the printed word,” says David Risher, an early Amazon executive.

Reading and writing aren’t just central to Bezos’s management style. His wife, MacKenzie Bezos, is a respected writer who just published her second novel,Traps. He’s not bad at twirling a word himself. Bezos’s annual letters to shareholders are widely read and shared in the business community—to be expected given Amazon’s size and sway. But the prose doesn’t merely stand out on the CEO curve; it’s actually good. From his 2012 letter: “Our passion for pioneering will drive us to explore narrow passages, and, unavoidably, many will turn out to be blind alleys. But—with a bit of good fortune—there will also be a few that open up into broad avenues.”

Bezos has been trying to build editorial businesses within Amazon for years. In the mid-1990s, when his now-quaint ambition was to create the largest bookstore on the Web, Bezos staffed up a large editorial department in an attempt to give the trusted touch of an independent book shop. These writers and editors—many of them former journalists—were eventually downsized during the dot-com bust and amid an acrimonious, internal competition with personalization algorithms. Bezos concluded back then that computers, not people, could more efficiently recommend the products that customers were apt to purchase.

He didn’t give up his dream of developing new forms of media, though. With the rise of the Kindle, Bezos created publishing imprints that encouraged authors to experiment and sell their books directly to readers while collecting an above-average royalty. This was immediately framed by observers as an attack on Amazon’s oldest partners, traditional publishers—and it was, in part. But Kindle Singles, which distributes bite-size novellas, and Kindle Serials, books that are meted out in chapters, have also given writers new ways to find an audience and earn a living. He’s attempting to do something similar with Amazon Studios, which backs original television shows and gives filmmakers an outlet for their work outside the usual Hollywood power structure. Bezos isn’t trying to kill the media business; he’s trying to reinvent it, racing against the likes ofApple (AAPL) and Google (GOOG) to build the most comprehensive array of devices and innovative online news and entertainment services.

Does all this mean the sun will shine brighter on theWashington Post? Bezos was characteristically vague about his plans in the frenzy of the announcement: “There is no map, and charting a path ahead will not be easy,” he wrote in the newspaper. “We will need to invent, which means we will need to experiment.” But it’s likely he’ll bring some Amazon management techniques to the Post (get ready for those six-page documents) and encourage experimentation without regard for short-term profits and losses. Bezos abhors anything that inconveniences his customers, so the paywall that instituted this spring might crumble. And if any of these moves undermine thePost’s teetering revenue sources, such as print ad pages, Bezos probably won’t care much. He said in an interview last year with German newspaper Berliner Zeitung that he thinks print newspapers will cease to exist within two decades. His overarching goal will be to create a thriving new media species on the digital frontier.

At least one friendly face will be waiting for him. Vijay Ravindran, the Washington Post’s chief digital officer, is a former Amazon manager who led the team that created the Amazon Prime shipping program in 2005. Ravindran says that for four years he has been “running the Amazon playbook” inside the Post and that he advocated for the Bezos deal with Graham. Others in thePost newsroom are likely to greet their new overlord a bit more skeptically, and not merely because of the constitutional quirks of the profession. The Graham family viewed the Post as a public trust with an obligation to challenge power. Tycoons who buy ink by the barrel often have less noble ambitions. A newspaper gives its owner a potent form of soft power and can be a political weapon even when not wielded overtly—witness Rupert Murdoch’s decades-long influence over British politics. As Amazon continues to grow, it will have plenty of vested interests brought before regulators and legislators.

Still, there’s a much simpler answer to the question of why Bezos bought a newspaper—an answer even the crustiest journalists will own up to. Every day begins with a blank screen, a room full of smart people, and a mission to find out how the world works and the motivations of its actors. It’s a lot more fun than delivering garden gnomes.