Boston Globe and Washington Post sold in industry shake up

October 2013 | FEATURE | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Within the space of four days in August, two of the US newspaper industry’s most prominent heritage publications were sold, relatively cheaply, to newcomers to the sector.

On 6 August the Washington Post Company announced it had sold its flagship newspaper to Amazon founder Jeff Bezos for $250m. Just four days before, on 2 August, the New York Times Co announced it was selling the New England Media Group, including the Boston Globe newspaper, to commodities investor and Boston Red Sox owner John Henry for $70m – considerably less than the $1.1bn the Times Company paid for the Globe in 1993. The sales of both newspapers are expected to be completed within 60 days of the respective announcements.

The deal for the Post will see Mr Bezos assume control of a number of the Post Company’s other publishing assets. However, Slate Magazine, theRoot.com and Foreign Policy Magazine are not part of the deal, and will remain with the Washington Post Company, which in the future will operate under another name. Similarly, the sale of the Globe includes a number of other assets including Boston.com, a 49 percent stake in Metro Boston and the direct mail marketing firm GlobeDirect.

Although the New York Times had been looking for a buyer for the Globe for some time, the sale of the Post came quite out of the blue. When viewed within the wider context of the markedly depressed US newspaper industry, the deals for both the Post and the Globe are particularly surprising.

The newspaper sector in the US has been in decline for some time and it is estimated that newspapers today are worth just 10 percent of what they were only a decade ago. Thanks to the all encompassing rise of the internet, the way in which people consume media, particularly the news, has drastically changed. The Washington Post, despite its status alongside the New York Times as one of the country’s two most prestigious newspapers, has not proved immune to this industry-wide slump. According to data from newspaper auditing firm Alliance for Audited Media, at the time of writing the Post was the seventh most popular daily newspaper in the US, with a total circulation of 474,767. This figure is representative of a 6.5 percent decline compared with 2012, when the Post recorded losses of $54m including pension contributions. The first half of 2013 saw the company report an operating loss of $49m.

In light of the struggles of the industry, it is striking that a businessman such as Mr Bezos, who has made his reputation and fortune via e-commerce juggernaut Amazon, would be interested in a business that has been savaged by the growth of the internet.

In some respects Mr Bezos’ interest in the Post can be seen as testament to his fascination with broken business models, and his desire to fix or reinvent them. Yet, for the time being at least, he will not be undertaking the day-to-day running of the Post personally. In an open letter on the paper’s website, Mr Bezos notes that the company’s existing management structure will be retained for the foreseeable future. Donald Graham, the grandson of Eugene Meyer, the man who purchased the company out of bankruptcy in 1933, will continue in his current role as chief executive and chairman of the Washington Post Company. Katherine Weymouth, the Post’s publisher and Mr Meyer’s great-granddaughter, will also continue with the firm in her existing role.

Although the level of Mr Bezos’ involvement in the company at this point appears to be negligible, it is clear that the Post, and arguably the newspaper industry as a whole, is in desperate need of innovation and experimentation. Losses and declining circulations stand as testament to that fact. In his open letter, Mr Bezos continues to note that “The internet is transforming almost every element of the news business: shortening news cycles, eroding long reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment.”

Mr Bezos’ Amazon.com expertly utilises Big Data collated from the site’s millions of visitors in order to present a more personalised and customised user experience. While there is currently no suggestion that Amazon will form any kind of a tie in with the Post, Mr Bezos’ pioneering experience in this field could easily prove to be crucial for the future of the Post and its contemporaries. Advertising revenues at the Post and across the industry have also been declining steadily over the last 10 years. This is an area in which Amazon’s analysis and expertise could prove vital.

In an industry that has changed very little over the last century, creating a more customised and personal experience for readers by utilising and exploiting Big Data metrics could well be crucial for the future of the Post and the sector itself.

Richard Summerfield