Be Glad Jeff Bezos Bought The Washington Post

Jeff Bezos, founder of Amazon now worth $25.2B (#19 on Forbes billionaire list) just paid $250 million to become sole owner of The Washington Post.

Some think the recent rash of of billionaires buying newspapers is simply rich folks buying themselves trophies.  Probably true in some instances.  That would benefit no one.  Just look at how Sam Zell ruined The Chicago Tribune and Los Angeles Times.  Or Rupert Murdoch's less than stellar performance owning The Wall Street Journal.

It's hard to be excited about a financially astute commodities manager, like John Henry, buying The Boston Globe - as it has all the earmarks of someone simply jumping in where angels fear to tread.

News companies detrimentally confused their product with their industry

These companies lost their way long ago.  For decades they defined themselves as newspaper companies.  They linked everything about what they did to printing a daily paper.  The service they provided, which was a mix of hard news and entertainment reporting, was lost in the productization of that service into a print deliverable.

So when people started looking for news and entertainment on-line, these companies chose to ignore the trend.  They continued to believe that readers would always want the product - the paper - rather than the service.  And they allowed themselves to remain fixated on old processes and outdated business models long after the market shifted.  They kept wishing for the market to return.  It didn't.

The leaders ignored the fact that advertisers could obtain much more directed placement at targets, at far lower cost, on-line than through the broad-based, general ads placed in newspapers.  And that consumers could get a much faster, and cheaper, sale via eBay, CraigsList or Vehix.com than via overpriced classified ads.

Defending their core business/product killed the company

Newspaper leadership kept trying to defend their "core" business of collecting news for daily publication in a paper format.  They kept trying to defend their local advertising base.  Even though every month more people abandoned them for an on-line format.  Not one major newspaper headmast made a strong commitment to go on-line.  None tried to be #1 in news dissemination via the web, or take a leadership role in associating ad placement with news and entertainment.

They could have addressed the market shift, and changed their approach and delivery.  But they did not.

Unlike a baseball team, newspapers are obsolete

Money manager Mr. Henry has done a good job of turning the Boston Red Sox into a profitable institution.  But there is nothing in common between the Red Sox, for which you can grow the fan base, bring people to the ballpark and sell viewing rights, and The Boston Globe.  The former is unique.  The latter is obsolete.  Yes, the New York Times company paid $1.1B for the Globe in 1993, but that doesn't mean it's worth $70M today.  Given its revenue and cost structure, as a newspaper it is probably worth nothing.

Markets change, creating losers and transformational opportunities

But, we all still want news.  Nobody wants the information infrastructure for collecting what we need to know to crumble.  Nobody wants journalism to die.  But it is unreasonable to expect business people to keep investing in newspapers just to fulfill a public good.  Even Mr. Zell abandoned that idea.

Thus, we need the news, as a service, to be transformed into a new, profitable enterprise.  Somehow these organizations have to abandon the old ways of doing things, including print and paper distribution, and transform to meet modern needs.  The 6 year revenue slide at Washington Post has to stop, and instead of thinking about survival company leadership needs to focus on how to thrive with a new, profitable business model.

Transformation can make The Washington Post a leader again

And that's why we all should be glad Jeff Bezos bought The Washington Post.  As head of Amazon.com  The Harvard Business Review ranked him the second best performing CEO of the last decade.  CNNMoney.com named him Business Person of the Year 2012, and called him "the ultimate disruptor."

By not doing what everyone else did, breaking all the rules of traditional retail, Mr. Bezos built Amazon.com into a $61B general merchandise retailer in 20 years.  When publishers refused to create electronic books he led Amazon into competing with its suppliers by becoming a publisher.  When Microsoft wouldn't produce an e-reader, retailer and publisher Amazon.com jumped into the intensely competitive world of personal electroncs creating and launching Kindle.  And then upped the stakes against competitors by enhancing that into Kindle Fire.  And when traditional IT suppliers like HP and Dell were slow to help small (or any) business move toward cloud computing Amazon launched its own network services to help the market shift.

Mr. Bezos' language regarding his intentions post acquisition are quite telling, "change... is essential... with or without new ownership....need to invent...need to experiment."

And that is exactly what the news industry needs today.  Today's leaders are HuffingtonPost.com, Marketwatch.com and other web sites with wildly different business models than traditional paper media.  WaPo success will require transforming a dying company, tied to an old success formula, into a trend-aligned organization that gives people what they want, when they want it, at a profit.

Expect a lot of change, and rather quickly

And it's hard to think of someone better experienced, or skilled, than Jeff Bezos to provide that kind of leadership.  With just a little imagination we can imagine some rapid moves:

• distribution of all content via Kindle style eReaders, rather than print.  Along with dramatically increasing the cost of paper subscriptions and daily paper delivery to cover cost
• Instead of a "one size fits all" general purpose daily paper, packaging news into more fitting targeted products.  Sports stories on sports sites.  Business stories on business sites.  Deeper, longer stories in ebooks available for $.99 purchase.  And repackaging of multiple stories that cover longer time spans and multiple views into electronic short-books for purchase
• Packaging content into Facebook locations or Google Hangouts for targeted readers.  Tying ads into these social media sites, and promoting ad sales for small, local businesses to the Facebook and other social sites
• Instead of a general subscription, creating an ala carte approach for readers to buy specific news and entertainment in an iTunes or Netflix style environment (or on those sites)
• Robustly attracting readers via connecting content with social media, including Twitter, to meet modern needs for immediacy, headline knowledge and links to deeper stories -- with sales of ads onto social media connected to the stories.  And selling promoted tweets to push content into user hands while generating revenue for advertisers
• Tying electronic coupons, and buy-it-now capabilities to ads linked to appropriate content
• Retargeting advertising sales from general purpose to targeted delivery at specific readers, with robust packages of on-line coupons, links to specials and fast, impulse purchase capability
• Increased use of bloggers and ad hoc writers replacing staff in order to offer differing, multiple opinions and insights quickly, but at lower cost.
• Changes in journalist and salesforce compensation linked to page views and readership, just as revenue is linked to same

This has been a business failure, and can be fixed by new leadership

We've watched a raft of newspapers and magazines disappear. This has not been a failure of journalism, but rather a failure of historical business leaders to address shifting markets and transform old organizations to meet modern needs.  It's not a quality problem, but rather a failure of business strategy to adapt to shifting markets.  And that's a lesson every business leader needs to note, because today, as I wrote in April, 2012, every company has to behave like a tech company!

Doing more of the same, cutting costs and rich egos won't fix a newspaper.  Only the willingness to experiment and find new solutions which transform these organizations into something very different, well beyond print, will work.  Let's hope Mr. Bezos brings the same zest for addressing these challenges and aligning with market needs he brought to Amazon.  To a large extent, the future of news and "freedom of the press" may well depend upon it.

Links:

Leadership matters - comparing Jeff Bezos with Steve Ballmer

Why Jeff Bezos understands managing innovation better than Larry Page

How to manage innovation in the crisis of market shift - and the success of Kindle

How Bezos led the successful launch of a disruptive Kindle product

How Bezos led Amazon to look outside its "core" to succeed

Learning from Sam Zell's failure - why it takes disruption to succeed in news

Recognizing the difference between soft sales and a market shift - newspaper case study