What Jeff Bezos Could Have Bought Instead of The Washington Post

PHOTO: jeff Bezos

Why would a billionaire buy a newspaper? Amazon.com founder and CEO Jeff Bezos now joins the ranks of Rupert Murdoch, Red Sox owner John Henry and Berkshire Hathaway CEO Warren Buffett.

About Bezos' $250 million purchase of The Washington Post newspaper and affiliated publications, Morningstar equity analyst Liang Feng said non-financial motivation is probably a "major component" of his purchase.

In a letter to employees of the Washington Post, Bezos wrote, "There will of course be change at The Post over the coming years. That's essential and would have happened with or without new ownership. 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."

Though the Washington Post Company has a market capitalization of over $4 billion, the firm's newspaper business has either generated minimum profitability or lost money in recent years, in part due to pension buyout charges.

In addition to the flagship newspaper, the sale includes the Express newspaper, The Gazette Newspapers, Southern Maryland Newspapers, Fairfax County Times, El Tiempo Latino and Greater Washington Publishing.

Read More: Amazon CEO, Founder Buys The Washington Post Newspaper for $250 Million

Though Amazon.com Inc., based in Seattle, is not involved in Bezos' transaction, the e-commerce site has its own extensive lists of acquisitions, including:

- Over $1 billionZappos.com, announced July 2009

- $775 million for Kiva Systems Inc., announced March 2012

- $545 million for Quidsi Inc., announced Nov. 2010

Unlike Amazon, Liang said the newspapers are not likely to "make a dent" in Bezos' net worth, which is about $25.2 billion, according to Forbes.

Last month, Amazon reported a surprise loss of $7 million, despite growing sales, due to the company's investments in its Kindle e-reader device and digital content.

In his letter to employees, Bezos wrote, "The values of The Post do not need changing. The paper's duty will remain to its readers and not to the private interests of its owners. We will continue to follow the truth wherever it leads, and we'll work hard not to make mistakes. When we do, we will own up to them quickly and completely."

Before the announcement that Amazon founder Jeff Bezos purchased the Washington Post newspaper for $250 million in cash, news broke over the weekend that Boston Red Sox owner John Henry bought the Boston Globe for less than one-tenth of the $1.1 billion the New York Times Co. paid for the paper in 1993.

The sale of The Boston Globe newspaper has raised the ire of a number of groups, including one that bid higher than the winning $70 million purchase price, and analysts in the journalism and sports fields.

John Lynch, chief executive of U-T San Diego newspaper, said his group was misled by the New York Times Co. and will seek repayment for the money it spent preparing its bid, the Boston Globe reported.

U-T San Diego didn't immediately respond to a request for comment.

Henry could not be reached for comment.

A Times spokeswoman explained, "The sale to John W. Henry is the result of a very full and active sales process."

"In reviewing bids, we took many factors into consideration and at the end of the process concluded, along with our Board of Directors, that this agreement to sell the New England Media Group to Mr. Henry was in the best interest of our shareholders as well as of The Boston Globe, the Worcester Telegram & Gazette and the Boston community," the Times Company's statement to ABC News said.

Roy Peter Clark, senior scholar at Poynter Institute, said it was a "good sign" that the Times Co. did not sell The Boston Globe to the highest bidder.

"I think it means that [The Times Co.] took some responsibility for the future quality of the enterprise and the nature of the public service to the citizens of Boston," Clark said.

Clark said he is "delighted as someone who greatly admires the Globe, who loves newspapers and who believes there's still a future for newspapers."

"I'm glad they found a buyer who already has strong connections with the community that it wants to serve," Clark said.

Still, he said he was shocked by the declining financial value of The Boston Globe.

"It's not a journalism crisis in...it's an advertising crisis," Clark said. "It's confusion and disruption in the economic model that has supported the news business for decades."

Robert Tuchman, president of sports and entertainment marketing company in New York Goviva, said Henry snagged quite the steal with his purchase price. But he is skeptical about the investment value of the paper, in light of Henry's other sports-related investments, such as Liverpool soccer club, Nascar's Roush Fenway racing team, and the New England Sports Network.

The Boston Red Sox is the third most valuable baseball franchise in the country is worth $1.312 billion, following the New York Yankees ($2.3 billion) and Los Angeles Dodgers ($1.615 billion).

"I think there are tons of sports businesses he could have invested in for that amount with much more growth opportunity and upside," Tuchman said of Henry. "My take is owning the Boston Globe which covers the team that he owns is a situation that will raise some eyebrows around objectivity. I think there is a plus for him for that. Also he can tie in some multi-million dollar sponsorships for the Globe with the Red Sox and vice versa. It's basically like owning one of your media partners."

Here are recent sale prices and estimates of newspaper companies:

1. The Tampa Tribune: sold for $9.5 million in 2013

2. Philadelphia Media Network (includes Philadelphia Inquirer and Philadelphia Daily News): sold for $55 million in 2012, compared to $515 million in 2006

3. Tribune Company's newspaper portfolio (includes The Chicago Tribune and The Los Angeles Times): estimated $623 million

Here are the latest figures, according to Forbes, showing the least valuable teams of various American sports leagues.

1. National Football League, The Jacksonville Jaguars: $770 million

2. Major League Baseball, The Tampa Bay Rays: $451 Million

3. National Baseball League, Milwaukee Bucks: $312 million

4. National Hockey League, St. Louis Blues: $130 million

5. Richard Petty Motorsports, Nascar: $50 million

Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...