This is a very strategic approach to the age old problem of how to reduce reliance on promotional sales (moving away from a high/low pric...
There's no shortage of speculation about why Amazon founder Jeff Bezos is buying the fabled Washington Post and six local Washington-area news affiliates for $250 million.
In a word, the main reason comes down to digital, analysts said. In two words, mobile digital, as in putting the Washington Post and an enticing variety of local news content or crowd-sourced information on the Kindle tablet and various other platforms running Kindle content. Perhaps such content would come free to subscribers or less than the paywall required for New York Times or Wall Street Journal content.
Beyond digital, there's also the inevitable fact that owning the Post will raise Bezos' already high profile in Washington, a city where important decisions about technology patents, wireless spectrum and Internet taxation are regular battles in Congress and federal agencies. Bezos might also be eyeing potential anti-trust actions by the U.S. government against Amazon.com, now that Apple has been hammered by U.S. Justice Department and 33 state attorneys general for e-book price-fixing, one analyst said.
It's hard to make big money with digital editions of daily newspapers, but pundits and analysts think Bezos -- seen as an online genius by many -- has the insight and dedication from his experience selling books and other products on the Web to make money with the newspaper.
While the purchase is separate from Bezos' role at Amazon.com, there's little doubt that his insights about digital content will affect decisions regarding the Post, and owning the newspaper could influence moves by Amazon.com -- especially with the Kindle and Kindle content, which can run on other platforms than Kindle.
Five analysts weighed in on what Bezos may be up to:
1: Bezos wants access to the Post's content for digital publishing on mobile devices, not just Kindle.
"Buying the Post is for integration of its unique content into the Amazon ecosystem, although it will increase his influence in Washington, too," said Ezra Gottheil, an analyst at Technology Business Research. "But the main thing Bezos cares about [it] is the written word.... Putting that content on the Kindle is not about the Kindle device, but about the Kindle client software used on many other devices. Amazon will keep the hardware alive because it works for them, but they are investing in the Kindle client as a primary channel for content."
Patrick Pexton, a former ombudsman for the Washington Post, predicted Bezos "will definitely want to experiment with the Post's presence on all digital devices." The paper's content already runs on Kindle, iPad and other tablets and mobile phones, but "some of its apps [on those devices] are pretty good, and some less good."
Jack Gold, an analyst at J. Gold Associates, also argued that Bezos could be more interested in the content of the Post and its rich troves of archives, meaning that the printed paper itself could be shut down. The archives alone would include award-winning investigations about Watergate and other big D.C. stories from the past.
"Bezos could shut down the presses and still make money using the content creators, including reporters and editors," to create new content for use on mobile and other digital platforms, he said. "Creating valuable content is not as easy as it seems in today's blogosphere."
2. Free or low-cost Post content on the Kindle would undercut higher-priced news paywalls charged by other newspapers.
Ken Auletta, a book author and New Yorker writer on media, said on CBS This Morning that Bezos could be contemplating putting the Washington Post's content on the Kindle for free. Auletta noted that while Bezos would be taking the Post private, he still would be in a position to influence content at Amazon.com -- and that influence could well be with the Post's international and national news, and more.
The Wall Street Journal and New York Times have become successful international and national online newspapers, added Gottheil. "But their paywall is too high to make them really mass international papers," he said. "If Bezos lowers the paywall, there's an opportunity for him to become a major distributor of newspaper news."
The Post's content could cost subscribers less than the paper's rivals or be free with Amazon Prime, a subscription service.
Added Pexton: "Maybe Bezos will thinking about new kinds of paywalls or metered pay for digital. Still, the problem is that ads on mobile just don't bring in much revenue." Ad dollars derived from mobile bring in far less than ads on digital desktops or in print, he noted.
3. Bezos gets six local newspapers and related businesses in the deal, opening the door for revenues from local ads.
Local news is a big part of the $250 million deal, even though the Washington Post is seen as more of a national and international newspaper. In addition to the Post, Bezos gets the Express newspaper, the Gazette newspapers, South Maryland Newspapers, the Fairfax County Times, El Tiempo Latino and Greater Washington Publishing.
Of note in the context of local content: Google, a major Amazon competitor, started on its "all news is local" theme in 2008 and has recently begun testing providing local news in its Google Now service.
Also of note: Investor Warren Buffet's decision last year to buy 26 local papers in 2012 could have influenced Bezos as well.
Said Gold: "Certainly, local news is important.... But the problem is that local news doesn't usually pay the bills. Papers have been cutting back on reporters covering local news. To do local news you have to have reporters scattered everywhere, so crowdsourcing is actually a more efficient way to do it, although it makes it harder to control quality."
If Bezos bought the Post for the local news, "it's going to be a tough way to pay the bills," Gold added, even as he noted it is still important to readers. "Like politics, at some level, all news is local news."
AOL started up Patch, a local online news service, about two years ago, but it has been a revenue loser, analysts noted. "Patch has not delivered here [in Washington] or anywhere else," Pexton noted. "If Bezos could figure local out, and innovate there, it could be huge."
Pexton said in his role as the Post's ombudsman until earlier this year he learned that activist readers in the Washington area often care as much about local politics and school board decisions as they do about national and international issues. "They're desperate for more [local] news," he said.
Gottheil said Bezos could well be highly interested in developing local content digitally to reap revenues and do something others haven't. "The full potential of local newspapers in electronic form has never been realized," Gottheil said. "Local papers have something that Google and national papers have not got, which is a local advertising [sales] force. Every pizza and cleaning shop could be a customer. Bezos would have to set up a network and skim profits, but Bezos is really smart and that's an interesting play."
One editorial executive who asked not to be named who works at one of the local newspapers Bezos is buying said the question for small business advertisers is whether they could get as much impact by posting their own fliers instead of paying for online mobile ads with a Bezos organization. He also questioned whether crowdsourced, user-generated content will be up to the standards demanded by Washington-area readers.
4. Bezos will raise his political capital in Washington.
Bezos "absolutely must be thinking that owning the Post could add to his influence in the nation's capital," Pexton said.
Aulette mentioned several topics of critical importance to Amazon.com -- and other tech companies -- that are discussed almost daily on Capitol Hill or within federal agencies. They include Internet taxation, patent reform, wireless spectrum allocation and even anti-trust litigation.
"Having influence in Washington is important to Bezos," Gottheil said. "There's the threat of anti-trust litigation from the Department of Justice. Here's Apple accused of fixing e-book pricing while Amazon wanted to sell e-books at a loss. Now, Amazon.com is left the primary distribution channel for e-books, so Amazon is facing the potential of anti-trust scrutiny."
Gold said that Bezos' primary objective with buying the Post, ahead of his digital intentions, is to "become more politically influential. [His] influence in Washington will naturally rise as a result of owning such a prestigious newspaper. Could this mean a run for office? Possibly. You have to wonder what's next for him and political office could be next."
Writer David Remnick in The New Yorker pondered Bezos' politics, calling them, "something of a puzzle" and noting Bezos has contributed to local candidates in his state of Washington and given prominently to the cause of gay marriage. Amazon also has defended selling controversial books like Mein Kampf and hasn't been willing to censor reader comments, Remnick noted.
5. Bezos is defining a new role for himself among a pantheon of tech visionaries.
Ken Doctor, an analyst of news economics, wrote in a Nieman Journalism Lab blog that Bezos is buying the Post partly out of a financial bet that it's best to buy the paper at the bottom of the market, and partly out of a sense of civic values favoring a free press.
But Bezos is also acting partly out of a strong sense of ego, Doctor said. "To place a bet in the tens of millions on a property in a distressed industry, believing you can turn around what most others failed to turn around, you better have high self-esteem," he said.
But it's also about Bezos, at age 49, finding his place in history, Gottheil added. "With the passing of Steve Jobs, the retirement of Microsoft's Bill Gates and Larry Page just emerging at Google, Jeff Bezos is the last man standing of the genius tech CEOs," Gottheil said. "Bezos plays chess, no doubt about it."
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is email@example.com.
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