The days of trudging out to the driveway to pick up the Sunday morning newspaper are gone for many Americans. In the Internet age, consumers are more likely to pick up their iPad or Kindle HD to read the day’s headlines.
But the news that Amazon.com, Inc. (NASDAQ:AMZN) founder Jeff Bezos is personally purchasing The Washington Post Company (NYSE:WPO) has many wondering if that will change. Part of the announcement was that Bezos would take over control of the paper, which has been run by the same family since 1933. Bezos immediately made clear that changes were in order, announcing there would be a need to experiment in coming months. In a memo to Washington Post employees, he referred to the Internet as having transformed the news industry, eroding revenue sources, shortening news cycles, and bringing competition.
A good buy?
Earlier this year, Bezos was part of a group that invested $5 million into Business Insider. That group is already vamping up the newspaper’s image, bringing on new editorial talent from a variety of sources, including popular web publications. While The Washington Post Company (NYSE:WPO) is still the most widely circulated paper in Washington, D.C., the staid, traditional look of the company’s online paper is notably different from the look of Business Insider’swebsite. While “staid” might be popular with D.C.’s highly political readers, to compete with many other online sources, Bezos might make the decision to drop the company’s more traditional headlines for some that are a little more attention-grabbing.
The Post is likely more than happy to offload its newspaper operations, considering earlier in the week the company reported an earnings drop of 14% in its most recent quarter. Net income dropped from $51.8 million in its first quarter to $44.7 million in its second. The paper’s circulation dropped 6.5% in the past year, but it is still the seventh-largest daily newspaper in the country.
Of course, the company is hanging onto the segments of its business that continued to perform well. The Post’s cable and broadcast television and Kaplan education segments showed higher profits, with Kaplan alone bringing in operating income of $23.7 million — a $20 million jump from last year’s same-quarter revenue.
Amazon.com, Inc. (NASDAQ:AMZN) has served as an example of innovation with Bezos turning an online bookseller into a retailer of online goods that successfully takes on Wal-Mart Stores, Inc. (NYSE:WMT). Proclaimed a micromanager by former employees, Bezos is involved in every facet of operations, although he has made clear that he’ll be keeping The Post’s CEO, president, executive editor, and editorial page editor in place.
One need only look to Amazon.com, Inc. (NASDAQ:AMZN)’s ongoing success to see Bezos’s innovation. However, as impressive as the company’s $15 billion in revenue (up from $12.8 billion the year before) is, Bezos and his team continue to amaze analysts by doing well despite its annual losses. Sales are almost always up for the company, but where it falls short is in actually earning anything from those sales.
To compete with other retailers, Amazon.com, Inc. (NASDAQ:AMZN) strives to offer low prices, but that comes at a cost. In its most-recent quarter, the company posted a $7 million loss. Since Bezos is taking on the newspaper industry — an industry plagued with declining ad revenue — this should definitely be an area of concern for investors.
Ensuring The Washington Post Company (NYSE:WPO) is as mobile-friendly as possible likely won’t be Bezos’s only move toward innovation. Newspapers all over the country are injecting Internet-style innovation even into their print versions. Gannett (NYSE:GCI) is now outsourcing its printing to The Columbus Dispatch, which provides two of the company’s papers in a more compact, easy-to-use format. The Cincinnati Enquirer and The Kentucky Enquirer re-launched earlier this year. The new format is not only smaller, but features bolder, eye-catching headlines and photos to lure in today’s time-starved readers.