Greetings from the CMS Blog! We hope you had a great summer. Though we were on hiatus, we didn’t stop paying attention to the goings-on in the world of media, and now we’re excited to start the conversation again. And we hope to hear from you as well!
One of the interesting phenomena of the summer was a number of high profile private purchases of major newspapers, over a matter of days. Jeffrey Bezos, the chief executive of Amazon.com, purchased The Washington Post for $250 million out of his personal wealth of an estimated $25 billion (it is estimated that this price is approximately equal to just 1% of his share of Amazon stock). John Henry, the Boston Red Sox principal owner and former investment fund manager, bought The Boston Globe for a paltry $70 million.
For many, the question was why these businessmen decided to invest in such a “failing” industry. Mayor Bloomberg of New York stated he had “no idea” why Bezos bought The Post. Others hypothesized that newspapers are the new “trophy” for billionaires – “Some billionaires like cars, yachts and private jets. Others like newspapers.” For his part, Bezos has said little about his private motives for buying the paper. He has stated that he “doesn’t have all the answers” for the problems facing the newspaper industry, but that he’s willing to start asking questions and is hopeful for a new “golden era” for The Post. His comparative advantage will in theory be a new “point of view” as to how the paper should evolve (and presumably keep costs down, as he so successfully did at Amazon), and provide a “runway” (i.e. more time for the company to restructure financially).
Others have observed that private ownership is perhaps a better status for the company; in an interview with Post publisher Katharine Weymouth, she pointed out that “If journalism is the mission…maybe (a publicly traded company) is not the best place for The Post.”
The Boston Globe was purchased in a similarly shaky financial condition. The New York Times Company, the previous owner, sold the Globe at a significant loss from the $1.1 billion it paid in 1993. Though some may consider it a risky investment for John Henry, he is known for a “keen grasp of numbers and a disciplined approached to statistics,” and an investment model “focused on ‘what is, not what should be.’” He will likely bring the same business acumen to the Globe that he brought to his previous investments including the commodities market, the Red Sox, the New England Sports Network, the Liverpool Soccer Club and a NASCAR team. In this intriguing piece from WBUR blogger Carey Goldberg, the author challenges Henry to break from the Globe’s traditional hierarchical coverage of the region and instead discover a “new Boston,” whereby the paper and its staff willingly seek out stories and sources that are increasingly relevant to the city and its readers today by digging into it’s “knowledge economy.”
But while noble, many news outlets may no longer be willing to invest in coverage that runs counter to audience expectations with so much weighing on profit margins. What does it take to make a media company profitable today? Similar questions have been raised in the context of 24-hour-news networks and online media. For example, a recent satirical post on The Onion mercilessly mocked the CNN.com website for posting an article on Miley Cyrus’ VMA Performance as their top story, above the crisis in Syria, solely to drive up web traffic and thereby advertising revenues. As the fake “Op-Ed” put it, “I want our readers to know this: All you are to us, and all you will ever be to us, are eyeballs. The more eyeballs on our content, the more cash we can ask for. Period.” Online news sources are now competing more and more desperately for advertising revenues. Is there a financially sustainable solution in the future?
What do you think?