Wednesday, August 07, 2013


"This isn't about how the Post was undervalued, either—it's been desiccating for years now. It's about how overvalued those bloated toast-of-the-town social media sites are"

Amazon founder Steve Jeff Bezos is purchasing the Washington Post for $250 million.  Like nearly every newspaper on earth, the Post is suffering plunging revenues, losses, cutbacks, and a shriveling newspaper.  Seriously, remember when newspapers were big enough to hide behind?  The actual size of the page has shrunk, not just the content inside.
But the Post has been dying a slow death for years now.  In fact, the only part of the Washington Post empire (such as it was) which was making any money was not related to news at all, but was the Kaplan Higher Education chain of for-profit colleges.  Recently, however, the Obama administration changed rules about colleges and basically killed the profit of even this sector.  Chris Kirkham writes at the Huffington Post:
By the end of last year, just as Graham and his company now acknowledge they began seeking a buyer for the Washington Post, operating income at Kaplan's higher education division had plummeted to $27 million from $406 million two years earlier, a drop of 93 percent, according to the company's securities filings.
As you can see from this handy graph from the article, the Kaplan group was keeping the Post afloat, briefly:

That cash cow ended, and how the paper is being sold.  You might justly ask what kind of idiot buys a newspaper in this day and age.  Its like buying a horse-drawn carriage company in 1930: technically some people are still using the things, but they are clearly on the way out.
And while none of us really know, I have some speculation that might explain it.
Bezos is a reliable left leaning Democrat.  He donates millions to Democrats every elections, and while it doesn't show up in his business (he's wisely apolitical on Amazon).  Some speculate that this is a better investment than donations to politicians - and isn't limited in any way by campaign finance laws - and there could be something to that.
After all, you can only really donate to a major political campaign every two years or so if you want to boost your political viewpoint, but controlling a reliably leftist newspaper means you get to do it every day.  I don't know if that factored in at all.
What I do know is that throwing money away to help a left-leaning cause is something that doesn't even cause people to blink.  Consider the Huffington Post, which has been losing money since the first day it opened, and doesn't even pay many of its writers.  Its a website which has massive advertising and publicity, with much of its content provided for free, which is losing millions every year.  Wrap your head around that.
But its still going strong, and recently was purchased by AOL (part of the megacorporation Time/Warner).  After losing almost $35 million last year, its better off than the Post (which lost that much in the first quarter of this year alone), but the Huffington Post is still a net loss.  So why would anyone buy either one?  Why throw your money away?
For the same reason people pour money into endless trashcans like Planned Parenthood, People For The American Way, and Southern Poverty and Law Center.  They all just chew up money and produce virtually nothing... except leftist activism.
Meanwhile, most attempts on the right to come up with any sort of conservative equivalent tend to fall apart.  I wrote for a while for a website called RightNetwork which was run by American Digest's Gerard Vanderleun and Little Miss Atilla's Joy McCann.  Kelsey Grammer promoted and helped fund the site, and noted the site was an effective use of viral advertising.  Keith Olbermann added the website to his "worlds worst" segment.  Wow, that's some publicity, huh?
RightNetwork lasted about six months and closed because the backers refused to continue investing in something that wasn't turning a profit fast enough.
I also wrote for the Washington Examiner, for a section of their online site called The Opinion Zone, but that project shut down as well for not making money.  Both were overtly, deliberately conservative in leaning and both just died.  RightNetwork still owes me several hundred dollars - and it owes Vanderleun even more.  We'll never see a dime of that money.
What's the difference here, why doesn't the right keep going when the left does?  Organizations like Code Pink have no income but keep roaring along.  Occupy pulled in hundreds of thousands of dollars in donations for crapping on the street and destroying public property.  What's going on here?
Well there are two things at play.  The first is that the left is big on donating money to non profits they believe in, hoping that this will fix the ails they perceive in the world, regardless of success or movement.  They understand this stuff takes time and is worth the cost even if it doesn't work out.  And most of the richest people in America are hard left (yes, they are: athletes, politicians, and celebrities make up the bulk of the wealthiest folks), so they have money to burn on this kind of thing.  Donating a hundred thousand to International A.N.S.W.E.R. if you made $25 million on your last movie is a drop in the bucket.  They're willing to put their money into what they believe in and don't care if it makes money, or even seems to be succeeding, as long as the cause is promoted.
The right isn't so big on this.  We want success, we reward effective business, and reject losses.  Right leaning people who made a lot of money tend to be businessmen and aren't in the habit of investing in net losses.  The cause is different for the right, and the passion is directed in other ways.  If your new website and venture doesn't show movement and profit right away, well I have other places to put my money.
Second, the left doesn't need money to survive.  What I mean by this is that the left works the system so well and so totally that donations and private interest are pretty much incidental.  For decades, the left has been gaming regulations, laws, charities, and the government so effectively that they can survive just on taxpayers - willing or not.
When a leftist organization starts up, it can get charitable government grants and regular cash from various programs just by being in existence.  They fill out every form, get every possible subsidy and slice of the cash initiatives that exist, they get grants and cash benefits, they get government support and all the little funding laws that Washington is full of but few of us know how to access.
So they don't have to make any money, or even rely on donors.  They're living off all of us, whether we support their ideas or not.  That's why Planned Parenthood and NPR freaks out when people start questioning whether or not we ought to be funding this stuff when we're trillions in debt.  That's why when anyone brings up any cuts to anything, the left blows a gasket.  Rank and file left leaning folks on the street probably shrug and agree that it probably should be done, but all those parasitical groups living off the tax base are facing potential starvation.  And they go nuts with all kinds of hysterical, shrill nonsense about starvation, "draconian" and so on.  Their very existence relies on spending flowing uninterrupted - even increasing every year.
And remember when President Bush put out his "faith based initiative" so that groups like churches and parachurch organizations can get a piece of this action?  Yeah, the usual suspects squealed about that, too.  Sure they brought up church and state, and I imagine that was part of their concern.  But the real problem deep down is that this would open up that cash vein to more right-tending groups.  And competition, especially with political enemies, is not to be tolerated.
So will the Washington Post turn its self around and become a profitable enterprise?  I'd be stunned if it did, and honestly can't imagine a way to make it happen.  Its not that Bezos is unfamiliar with operating at a loss. was in the red for years, it ate costs and lost money for year after year, deliberately.  The website intentionally sold goods at a loss to undercut all competition both existing and potential.  The difference is that they did so in order to establish themselves as the online marketplace, as the biggest web store in the world.  Now they make a lot of money every year.
The Washington Post won't make money, not ever, no matter what the business plan.  And I suspect that doesn't really matter at all to Bezos.  Having the Post continue is good politics, it helps the folks in power, and it makes him more valuable and useful to the people who write regulations, pass and enforce laws, and run the country's government.
Think of this purchase not as a business investment but as an investment in cronyism and pull.  Yes, he's going to lose money, but he's so rich now it doesn't matter and what he gets out of it makes up for all that cost.  Now when the leftists in charge think of they think "he saved the Washington Post."  Its like pharmaceutical companies working to support the ACA ("Obamacare") because they then got the ability to help write it and get exclusions and protection.  Same deal with AARP and the American Medical Association.
Because that's how politics works, even more now than ever.  You can be on your own (or worse, on the opposition side), and get harrassed by various government agencies, nailed by regulations, oppressed by laws and enforcement, and find zero cooperation with your filing and attempts to obey laws... or you can be on the side of the ones in power and get protection from all that.  Like Microsoft found out in the Clinton years, you pay your tribute or you get punished.  Play along and you get treated well.  Most of the time.  Just ask the Kaplan Higher Education group.
*UPDATE: Rush Limbaugh has a great piece on his site about newspapers, in reference to a previous billionaire purchase by Sam Zell who bought the LA Times and the Chicago Tribune papers. Zell figured he'd turn things around by cutting costs and changing how the paper ran. The papers just ignored him and did what they wanted. Neil Cavuto at CNN asked him why he didn't lay the law down:
ZELL: Now, the problem comes down to how some great philosopher, I think it was Confucius, who said, "Never pick a fight with a guy who buys ink by the barrel."

CAVUTO: You own the barrel.

ZELL: That's what I thought. That's what Jeff Bezos thinks. What I found out, and what he's gonna find out, is he doesn't own the paper.
Basically the newspaper guys have their own agenda, care nothing for the bottom line, have a "higher calling" and answer only to themselves, even to the point of flat out suicide for the business. They ignored Zell, just didn't care what he had to say and he's saying they'll ignore Bezos, too.  Its a great piece, I recommend reading it all.
**UPDATE TOO: On the Morning Joe, Joe Scarborough asked how this time buying a newspaper was going to turn out differently and the answer from leftist Eugene Robinson helps illustrate my point:
“There are rich guys,” he said, “and there are rich guys.” And from what Robinson has heard—no doubt from totally independent and objective sources—Jeff Bezos, whose net worth is estimated at $28 billion, is “a prince among men.
He's a great man for saving the Washington Post, a hero, a "prince among men" who has proved he's better than other rich folks.


Hank said...

Another excellent article.
And probably the best explanation of Bezos purchase of the WAPO.

Anonymous said...

One thing - it's Jeff Bezos, not Steve. Otherwise, yeah.