Written by Mary Buffett
Beatles lyrics aside, It’s been a watershed week for the newspaper business. The New York Times unloaded the Boston Globe for only $70 million after purchasing it for over $1.1 billion back in 1993. When you consider the legacy costs of pensions and other items that new owner John Henry is picking up, it’s clear the owners of the Times paid the Globe to simply leave its balance sheet.
By far, the bigger story was that the Graham family unloaded the Washington Post, its flagship publication, for only $250 million to Amazon.com founder Jeff Bezos. While the New York Times calls itself “the paper of record,” the Post finishes a close second and they have covered the White House, the halls of Congress, and everything in-between with a ferocity that often beats the Times at their own game.
The fallout has been one of sadness that one of the great newspaper families has left center stage. However, in a good way, this could be the shape of things to come.
The Washington Post, unlike the Times or the Globe, also comes to the table with a narrative arc that would make a great primetime drama. While founded in 1877, Eugene Meyer picked it up in a bankruptcy auction in 1933 and slowly built a media empire that included Newsweek, WTOP, and a number of other companies. While Eugene Meyer might have saved the paper from an early grave and oblivion, it was his daughter, Katharine (Kay) Meyer Graham, who made it great. Marginalized by her far more glamorous sister and a brilliant but unstable husband, Kay faded into the scenery as a square peg of an otherwise brilliant family. Her father was in awe of Philip Graham and made him Publisher of The Post in 1946. Soon, Phil began to assemble the talent that would make both Newsweek and the Post hip and smart alternatives to Time Magazine and the New York Times.
However, as brilliant as Phil Graham was, he could never outrun his demons. After building the Post brand, he plunged the paper and family into great crisis, spiraled downward into a number of affairs and split the paper into two groups, The “Phil People” and the “Kay People.” There was talk of divorce and he might actually end up with the family paper. It got to the point where the daily soap opera inside the Post eclipsed any coverage on the front page. However, in 1963 as Phil was convalescing from a breakdown, he pulled out a shotgun and killed himself while Kay was in another room.
The great untold story of the Washington Post was how a shy and insecure Katharine Graham discovered that she was made of far tougher stuff. When she took over the reins of the family paper, most did not know what to expect and some, fearing that the Post might begin a long slow decline, started to look at the New York Times as the pace to be. My former father-in-law, Warren Buffett, also played an important role as a long time member of the Washington Post’s board; he served as her financial tutor. While an acquisition of the Post did not fit within his sweet spot of buying small and mid-sized newspapers, Warren played a quiet and an unassuming role protecting the Graham family’s crown jewel.
However, Kay built something remarkable in her own right, and by doing so, she transformed herself into something special. Within a few short years became the Katherine Graham we all know today. The Post, along with the Times, argued in front of the Supreme Court that the Pentagon Papers should be published. In an instant, any remaining public support for The Vietnam War vanished. As a charter member of Richard Nixon’s “Enemies List,” Graham found it far more difficult reapplying for broadcast licenses for WTOP because the Nixon White House wanted payback for their tough coverage.
Then there was the story that changed everything; a minor break-in at the Watergate became the constitutional crisis of the century. Ben Bradlee, the paper’s executive editor, stuck by Woodward and Bernstein and the rest is history. All of the parts that the Eugene Meyer, Phil and Katherine Graham had built over the years all came together and provided a great national service.
The Post remained profitable into the 21st century but a number of tidal changes gnawed at their durable competitive advantage. Classified advertising, a great moneymaker for many papers, began to migrate to online platforms like Craigslist. Full page advertising, another great revenue source for the Post, suffered a great decline as the nation went into The Great Recession and most dailies were reduced to thinner versions of their former selves. Finally the advent of the internet, the circulation of most American papers — the Post being no different — fell into a steep decline. In 1999, the daily circulation of the Post stood at a healthy 762,000 with 1,065,000 for Sundays; by 2013 it had fallen to 474,767 and 838,014 respectively.
Because newspapers still maintained the legacy costs built upon the days of better balance sheets, publishers were ill-prepared to deal with the changing financial pressures of the 21st century. Many papers closed or were further consolidated. In many respects, many wondered when the news industry would finally reach rock-bottom.
In many ways, most newspaper publishing families stumbled half-heartedly into the digital space because their expertise was elsewhere. They were brilliant when it came to building circulation block by block, attracting the right talent, or even setting up the paper for a multi-generational run, but most failed to understand how to solve the digital riddle. Until The Great Recession, newspapers still remained profitable enough that such question could be delayed until institutional procrastination set in. Newsprint saw digital as an internal competitor. On the other hand, owners failed to grasp how to publish newspapers in a digital space and sustain themselves financially over the long term.
Just as Elon Musk taught the car industry that a quality electric vehicle could be built profitably, perhaps it makes good sense that Jeff Bezos will soon own the Washington Post. With Amazon, Bezos elevated the retail buying experience by moving it online. When many questioned his growth strategy when Amazon produced gallons of red ink, he remained patient and built a stellar brand. In an odd fashion, Bezos may have to do the same thing at the Post. He might even have to “blow up The Post in order to save it.” Should that be the case, being patient as these changes bubble upward will be critical.
If libraries were the internet, before such an animal was ever created, then newspapers were how content was streamed to us. When you strip away the artifice, newspapers carry content from the publisher to your doorstop. For centuries, your paperboy was the final link when it came to content delivering “the first draft of history,” as Phil Graham called it, to your front door. Today, digital news overtook newsprint because people are demanding instant access to content.; you can n longer wait for tomorrow’s edition. There was a time when there were dozens of newspapers flooded New York and they would publish updated editions every hour for street for vendors to sell. Now, they are all gone and what remains standing is trumped by the internet.
In the next decade, the newspaper business will be at its most exciting and dangerous. At some point, even the New York Times will cease printing its daily run and will opt for an all-digital edition. However, as digital revolutionizes how news content is aggregated and distributed, perhaps Jeff Bezos can use the Washington Post to teach a generation of publishers how to do it right.
And that would really be front page news.