Amazon's Media Purchase & Usage Data May Have Led Jeff Bezos to Buy The Washington Post

Jeff Bezos Insights From Amazon Likely Led Him to Pay $250 million for The Washington Post

Citizen Bezos?

The big news in media last week was how perhaps Web billionaires may rescue the shrinking newspaper industry. Headlines, following the August 5 purchase of The Washington Post for $250 million by Amazon founder Jeff Bezos, included "Citizen Bezos", a twist on Citizen Kane the 1941 classic Orson Welles movie about media mogul William Randolph Hearst.

In interviews Post Company CEO Don Graham said: “The Post could have survived under the company’s ownership and been profitable for the foreseeable future. But we wanted to do more than survive. I’m not saying this (sale to Bezos) guarantees success, but it gives us a much greater chance of success.”

Graham added that Warren Buffett "thought Jeff was the best CEO in the United States". As a Post article on the news noted, "billionaire Warren Buffett, has been a mentor to Washington Post Co. Chairman Donald E. Graham. Buffett sat on the Post board for (26) years as its largest outside shareholder."

Buffett, whose Berkshire Hathaway owns nearly a billion dollar of Washington Post stock, resigned from the Post company board in May 2011 "because of travel commitments linked to Berkshire Hathaway's acquisitions abroad."  He said  "the newspaper business will be tougher and tougher and tougher, and it is already plenty tough." So he may have had some hints that the Graham family, which owns 14% of the Post Company, may decide to sell the Washington Post newspaper.

Why did Buffett not buy the Post? John Cassidy writes in The New Yorker, The Washington Post  "newspaper division lost about a million dollars over the past year, which means its earnings multiple was negative—hardly a buy signal for a value investor like Buffett."

Why then did Bezos, whose Internet retail giant Amazon is quietly destroying numerous businesses including rival booksellers like Barnes & Noble, pay $250 million for The Washington Post? As anyone who has used Amazon knows, the online retailer has the widest range of product offerings, prices that beat most rivals and  good customer service. This plus its refusal so far to collect sales tax has enabled it to cripple its rivals, apparently its primary goal at present.

Then, given its edge in technology and analysis of digital data from traffic and transactions, Amazon must have the best insights into customer purchases of media products, including books as well as through its Kindle e reader, electronic versions of books, magazines and newspapers. So, based on such insights, as with Amazon, Bezos likely has a long term strategy of how to profitably expand The Washington Post into a digital platform for news, opinions, videos, coverage of arts, style and people.

Its too bad that since The Washington Post will be privately owned by Bezos personally, the conduct and results of this experiment will not be known publicly.