Meet Patrick Dorsey, Publisher of the Herald Tribune
Why do billionaires buy newspapers like the Herald Tribune and Washington Post? What's the method to their madness? Investing in a dying industry to preserve the "Fifth Estate" for the public good? Or own a mouthpiece to promote their personal agendas?
Read All About It: Digital CEO Buys Traditional Media!
With the sale of the Washington Post to Jeff Bezos, the newspaper enters a crucial phase in its 136-year history amid disruptive changes in communications, technology, and reader habits. According to HBS professors Bharat Anand and David Collis, both experts in corporate strategy, the qualities that Bezos has shown in his leadership at Amazon, including constant commitment to the customer and a long-term approach to innovation, are good news for DC's paper of record.
WANTED: A NEW ECONOMIC MODEL
By: David Collis, Thomas Henry Carroll Ford Foundation, HBS Adjunct Professor of Business Administration
The joke used to be that you could only make a million dollars in the airline industry if you started with a hundred million dollars. With the acquisition of the Boston Globe for about a twentieth of its value 20 years ago and of the Washington Post for a twentieth of the group's market capitalization, it is clear we can now substitute newspapers for airlines. Yet John Henry, the winning bidder for the Globe, and Jeff Bezos, the new owner of the Post, are not noted for making poor business decisions. Is there a method to their madness, investing in what has been widely characterized as a dying business?
Of course there are plausible explanations for their purchases that have nothing to do with economics. Their motives might include both the public good (maintaining a crusading fifth estate to counterbalance other, increasingly concentrated sources of power and wealth) and self-interest (the vanity of having a mouthpiece to promote their personal agendas, or, more troubling perhaps, to influence the public and legislators on issues that affect their other businesses: the Boston Red Sox and Amazon).
But is there an economic rationale to the investment? Or to put it more bluntly, is there a viable future for these newspapers after the Internet has disrupted the traditional print business? Since Bezos's strategy for any business has always been based on customer-centricity, begin by asking exactly what role a newspaper can play in a consumer's life? As a physically distributed printed daily paper carrying local classified advertising, probably not much.
But imagine a world that lacked a trusted intermediary selecting key events, reliably reporting the facts, and offering informed analysis—all available anywhere, anytime, on any device. In its absence, entrepreneurs would be lining up to launch such a "curated" edition of world news. And if that edition could be customized to your needs and interests, how much more valuable would it be? And if it were provided by a worldwide brand already recognized for integrity and honesty, so much the better. The Globe and Post can fill that need.
The objection has always been that there is no way to monetize such a role. Online advertising does not plug the gap left by the demise of the classifieds. Nor will enough subscribers pay to get behind a firewall. Yet take a very long-term view of the evolution of the Web—something that Bezos is willing to do—and ask, as one possible scenario: In a world of micropayments on the Web (say at 1/10th of a cent per page view), would it be possible for enough people to run up a bill that would keep the Post in business?
Who knows what the new proprietors will do with their acquisitions, but don't underestimate the potential for a real return on their investment.