Why billionaires and tycoons are buying media assets


(Second Part)

On Monday, August 5, Amazon founder Jeffrey P. Bezos, paid $250 million (less than 1% of his $27 billion networth), including pension obligations, for the venerable Washington Post daily which had been owned and managed by the Graham family for four generations since 1933. Bezos is also from Washington, but the state. He says he doesn’t intend to relocate from Seattle to DC. His $137.4-billion Amazon empire is built on reading and books (he owns a quarter of the book business). He is used to a game of low risk and high reward.

Bezos, 49, is pro-same sex marriage, pro-Democrat, and until a recent turnabout, wanted to pay no taxes on sales by Amazon online.

On Friday, August 2, John Henry, owner of the Boston Red Sox, paid $70 million, without pension obligations, for the Boston Globe. The seller, The New York Times, had previously bought the Globe for $1.1 billion in 1993.

Berkshire Hathaway Inc. CEO Warren Buffett is an old-time large investor in the Washington Post Co. and has a collection more than 30 small and medium-sized newspapers he bought for their local focus.

In the Philippines, the biggest media investor is my friend and compadre, Manuel V. Pangilinan. He has invested P26 billion in the money-losing TV5 and acquired control of Philippine Star and a minority interest in the Philippine Daily Inquirer. MVP believes media’s content can be piped into his over 70 million cellular subscribers and PLDT DSL subscribers. He is one guy who has combined TV, radio, newspapers, Internet, and telephony, under one house—a no-no even during the Marcos martial law years.

MVP’s ownership in these media outlets has enabled him to present his side vigorously following public outrage over last year’s Philex gold mine spillage and this year, the atrocious rates of his water concession subsidiary, Maynilad Water (whose water rate will increase from P4.96 per cubic meter in 1997 to P42.55), a 758% increase in 16 years or an average yearly increase of 47.43%). Which other business increases its price 47% per year and makes 43% margin?

Writer James Fallows says newspapers are “the infrastructure of our public intelligence”.

Newsmen, who generally are of above average intelligence, resourcefulness, cunning and missionary zeal, gather megabytes of data, separate truth from a haystack of rumor and untruth, make an analysis, create and present the big picture in an easily understood context, hoping the public and government will react based on certain standards of decency, morality, common sense, and good governance.

Newsmen and newspapers can do that with consistency and credibility provided they have one crucial resource—independence.

In recent weeks, large and once powerful American newspapers have fallen into the hands of already powerful billionaires and moguls who once were thought to have no liking nor predilection to owning or managing newspapers.

The Washington Post Co. is worth $4.2 billion and had assets estimated at $300 million. But since it lost $54 million on revenues of $582 in 2012 and lost another $50 million in the first half this year on revenues of $138.4 million with circulation down 7%, the $250 million paid by Bezos is considered generous. Multiply zero by 15 times and you get zero. The Post had zero price earnings ratio. The $250 million is above zero; therefore, it is generous.

“There is no map, and charting a path ahead will not be easy,” Bezos wrote Post stunned employees Monday after his surprise acquisition. “We will need to invent, which means we will need to experiment,” he said on the paper read by US political leaders first thing in the morning. He praised the Grahams’ “courage” for the journalism of their paper and for deciding to sell the daily.

Bezos is expected to parlay his business savvy and online strength and The Post’s content to create and market a more dynamic newspaper. The Grahams made a mistake in managing The Post as a purely local or regional newspaper.

Berkshire Hathaway Inc. CEO Warren Buffett has assembled a portfolio of more than 30 small and medium-sized newspapers while Boston Red Sox owner John Henry recently agreed to pay $70 million for his hometown newspaper, The Boston Globe.

The Post’s greatest glory was bringing down a sitting president, Richard Nixon. The paper dictated the political agenda in the political capital of the world’s most powerful nation.

Says The New York Times: “The Washington Post under the Graham family has been a source of both constancy and coverage, a center of gravity and a force in the civic, social and cultural life of a city where many others came and went.”

NYT’s David Carr says that “in selling to Mr. Bezos, the Grahams left the Sulzbergers, the owners of The New York Times, as the last family standing in a club that once also included the Chandlers (Los Angeles Times), the Copleys (San Diego Tribune), the Cowles (Minneapolis Star Tribune), and the Bancrofts (Wall Street Journal). But even as those other families sold out to moneyed interests, it always seemed a safe assumption that the Grahams would continue to find a way to exercise a certain kind of stewardship over Washington.”



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