The Future of News: The Washington Post
Can the Washington Post bring news online?
The Washington Post has a storied history as a leading American news organization, but digitization has forced major shifts in how the company delivers news content.
The Washington Post was founded in 1877, went public in 1971, and and has a storied history of news coverage, including reporting on Watergate that led to President Nixon’s resignation in 1974 (1). Yet today the paper’s operating model faces significant challenges, as the old business of printing hard-copy papers and delivering them has been radically shifted in an age where people can access news content online instantaneously. Questions about the sustainability of The Washington Post have significance not just for the future of it as an individual enterprise but also reflect meaningful societal questions about the future of investigative reporting.
Legacy Operating & Business Model
In the legacy Washington Post model, the company produced news content that was physically printed and distributed, paid via a subscription or one-off basis per paper. Under the legacy business model (which is still a component of the Washington Post’s business), a consumer can purchase daily morning delivery a hard-copy of the paper for $455 annually (2). The operating model underlying this type of business involves sending distinct editions from the newsroom to printing machines and a very extensive paper delivery last-mile delivery operation. As a result of these dynamics, The Washington Post had primarily maintained a position as a regional newspaper; it did not have an extensive national distribution network comparable to USA Today or The New York Times.
Digital Operating & Business Model
In the emerging digital world, the Washington Post’s operating models and business models shift dramatically. First, the cost of delivering digital content is fundamentally different, as it reflects digital distribution systems rather than physical production and goods (ie. paper and ink) costs. The pricing model reflects a lower willingness to pay for digital content, as the Washington Post has pursued a $48 national price point for digital content access (2). This business model is strategically oriented to driving subscription base scale.
How is The Washington Post Adapting?
Jeff Bezos purchased The Washington Post for $250 million in 2013 and has supported aggressive digitization efforts. In a recent milestone for the paper, The Washington Post drew 66.9 million visitors in October 2015 versus 65.8 million for the New York Times (3). This growth includes substantial mobile news consumption, including 51.2 million users (4). The Post has also expanded its distribution reach, including publishing all of its content as Facebook Instant Articles, partnering with 300 newspapers to form a newspaper network, and recently a distribution deal via Amazon Prime (which is estimated to have 25 to 40 million members) (2, 3). Finally, the paper is trying to disrupt itself by backing smaller technology initiatives including Bandito, Loxodo, and Arc (3). Jeff Bezos wants to pursue an Amazon-like strategy with the Washington Post by prioritizing scale over profitability and ultimately building a dominant and indispensible digital news network.
- Don’t miss the next platform shift: The Washington Post has been caught somewhat flat-footed in the digital shift, and it should be prepared for additional changes in the content consumption landscape. In this context, the emergence of virtual reality as a new platform provides huge greenfield opportunities for innovative news delivery mechanisms. The Post should explore launching a skunk-works virtual reality news studio.
- Experiment with micropayments: emerging decentralizing technologies, especially bitcoin-related innovations, enabled minute micropayments that could be employed to support new content monetization strategies. Limited transaction costs enable frictionless small payments that might make ad-supported models less compelling.
- Explore last-mile network options: The Washington Post can either leverage its last-mile newspaper delivery network to deliver other items or should shut down its last-mile nodes and rely instead on a company like Amazon’s delivery network. This type of strategy, coupled with more distributed production facilities (ie. in Amazon factories) could perhaps enable those that actually do want a hard copy of the paper to access the hard-copy Washington Post experience.
- Continue scale emphasis: All of a sudden, The Washington Post is not limited by its regional focus and can instead provide relevant news content globally. Prioritizing quality analysis that has global relevance (rather than stories on the Washington Nationals) might help tilt the balance of the company more towards scale.
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- The Washington Post. Washington Post Co. Timeline. 2013. https://www.washingtonpost.com/apps/g/page/national/washington-post-co-timeline/374/
- Doctor, Ken. Jeff Bezos Finally Pumps Up The Post With Prime. Politico. 9/15/2015. http://www.politico.com/media/story/2015/09/jeff-bezos-finally-pumps-up-the-post-with-prime-004137
- Kennedy, Dan. 5 Things Publishers Can Learn From How Jeff Bezos Is Running The Washington Post. Nieman Lab. 6/8/2016. http://www.niemanlab.org/2016/06/5-things-publishers-can-learn-from-how-jeff-bezos-is-running-the-washington-post/
Student comments on The Future of News: The Washington Post
It’s interesting how the Washington Post was able to reinvent itself with digitalization. In my previous job, we had some clients wondering if their valuation multiples would start looking more like technology multiples (significantly higher) as they started shifting their business models to digital. After doing some analysis we concluded that this wouldn’t be the case given the general trend that millennials don’t want to pay for news and the high costs associated with printing and delivery network. If the Washington Post manages to finish this business transformation and find other sources of revenue, it could generate a lot of value for its shareholders.
As online news sources grow, it is likely that readers will become even less likely to pay for a newspaper subscription. I wonder if the Washington Post is considering online ads as a significant source of revenue yet, I looked into their webpage and it seems that there is quite a lot of banner placement. However, I have seen other cases of major newspapers where shifting their business model to source revenues from ads seems to put quality of online news at risk. This is because sometimes the most controversial titles, or those related to superficial subjects such as celebrities and scandals seem to attract more clicks, and this allows for a “better sell” to advertisers that are looking to place ads in the pages with the most reach!