Thursday, August 8, 2013

From Hedge Funds to Newspapers

Beginning last Saturday, two stunning newspaper developments occurred. 

The first was the announcement that The Boston Globe was being purchased by John Henry, owner of the Boston Red Sox, and formerly the founder and manager of a hedge fund that once held as much as $2.5 billion in financial assets.
The second was the revelation that The Washington Post was purchased by Jeff Bezos, founder of Amazon, and a person who, like John Henry, had also managed a hedge fund on Wall Street.

The Globe was picked up from the New York Times Co. for the bargain-basement price of $70 million.  In 1993, the Times Co. bought the Globe for a cool $1.1 billion.

Additionally, citing “several former high-ranking Globe executives,” the Boston based paper reported on August 2nd that “The Times Co.  . . . withdrew a large stream of cash from the Globe during its ownership, a sum at least equal to the purchase price.

Also, the News Consortium reported that John Henry’s “straight cash deal” for the Globe does not include assumption of its pension liabilities, estimated at over $100 million.
Probably the most stunning development associated with these two newspaper deals, though, is the sale of The Washington Post to Jeff Bezos for $250 million in cash.

Arguably, the Post has as much, if not more influence over the coverage and reporting of what goes on inside Washington’s Beltway, than does The New York Times.
An indication that this assumption may have some meat on its bones comes from a story in The New York Times on August 5.  It posits that “Critics of Amazon were aghast at the news of The Washington Post purchase, saying it would further increase the power of a company and a tycoon they think already has too much of it.”

The article claims that “rivals and critics were already concerned that the newspaper’s work would be used to help Amazon.”  To that I say, what of it?
The report continues to fret about this transference of media power to Mr. Bezos, an acknowledged successful entrepreneur, marketing genius, and technological whiz, by quoting Dennis Johnson of Melville House as follows:

 It’s an old story – rich man buys a newspaper – but in this instance it’s one of the richest men ever buying one of the most important newspapers ever, which is the one our government leaders read first thing every morning.”
OK, Mr. Johnson, what would you have:  a person of meager resources buying it with too much financial leverage and who may proceed to bleed it out; somebody with no power, no business acumen; someone with no passion for bringing entrepreneurial skills to an entirely different challenge?

Jeff Bezos and John Henry will apply new, refreshing perspectives to an industry undergoing a major life-threatening adaptation to the digital age.
It needs the support of allies, not internal grousing about new people coming in to help.

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