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TheStreet Open House

Newspaper Sales Make Headlines but Investors Look Elsewhere

Stocks in this article: WPONYTAMZN

NEW YORK ( TheStreet) -- Everyone loves newspapers, or at least the editors of major news organizations, all of whom spent their formative years in print.

So, it's to be expected that the sale of The Washington Post to Amazon's (AMZN) principal owner Jeff Bezos has produced reams of analysis, nostalgia and innumerable references to Woodward and Bernstein.

But for investors, the question as to whether Bezos can turn around The Washington Post's declining numbers is no longer their problem. Donald Graham's decision to offload his legacy print publication is ultimately good news.

And the stocks are reflecting that sentiment. Washington Post Co. (WPO) shares jumped 4.3% to close Tuesday at $593 on the assumption that the Washington D.C.-based media company that also owns the education business Kaplan and an assortment of broadcast and cable-TV stations will soon be free of the conundrum known as print. Similarly, New York Times (NYT) gained 1.7% to finish the day at $12.08, fresh off its announcement on Saturday that Boston Red Sox owner John Henry has agreed to buy The Boston Globe.

"The message here from investors is clear: the less newspapers, the better," Larry Haverty, a portfolio manager at GAMCO Investors and an owner of 21st Century Fox (FOXA), said in a phone interview. "It's very clear that the traditional model of newspapers is thoroughly endangered, and it looks as though we're in second derivative-ville where the rate of decline is accelerating."

Bezos, who is paying $250 to buy the Post, separate from Amazon, certainly has the cash on hand. The Amazon founder has a personal fortune of $27.9 billion, according to data compiled by Bloomberg, making him the 16th wealthiest person in the world. By spending $250 million to buy the Post, Bezos is making a wager that he can afford to lose while taking on the noble challenge of charting the course for a venerable industry desperately trying to establish a sustainable business model.

For Bezos, its a game of low-risk, high-reward. Building Amazon is one thing, rebuilding the U.S. news business is another.

The Washington Post newspaper won't be easy to fix. The capitol's best-read daily has been losing money while hemorrhaging readers to an assortment of Web sites led by Politico. This has come even as the Post became one of the most innovative newspaper Web sites in the country, introducing high-quality video long before it became an Internet staple.

Nonetheless, the Post under Graham made the fateful decision back in the 1980s to concentrate on being a local newspaper rather than seeking national ambitions, as the New York Times. As local advertising and local circulation has plummeted in the age of the Internet, the company's newspaper division posted a loss of $49.3 million in the first half of 2013.

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