The Deal: Jeff Bezos and the Amazon Post

NEW YORK (TheDeal) -- Jeff Bezos closed the purchase of the Washington Post on an auspicious news day. 

The change in control on Oct. 1 coincided with the shutdown of the Federal government and the debut of the health insurance exchanges created by the Affordable Care Act. As a news story, political discord plays well in the Washington Post's local audience and among the readers outside the Beltway who make up 90% of its online audience. 

The dual local-national nature of the Washington news market presents a dilemma for Bezos and the paper's leadership. 

Should the Washington Post focus on the attractive markets in Washington, 

Maryland and Virginia, or devote the resources to develop national coverage and advertising, which it has attempted to do in the past? 

There is more for the Inc. (AMZN) founder and CEO to contemplate. Bloomberg LP and Politico LLC have introduced custom information services 

in Washington that bill thousands of dollars a year. 

Their success on the Washington Post's home field underscores the opportunity to provide lucrative information services to lobbyists, contractors and others who do business in Washington. 

The speculation about how the e-commerce tycoon will remake the paper has been boundless since Bezos announced his $250 million investment this Summer. Basic questions about geographic emphasis and the application of technology to consumer or professional audiences provide a starting point for contemplating the Amazon Post. 

"They need to decide what they are going to be," said Merrill Brown, director of Montclair State University's School of Communication and Media, who was the founding editor-in-chief of and a Washington Post reporter. 

In addition to chasing stories, Brown suggests, the editorial mission would include product development and collaboration with the business side of the paper. Changing the news model likely will involve rethinking such fundamental journalistic principles as the church-state division, which could create profitable news formats but could also produce newsroom turmoil. Especially since Bezos is known equally as much for his volcanic temper as for his business vision. 

"The most important thing to do there is to really create a different culture," Brown said of the newspaper. Gannett Co.'s  (GCI) appointment of MarketWatch founder Larry Kramer as the publisher of USA Today could serve as an example of an online-minded overhaul. 

"The reality is there isn't a deep bench of great digital thinking there," he said of the Washington Post

Bloomberg and Politico have demonstrated the market for high-priced digital products in Washington. In early 2011, the former introduced Bloomberg Government and the latter, Politico Pro. Lobbyists, congressmembers, staffers, association executives, contractors and others pay thousands of dollars a year for subscriptions to the real-time news services. 

"That market was just taken away from the Post," said Ken Doctor, a consultant with Outsell Inc. in Burlingame, Calif. "Under Bezos, they could contest that market." 

The Amazon founder's deep pockets will help. Doctor said Bezos would be more open to exploring new markets and formats than the prior ownership, which remained committed to the newspaper model. 

Bloomberg Government charges $5,700 annually per subscriber. Don Baptiste, who co-founded and heads the unit, led the development of the service in 2009 and 2010, and conducted market research with potential subscribers. 

"We asked them some pretty simple questions," he said. "What do you like? What don't you like? If you could have anything you want what would it be," he said. 

Baptiste said that people cited "the usual suspects for information here in Washington" when asked about their reading habits. 

The Washington Post topped many lists. Many subscribed to Congressional Quarterly, National Journal and the Leadership Directories Inc., or to specialty publications such as Jane's Defense Weekly

In addition to traditional news, Bloomberg Government provides legislative tracking alerts, Congressional Research Services reports, transcripts of hearings, updates from a data team that watches the floor of the House and Senate and other formats of news and information. 

"When a law is passed we link all the regulations that come out of it," Baptiste said. 

Bloomberg Government also maintains a database of contractors and has a new "partner finder" app that helps subscribers identify potential collaborators for bids. 

When Politico introduced its high-priced professional service in February 2011, General Electric Co.  (GE) sponsored the launch. The Fairfield, Conn., manufacturing and financial services company was Politico Pro's sole advertiser in its first quarter. 

The service includes news alerts and perks such as briefings with editors and events. Initially, Politico Pro focused on energy, healthcare reform and technology. In 2012 it added defense, financial services, tax and transportation. Earlier this year it added trade, agriculture and education. 

Parent Allbritton Communications Co. will have ample funds to develop Politico and Politico Pro, pending completion of the $985 million sale of eight television station to Sinclair Broadcast Group

Politico Pro would not disclose the price of a subscription, though it reportedly exceeds $3,000 per year. The company said in March it had 7,000 users at more than 1,000 organizations, with a 96% renewal rate. 

"What Politico has proven is you can be a general news organization and a B-to-B custom house at the same time," Outsell's Doctor said. 

The Washington Post covers subjects like the nexus of healthcare and politics, Doctor said, "but it covers them like a newspaper." 

Washington regulatory lawyer Andy Lipman of Bingham McCutchen LLP suggested that targeted professional services would have been "a natural progression" for the paper, but that management may have been concerned about cannibalizing its readership. The Washington Post or others could develop services that track news across regulatory bodies, or that follow diplomatic missions in Washington. 

Lipman also suggested Amazon-like features could be integrated into the Washington Post's content. "You're reading a news report about a particular agency," he said, "and you can have the underlying legislation or the relevant case law sent to you." 

For and other online retailers, location can be an abstract concept. Amazon's ubiquity and scale have a lethal effect on retailers from mom-and-pop, neighborhood shops to big-box chains. The company has also tried to cultivate a local touch by setting up drop-off boxes in stores and offering customers local deals. An investment in urban marketing site LivingSocial Inc. exemplifies this focus. 

"The Washington Post has a very strong local footprint," Doctor said. "It is number one, it is Tier 1, in the D.C. area." 

The company committed to local coverage after Watergate, he said. "The Times invested in plants around the country and became an national paper," Doctor explained. "The Post decided to double down in D.C." 

The paper, though, has made efforts to expand nationally. In 1962 the Post and the Los Angeles Times established a joint news wire. 

"Washington Post content was carried in newspapers all over the country and overseas as well," Doctor said. 

The paper set up national bureaus in Chicago, Denver, Los Angeles, Miami and New York, and published The Washington Post National Weekly Edition

It came to an end in 2009, however, when the company disbanded the partnership with the L.A. Times, closed the last of its national bureaus and ceased publication of the weekly. 

Bezos could revisit the national market, and the automotive, travel and image advertising accounts that go with it. 

"Today more than 80% of uniques come from outside the D.C. area," Doctor said. 

"There is a possibility of monetizing that audience," he added. "But it has been difficult for newspapers to monetize a nonlocal audience." 

There is a Coke and Pepsi factor that comes into play in the advertising market. In terms of nationwide audience, the Washington Post trails the Wall Street Journal, New York Times and USA Today

Cuts to the editorial staff don't help. Doctor said the Washington Post's newsroom is about half the size of the one that produces The New York Times, putting it at a disadvantage. "Especially on the Internet you want to be No. 1 or No. 2," Doctor said, "otherwise there is very little money." 

The Alliance for Audited Media reported that the Wall Street Journal and New York Times had the top daily newspaper readership in March 2013, with average print and online circulation of 2.4 million and 1.9 million, respectively. 

USA Today came next, with a blended print and online daily circulation of 1.7 million. The Los Angeles Times, New York Daily News and New York Post had higher print-online numbers than the Washington Post, which scored a daily circulation of 475,000 for print and digital. 

The Wall Street Journal and New York Times grew 12.3% and 17.6% for the year ended March 2013, respectively, while the Washington Post declined 6.5%. 

Peter Krasilovsky of BIA/Kelsey said that developing local bureaus throughout the country would be costly. 

"The New York Times went through this 15 or 20 years ago," he said, when the company invested in various bureaus. 

Partnerships with foundations or local news organizations could be an appealing alternative. 

The New York Times has made content deals with the Bay Citizen in San Francisco and Austin, Texas-based Texas Tribune. The deal with the Bay Citizen ended in 2012, but the Texas Tribune provides content to the Times. 

Krasilovsky suggested that Bezos would also "leverage the Post brand in the Washington, D.C., area to make it more of a local commerce hub." 

The Washington Post has already developed local initiatives such as Service Alley, a social media site that provides information on home-related services. 

Though the deal closed in October, there is no sign that a dramatic Amazonification of the Washington Post is imminent. The newspaper and a representative for Bezos declined to comment for this article. 

"They regret that Politico happened elsewhere," Brown said. "They should similarly be apprehensive that Bloomberg and others are spending an enormous amount of money to cover Washington." 

Part of the challenge is that the Washington Post is an existing institution, whereas Politico Pro and Bloomberg Government are new ventures. 

Imagining ways that the Washington Post could be laboratory for the delivery of news has real allure. 

Gauging the cultural issues, such as the collaboration of newspaper business and editorial departments, and how that could affect reporting, is more difficult but are an equally important part of the experiment.

Written by Chris Nolter