Jeff Bezos and Other New Moguls Enter Struggling Industry Where Watchdogs Matter

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The death knell for the newspaper industry has sounded loudly in recent years.

In the past decade, employment by newspaper organizations has declined nearly 40%, according to numbers from the US Department of Labor's Bureau of Labor Statistics. While 20 years ago newspapers were earning $0.15 on every pre-tax dollar, today newspapers are burdened by declining advertising revenue. The Newspaper Association of America has determined that from 2006 to 2011 newspaper advertising revenue declined 50%. Last year, IBISWorld ranked the newspaper industry as the fifth fastest declining industry in America, right after recordable media manufacturers. Industry revenues are projected to decline at an average rate of 4.2% per year from 2012 to 2017, which is bad news for big players like The New York Times ( NYT ), Tribune Company (OTCMKTS:TRBAA), and Gannett Co ( GCI ).

This makes it difficult to explain why newspapers -- newspaper companies, that is -- are this summer's hottest must-have accessory. In a week's time, three high-profile newspaper purchases have occurred: Boston Red Sox owner John Henry bought The Boston Globe for $70 million; IBT Media acquired Newsweek from media conglomerate IAC/InteractiveCorp ( IACI ), and Amazon ( AMZN ) founder and CEO Jeff Bezos purchased The Washington Post for $250 million.

Bezos has arguably gained the most media attention among the three, many questioning the reasoning behind his entering a troubled industry.

Writing for Bloomberg Businessweek , Brad Stone attempts to understand Bezos's thinking:

With the rise of the Kindle, Bezos created publishing imprints that encouraged authors to experiment and sell their books directly to readers while collecting an above-average royalty. This was immediately framed by observers as an attack on Amazon's oldest partners, traditional publishers-and it was, in part. But Kindle Singles, which distributes bite-size novellas, and Kindle Serials, books that are meted out in chapters, have also given writers new ways to find an audience and earn a living. He's attempting to do something similar with Amazon Studios, which backs original television shows and gives filmmakers an outlet for their work outside the usual Hollywood power structure. Bezos isn't trying to kill the media business; he's trying to reinvent it, racing against the likes of Apple and Google to build the most comprehensive array of devices and innovative online news and entertainment services.


Reinvention is key here. How Henry, IAC, and Bezos reinvent these businesses will likely be watched closely over the coming years. Bezos himself has publicly admitted he does not have a definite plan for The Washington Post.

"There is no map, and charting a path ahead will not be easy," Bezos said in an open letter published in The Washington Post. "We will need to invent, which means we will need to experiment."

While there might not be a map, there are certainly indicators of what audiences need and want, and what news organizations currently aren't delivering.

Last month, the Pew Research Center polled 1,480 adults on the their attitudes toward news organizations. What they found could serve as a bellwether for what new players in the space will push for with their companies.

The research found that 69% of people say television is their top source of news. However, the Internet is catching up. Fifty percent of the public uses the Internet as their main source of national and international news, up from 43% in 2011. Of people between the ages of 18 and 29 years old, a whopping 71% say the Internet is their main source of news, versus 55% who cite television as their main source of news. Among 30-49 year olds, 63% use the Internet as their main source of news.

Newspaper readership has been the hardest hit, according to the study. In 2001, 45% of Americans cited the newspaper as their main source of news. Today, a mere 28% turn to broadsheets over television, the Internet, and radio.

While readership is clearly transitioning, public opinion of the news is suffering.

A mere 28% of people feel journalists contribute a lot to society's well-being, down from 38% of people polled in 2009. At the same time, 78% of people believe news organizations are biased, and 67% believe news stories are often inaccurate -- compare that to 1985, when 44% believed news organizations were inaccurate. Regarding perceptions of news organizations overall, 65% of people say news organizations tend to favor one side, and 75% say they are often influenced by powerful people and organizations.

What will the new generation of newspaper barons do to boost public opinion of journalists and news organizations? That's to be seen. However, one finding of the study did highlight a role news organizations seems to be winning popularity in: as a political watchdog.

A large majority of the public (68%) believes news organizations keep political leaders from doing things that should not be done. That opinion is nearly equal amongst Democrats, Republicans, and Independents. About half of those surveyed (48%) say news organizations help rather than hurt democracy, versus 35% who believe it doesn't. Young people, those between the ages of 18 and 29 years old, increasingly believe the press has prevented political leaders from doing things that shouldn't be done. In 2011, 56% of young people believed this. Now, 75% of young adults believe this.

Last year, the public was 10% less likely to view the press as an effective political watchdog.

"Young people have especially become more likely to say news organizations keep political leaders from doing things that should not be done, a shift in opinion that has taken place concurrently with rising concerns about civil liberties," the report points out.

Thinking about the future, the picture of a typical young reader comes together. He or she reads the news on the Internet -- maybe on a Kindle or an Apple ( AAPL ) iPad) -- and might not trust that the news is free of bias. However, he or she does see the press as an effective watchdog.

For players like Bezos, who knows to focus his business strategy on the long versus short run, this is a customer profile to pay attention to.

Twitter: @brokawbrokaw



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AAPL , AMZN , GCI , IACI , NYT

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