Business

Amazon's Jeff Bezos brings experimentation to newspaper industry

FILE - In this Sept. 6, 2012 file photo, Amazon founder and CEO Jeff Bezos speaks in Santa Monica, Calif. Bezos plans to buy The Washington Post for $250 million. (AP Photo/Reed Saxon, File)
FILE - In this Sept. 6, 2012 file photo, Amazon founder and CEO Jeff Bezos speaks in Santa Monica, Calif. Bezos plans to buy The Washington Post for $250 million. (AP Photo/Reed Saxon, File) AP

SAN FRANCISCO — Jeff Bezos has already transformed one traditional print business, books, into a digital one. The experience provides a blueprint for how the billionaire technology executive is now poised to overhaul newspapers after his $250 million acquisition of The Washington Post.

Since Bezos founded Amazon.com Inc. in 1995, he has forced the publishing industry to embrace e-books and digital reading devices. He has also made the Seattle-based company a leader in online advertising and collecting consumer data over the Web. Those strategies have helped vault Amazon into the world's largest e-commerce provider and one of the top Internet companies with a market capitalization of $138 billion.

Bezos, 49, will bring that background to bear as he plunges into the newspaper industry with his deal Monday to buy the Post.

"It's clear that Bezos has a very deep and rich history in publishing, particularly since books were Amazon's bread and butter and still are," said Dan Kurnos, an analyst at Benchmark Co. "He's got a lot of experience."

In a letter to Post employees, Bezos laid out the challenges ahead for newspapers, saying the "Internet is transforming almost every element of the news business." Bezos, who is buying the Post as an individual and unaffiliated with Amazon, added that "we will need to invent, which means we will need to experiment."

For Bezos, experimentation is nothing new. Over the years, the chief executive officer has pushed Amazon into everything from streaming video to hosting Web services and delivering groceries.

Bezos has also used his personal fortune — his net worth stands at $27.9 billion, according to the Bloomberg Billionaires Index — to invest prolifically outside Amazon through his investment fund, Bezos Expeditions. The fund has backed young companies such as Twitter, the 3-D printing company MakerBot Industries and robot firm Rethink Robotics.

"He invests in things where information technology can disrupt existing models," said Rodney Brooks, the MIT professor behind Rethink Robotics.

Chief among Bezos' experiments that have paid off is how Amazon has pushed the publishing industry toward a digital business model. Amazon began selling e-books in 2007 and unveiled the Kindle e-reading device that same year. By 2011, Amazon said its books for Kindle readers surpassed its print sales.

Many e-books now sell for prices close to those of print ones, a lesson the newspaper industry would do well to heed.

Amazon has used demand from customers to push down prices of print books. At the same time, when Bezos introduced the Kindle, he offered the most popular books at prices close to paperback books, setting the bar for digital content for years to come.

"He's managed to get e-book pricing pretty close to print pricing," Kurnos said. "If he can do that in newspapers, then ultimately it's a sustainable cash flow model."

Amazon provides other strategies to Bezos for his move into newspapers. As print publications search for a way to stem ad-revenue declines, Amazon has increased online advertising sales, which are estimated to rise 40 percent to about $835 million in 2013 from the year prior, according to Emarketer Inc.

Amazon also has a trove of consumer data, from reading and shopping habits to credit card information. The company was a pioneer in targeting products to customers based on previous purchases — techniques that could benefit the newspaper industry as well.

How much Bezos will use his Amazon experiences with the newspaper is unclear.

"Jeff is not coming in with a plan," Washington Post Chairman and CEO Don Graham said in an interview. "Jeff knows how to get people together to develop successful changes in what we do."

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