First Past the Post: What’s Next for the What’s Left of the Washington Post Company?
The Washington Post Company’s newest acquisition doesn’t exactly produce lively reading.
“The Forney ‘T’ Oil Gun assembly typically consists of a guide tube, retraction assembly, oil gun and quick disconnect coupling,” drones one document in the “literature library” section of the Forney Corporation’s website. “The guide tube supports the oil gun and provides both a cooling air connection and a gland for the gun to slide in and out of the firing position. The guide tube also retains the gun retraction assembly and the oil position limit switches. The oil gun is a concentric tube arrangement with a separate removable tip.”
Founded in 1927 to make oil and gas burners for electric utilities, Forney now also builds parts for chemical processing plants, the cement business, and paper mills. Besides domestic sales, its three plants also do good business exporting to China, a market it first entered 30 years ago. When the Post Company bought the firm last month for an undisclosed price, CEO Don Graham made it sound like a perfectly natural move: “Forney is a small acquisition that fits with our decentralized operating philosophy. We are a diverse group of businesses sharing common goals and values but each with its own identity and workplace culture, and with management responsible for its operations.”
The Post Company’s two previous transactions also fit that diversity-oriented mold. In February, it sold the Everett (Wash.) Herald, a daily paper in the Seattle suburbs that it had owned for 35 years, to Black Papers, a Canadian chain. And last October, the company bought a majority stake in Celtic Healthcare, which provides skilled home-health and hospice services in Pennsylvania and the Baltimore and D.C. suburbs.
But nothing made a statement of corporate diversification as much the deal the Post Company announced last Monday, four days after it officially got into the industrial boiler manufacturing game. The outfit named for the newspaper Graham’s grandfather, Eugene Meyer, had bought in 1933 was selling the Washington Post—was selling all its remaining papers, in fact—to Amazon founder and CEO Jeff Bezos, for a quarter of a billion dollars.
Once that transaction closes, the Post-less Post Company (which will be required to change its name) will remain as a sort of Carlyle Group- or Danaher Corporation-lite, a hodgepodge holding company with a for-profit education business, a cable TV system, a half-dozen television stations, some news properties (Slate, The Root, Foreign Policy), a news aggregation service, an ad agency for social media, a home healthcare unit, and some boiler-part factories.
That the company got to the point where it decided to spin off its namesake business, no longer its biggest source of revenue, says more about the wider financial troubles of journalism than about the District or its region. But that didn’t make it any less surprising for Post employees, or competitors, who had assumed the family owners would always be around—nor will it make it any less odd to see Graham sitting at the head of a newspaperless conglomerate, one which will still be one of the 20 biggest public companies based in D.C.
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When word spread last Monday that Post management would address employees, many people in the newsroom figured the topic would be office space. The Post had put its building up for sale earlier this year; who would buy it and where the paper would move were the kinds of things that might merit an all-staff meeting, especially in the overheated office real estate climate of D.C. in 2013.
As Graham instead announced the results of negotiations with Bezos that he’d been conducting in secret for months, employees were shocked—an audio recording of the meeting, obtained by Poynter’s Andrew Beaujon, picks up the sounds of several hundred people muttering to their neighbors as soon as the news broke. “The Grahams have always been in the driver’s seat,” says Freddy Kunkle, a Post Metro staffer who’s worked at the paper for 13 years and is the co-chairman for news of the paper’s Newspaper Guild union unit. “They own the voting shares. They’ve always had something of a firewall that a lot of public companies don’t have.”
The notion that the family could sell the paper wasn’t totally foreign, though, especially to the ninth-floor office suites at 1150 15th St. NW where the Post Company’s executives work. “Last year, as part of a regular ongoing strategic review that we have, there was at least one meeting where [Post publisher] Katharine Weymouth discussed it quite openly: Is this one option that the Post Company should be considering?” says former Post Executive Editor Marcus Brauchli, who’s been a vice president of the paper’s parent company since resigning from the newsroom last year. He says he found out about the sale a couple of hours before Graham made it public. “You always want to consider every option. But did I think that they were on the brink of it? No.”
Brauchli’s years running the newsroom saw three formal rounds of mass buyouts, by the Guild’s count, and quite a few informal ones offered to individual staffers. “We were perpetually faced with the necessity of keeping expenses down, not just in the newsroom, but across the building,” Brauchli says. That’s been the case for most newspapers for most of the last decade, of course, and especially since the Great Recession began. But Brauchli argues the local daily has it worse than most. “The Post does face a unique challenge: [It has] a national newspaper cost base with a regional newspaper revenue base.”
The Post aims to cover national politics and policy aggressively, in part because that’s what many of the paper’s online readers go to washingtonpost.com for from outside the region—84 percent, according to the Post Company’s last annual report. Which means it can’t just run lots of wire stories and focus on local news. But like most legacy papers, it still gets most of its revenue from its print edition—which basically only circulates in the D.C. area, and which has seen circulation fall by more than 35 percent in the last decade. Advertising revenue fell along with it, down 14 percent just last year. The company’s newspaper publishing division reported a loss of $11 million last year (after accounting for voluntary pension charges, without which the loss would have looked far larger).
All that might have been sustainable for a while, even for a publicly traded corporation, because the Graham family controlled a majority of the voting shares. “We’ve always understood that it was a public trust and treated it as such,” Weymouth told Post TV the day after the sale was announced. But lately, Kaplan, the company’s education and test prep subsidiary, has been in trouble nearly as dire as the newspaper. Two years after the Obama administration issued new regulations on the for-profit higher education industry in response to complaints about high student loan default rates and overly aggressive recruiting, the bottom fell out of the business. Profits at Kaplan’s higher ed division fell by 82 percent last year, from $148 million to $27 million. The company’s test-prep arm had expanded into for-profit education in 2000, and when business was good, it was more than enough to offset the decline in newspaper income: In 2009, the nadir for the newspaper industry, education accounted for 62 percent of the Post Company’s revenue.
“Clearly that was a lifeline, and when that went south, that is the direct cause of this [sale],” says Ken Doctor, a media analyst for Newsonomics. Owning a public trust is one thing; owning a money pit is another.
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When the Chandler family sold the Los Angeles Times and several other newspapers to Tribune Co. in 2000, that was the end of Times Mirror Co., the holding company that operated the papers. After the Boston-based Bancroft family sold Dow Jones & Company to Rupert Murdoch’s NewsCorp in 2007, they largely vanished from the public eye, surfacing only to grouse occasionally that they wouldn’t have sold to Murdoch if they’d known his British tabloids were hacking into people’s voicemail systems.
But when Bezos takes control of the Post later this year, the Graham family will still be major players among the District’s homegrown businesses, even if the assemblage of companies they’ve got left no longer includes the newspaper. “They will be an important local business,” says Ward 2 Councilmember Jack Evans, a candidate for mayor who says the sale of the newspaper to a tycoon from across the country reminds him of the loss of former D.C. institutions like Dart Drug, Crown Books, Riggs Bank, Woodies, Garfinckel’s, or Hecht’s. (Naturally, Evans says, he hopes to keep the renamed Post Company in D.C. proper: “Any company is going to look, ‘Where can I get the best deal?’ I would match any offer that Maryland and Virginia put on the table to try and get the company.”)
The Post sale might not be the last big one the company does in the near future, either. The six TV stations it owns could fetch up to $2 billion if they were sold together to a larger broadcasting entity, analyst Craig Huber of Huber Research Partners estimates. “They’ll likely pick and choose their spots,” Huber says. “One thing I like about the company is they’ve got an awful lot of cash laying around.”
Even if the company did unload the TV stations, keeping Slate, the Root, and Foreign Policy would mean it was still active in journalism. (Will the Post keep running Slate stories in its Sunday business section or using pieces from the Root and Foreign Policy in Outlook? “We haven’t even begun to think about things like that,” Post editor Marty Baron says.) The company’s WaPo Labs unit—which developed a Facebook app to share what Post stories readers clicked on with their friends, another social tool called Trove that aggregates headlines of interest, a mobile phone Metro app called DC Rider, and other new projects—isn’t going to Bezos in the sale, either.
“An interesting question here is, what does Don Graham do now?” Doctor says. Maybe keeping Slate is just enough news for a guy who got into the business as a Harvard undergrad, and who worked as the Post’s sports editor when his mother, Katharine Graham, was the publisher. “It gives him a good focus when he has to say goodbye to the Washington Post Company. $250 million: That’s a nice goodbye.”
Illustration by Jandos Rothstein