June 13, 2023

WaPo Needs a Vision; I’d Consider Local

It is a tale of two papers when looking at The New York Times versus The Washington Post. One continues to grow, acquiring new subscribers across its bundle of products. The other is WaPo and it has lost 500,000 digital subscribers since 2021. There is no clearer sign than this that WaPo needs a new vision.

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Now let’s jump in…


Fred Ryan, the publisher and CEO of The Washington Post, announced that he was leaving the company in August. The business has undergone tremendous growth since he took over nine years ago. According to a WaPo story:

At the time, the majority of The Post’s revenue came from its print business, and it had about 35,000 digital subscribers. Now, Ryan said, the majority of The Post’s revenue comes from its digital business, and it has about 2.5 million digital subscribers.

It’s an impressive feat. Unfortunately, these numbers put the company in a position of being in a very far behind second place relative to its primary competitor, The New York Times.

The fundamental problem for WaPo boils down to long-term strategy. Much of its growth came because of the Trump White House and COVID. But as fewer people have paid attention to news—especially D.C. news—growing subscriptions has proven to be very difficult.

To compound this, it’s obvious that Fred Ryan lost the faith of his senior leadership team. The company lost its Chief Product Officer and Chief Revenue Officer over the past year. Its CEO has now left. Owner Jeff Bezos has two choices.

Either he sells the company because he is having too much fun being a multi-billionaire on his new yacht. Or, if he genuinely cares about the longevity of the company, he needs to push for a new vision.

My recommendation would be to dig into an idea Chartbeat’s Tony Haile wrote nearly three years ago in the Columbia Journalism Review. Go local.

Here’s the Times in 2020: it added 587,000 new subscribers in the first quarter. That’s almost three times the number of total subscribers to the Los Angeles Times. It’s more than 70 percent of the total cumulative subscribers to Gannett’s 260 media properties. The New York Times has more digital subscribers in Dallas–Fort Worth than the Dallas Morning News, more digital subscribers in Seattle than the Seattle Times, more digital subscribers in California than the LA Times or the San Francisco Chronicle

The fundamental premise behind Haile’s entire piece is that because of The New York Times’ scale, it will continue to beat everyone else in a one-on-one fight. People will only choose one major subscription and The Times is simply better fit to win. And even in 2023, the numbers bear that out.

But what WaPo has that The Times doesn’t is Arc XP, a CMS that it licenses to media companies around the world. And what Haile originally proposed—and I would encourage WaPo to seriously consider—is to create a hub & spoke subscription product that uses Arc XP as the sort of unifying technology.

In a nutshell, a partnership between WaPo and a local publication presents a unique subscription product that The New York Times can’t offer. Let’s use the Dallas Morning News (DMN) as an example. If you live in Dallas and you had to pick between The Times and DMN, you’d likely pick The Times because you get more. But what if you could get DMN and WaPo at the same time?

With a single subscription, you’re now getting great national/international reporting from WaPo while also getting local news from DMN. You’re getting two for the price of one.

But this is specifically not a bundle. With this hub & spoke product, WaPo is at the center. And then each local publication is its own spoke. Someone in Seattle won’t care about things going on Philadelphia; someone in Boston won’t care about Dallas. But someone in Seattle will care about politics and international news.

What’s good about this is that it’s not an area in which The Times will ever compete. Why should it? It’s already winning in these cities. And for the local publications, they open themselves up to a larger audience because the product is at least as good as The Times, if not better.

But how does everyone get paid? Haile proposed:

Distributing subscription revenue based on attention share would be more effective. A Seattle Times subscription is $16 a month. We can set aside $6 for the Seattle Times as a revenue buffer, and put the remaining $10 into a pool based on attention share. If the Seattle Times subscriber spends 50 percent of their time on the Post’s site, then the Seattle Times makes $11 that month and the Post makes $5. 

The nice thing about digital subscription is that every dollar beyond your costs goes straight to the bottom line. It really doesn’t cost much to service additional subscribers. And so, even though you’re not getting the full ARPU, it’s better than the $0 both of these publications are getting when going head to head with The Times.

And it all goes back to that Arc XP software. Right now, it sells it to publications like any SaaS company would. But going forward, it could treat the software as the precursor to any long-term business development deal. Save a large % of the software cost in exchange for joining the hub & spoke network. Local publications would get great software plus the ability to market WaPo’s breadth of editorial coverage.

This is certainly not easy to pull off. I suspect many publications will not want to give up any of the subscription dollars because of the fear of lost revenue. It has historically been very difficult to get numerous publications to work together.

I think that’s what makes this unique, though. It’s not numerous publications working together. It is numerous publications working one on one with The Washington Post. That makes it more straightforward.

But maybe this is not bold enough for Bezos. Another approach would be to acquire Lee Enterprises, which owns a number of local publications in 25 of the 50 states plus a number of other digital-only publications and marketing services providers. One of those is Blox Digital, which is a competitor to Arc XP. I suspect a combined WaPo/Lee wouldn’t need two CMS providers.

A couple of numbers worth looking at in Lee’s Q2 financial results:

  • Digital revenue was up 12% YoY to $65 million
  • Digital-only subscribers was up 21% YoY to 596,000
  • Print subscription revenue was down from $77,255,000 to $64,586,000
  • Print advertising revenue was down from $44,248,000 to $31,450,000

Remember up above when I said that WaPo was a primarily print business when Bezos bought it? That’s what Lee is right now. It’s fighting to become a digital-first business, but it has to manage its print decline carefully.

Could a combined WaPo and Lee create the same hub & spoke that Haile wrote about? I suspect that would be possible. And in this case, there would be no sharing of revenue since it’d be one company.

Now Lee is not a clean acquisition. According to Google Finance, it’s only worth $85.4 million. But it has $460 million of debt on the books with a fixed interest rate of 9%. And so, at minimum, it would cost $545.4 million to take the company over.

Back in 2021, Alden Global Capital tried to buy Lee for $141 million. With the assumption of debt, that would have been $601 million. And Lee fought incredibly hard to prevent that deal from happening until the hedge fund backed down.

So, if $601 million wasn’t enough, what would it really cost? It’s impossible to say.

But the way I see it, this would give Bezos a powerful enough media platform to compete head-to-head with The New York Times. The local publications would be able to focus all of their resources on local reporting while providing the great national and international reporting that WaPo brings to the table. The combination of both could overcome what The Times has.

Whether anyone at WaPo has the conviction for either of these attempts remains to be seen.

Can pubs depend on Amazon Affiliates?

According to a tweet I happened across here:

Amazon will start paying affiliates 0% commissions on products categorized as Beauty, Health & Personal Care, Personal Care appliances, and Luxury Beauty later this month.

This is rolling out in Australia first, but I would be shocked if it stopped there. If you dig deeper, the commissions are changing across everything using the current commissions compared to what the tweet says:

  • Toys: 10% –> 8%
  • Apparel, Shoes, Handbags & Accessories: 12% –> 10%
  • All Other Categories: 10% –> 2%
  • Etc.

The reality is, if you’ve been generating affiliate revenue from Amazon, there are going to be some serious cuts in the amount of revenue that you’re making.

If I were a betting man, I would suspect that Amazon Affiliates will push all rates to as close to 0% as possible. Amazon needs to improve its retail margins and, arguably, it has a strong enough brand that it doesn’t need to pay people for promoting products.

For publishers that are doing great business on Amazon, it’ll be important to find other affiliate sources. And for products that you sell a lot of, trying to bypass Amazon entirely and working out deals with the product companies themselves would remove some of the risk.

We’re leaving an era of platform dependency. As everyone puts up their walls, we’ll need to develop new strategies. Things will look different as time goes on.

Thanks for reading. If you have thoughts, hit reply or become an AMO Pro member for an invitation to the AMO Slack plus an additional newsletter on Fridays. I hope you have a great week!