La Plus Ca Change…

1.
That yowl of pain you heard coming from the nation’s capital on Monday afternoon was the death cry of the print newspaper business as it was cut to the heart by the buyout of the Washington Post by Amazon CEO Jeff Bezos. Just forty years ago, during the Watergate scandal, the Post was an economic and cultural force potent enough to help take down a sitting president, and now it has itself been taken down by a guy who less than twenty years ago was working out of his garage selling books on the Internet.

The surprise $250 million deal has coup de grâce written all over it, and in newsrooms across the country, reporters and editors – those who still have jobs – will be grousing over the rich symbolism of one of the crown jewels of American journalism being snapped up by a mogul made rich by the very technology that killed the print business model. But once the grumbling dies down, those of us who care about journalism and culture may have to concede two obvious points. First, we damn well better hope Bezos succeeds where others have failed in figuring out how to produce professional-quality content in the digital age, not just for the sake of the Washington Post or even of the news business, but for the sake of cultural and artistic production in general. Second, of all the billionaires with the means to buy a major cultural institution like the Washington Post, Jeff Bezos might just be the one who can reinvent it for the 21st century.

The details of the Post deal are curious – and telling. For one thing, the newspaper’s parent company, which owns a diverse group of media and educational businesses including the Kaplan test prep company, is selling only its newspapers and holding onto its other businesses. For another, Bezos is buying the Post on his own, and won’t merge it into Amazon, the online retailing behemoth he still runs. Finally, Bezos has said he doesn’t intend to lay off employees and will keep Katherine Weymouth, granddaughter of legendary Post publisher and Washington powerbroker Katherine Graham, on as the newspaper’s publisher.

In other words, the Washington Post Company sees its signature property as a money-loser, and Bezos appears to be stepping in as a white knight to save a cultural institution from falling into disrepair. The history of these sorts of deals is mixed at best. After all, just three years ago the Post Company sold once-mighty Newsweek for a dollar to yet another billionaire, 92-year-old Sidney Harman, who brought in former New Yorker editor Tina Brown, with a plan to merge the aging print weekly with the website The Daily Beast. Harman, however, promptly died, and with the magazine hemorrhaging readers, Brown just last week severed ties between the website and the print magazine, selling Newsweek to start-up International Business Times.

As its purchase price suggests, the Washington Post is in far better shape than Newsweek was, but the paper’s core business of covering inside the Beltway news is under threat from websites like Politico. More importantly, the paper faces the same problem all legacy news organizations face, which is how to scale back its news operation to a level that is economically sustainable in a post-print era without doing fatal damage to the news gathering itself. To do that, though, requires a nuanced understanding of why the old business model failed in the first place.

2.
There are two versions of the story of why print newspapers bit the dust, one a tech-geek fantasy, the other a more prosaic business tale. In the tech-geek fantasy version, spread by the likes of digivangelist Clay Shirky in his 2008 book Here Comes Everybody, newspapers were beaten at their own game by bloggers and regular citizens armed with iPhones and laptops who were able to deliver news faster and more cheaply than the old print warhorses. Ironically, Shirky and others who advance this theory are laboring under the same misconception that has plagued news executives for the last twenty years – namely, the assumption that the principal business of a newspaper is gathering news. Newspapers don’t sell news. Rather, they give news away for free in order to maintain a distribution system for business information, most of which takes the form of paid ads. Newspapers remained as lucrative as they were for as long as they did because until the introduction of the web browser in 1994, nothing else offered cheap access to the millions of ordinary consumers who picked up the paper that landed on their front curb every morning.

Understanding this distinction helps explain why television hurt but did not kill newspapers. Television long ago entered more homes than newspapers ever did, and in many ways TV, which includes moving pictures and sound, is a better delivery device for news. But again, news isn’t the product for sale; advertising is, and by its nature, television can only effectively sell broad conceptual ideas that can be communicated visually in thirty seconds. You can use television to convince millions of Americans to shop at Safeway, but you can’t very well use TV to tell Americans about everything that’s on sale that week at their neighborhood Safeway. And if you are trying to find a roommate or selling some old furniture, you can’t afford the thousands of dollars it would cost to run even a fifteen-second spot on a local station. For those kinds of tasks, you called up your local paper and bought a classified ad – until, that is, Craigslist and eBay came along and let people post those ads essentially for free.

To repeat: newspapers aren’t dying because they’re getting beat on news reporting. Newspapers are dying because the Internet separated the news content from the advertising revenue stream. For generations news executives thought they were selling news, while in fact they were selling a pipeline to consumers that companies and individuals paid to use. Now, the Internet itself is that pipeline, and we’re watching a wild scramble to see who will control it and the rafts of dollars flowing down its many tributaries. So far, tech giants like Apple, Facebook, Google, and, yes, Amazon, are winning that battle hands down.

This same battle, meanwhile, has been playing out across all forms of cultural and artistic expression. Twenty years ago, if a rock band wanted to find a wide audience for its music, it signed with a record label, which then recorded the band’s music and distributed it to stores across the country. Now, thanks to the ease of digital distribution, young musicians can bypass record labels and post their songs online for free. But if they want to make any real money from their work, they will almost certainly have to turn to Apple’s iTunes site and its direct pipeline to America’s ears.

A similar story has played out in the movie business, which only a few years ago could depend on DVDs rentals to make up revenue lost at the box office. Now, thanks to streaming services like Netflix, DVD rental fees have dried up and movie studios are madly turning out special-effects-laden comic-book serials in the hopes of winning over American teenagers and Chinese moviegoers, the last groups still consistently willing to pay to watch a movie in a theater (as long as it’s loud, violent, and not overly dependent on the subtleties of spoken English).

Books have been somewhat insulated from these disruptions because, so far, most readers still prefer physical books over e-books, but the terms of the battle are the same. Publishing firms, which have for generations paid writers to produce and editors to curate books are fighting tech giants Apple and Amazon, which view books primarily as loss leaders they can use to attract customers to their e-readers. So long as most readers continue to prefer printed books, publishing will limp along in its wounded state, rather like the news business after television but before the Internet. But there is a tipping point at which e-readers, and the recommendation engines controlled by the tech giants, could take over the curating role now played by publishing houses, thereby killing the publishing industry as we know it.

3.
All of which brings us back to Jeff Bezos and the Washington Post. Over the last twenty years, much of the money and power once held by content producers – newspapers, record labels, movie studios, publishing houses, etc. – has transferred to the tech giants that now control the digital pipelines to consumers. This means that it’s much easier for any individual artist or journalist to reach an audience, which is a great and good thing, but it also means that the tech giants controlling the pipelines are taking ever increasing shares of profits.

For the past decade or so, we have been enjoying a strange hangover period of the pre-digital age. A generation of journalists and artists trained in the dead-tree era, who have few other marketable skills, have continued producing art and journalism even though they are getting paid far less for their work than they used to. But every year more of these content producers are retiring or moving on, and we are entering a new period dominated by the first truly digital generation of bloggers and artists who are faced with the task of rebuilding the culture industries out of the ashes of the tech explosion.

I and many others have argued that, so far at least, this generation has relied too heavily on memes and information derived from the legacy content producers. In journalism, this has meant hordes of bloggers feasting on an ever-shrinking supply of reported news from print-based news organizations. In film, this has meant kajillions of kids with camera phones riffing on existing story worlds, like Star Wars and Harry Potter, and uploading the results onto YouTube. As Jaron Lanier, a digital pioneer recently turned Internet skeptic, puts it in his 2011 book You Are Not a Gadget, we are a culture in danger of “effectively eating its own seed stock.”

Obviously, this cannot go on forever, but thus far the most powerful technological disrupters have shown little interest in investing in the content carried along their digital pipelines. Apple, with its market-making iPhone and iPad devices, sparked a creative revolution in the world of apps, but when it comes to cultural content like books, movies, and news, all the tech companies have done is made it cheaper and easier to get what you want, cutting deeply into the profit margins for the content producers in the process.  

Amazon, which now controls a quarter of the book business, has of course played a huge role in this devaluing of cultural content, but in recent years Amazon has also quietly begun investing in content of its own. Since 2009, Amazon has launched imprints focusing on romance (Montlake Romance), thrillers (Thomas & Mercer), and sci-fi (47North), and now even general adult titles (New Harvest) and literary fiction (Little A). Compared with Amazon itself, these ventures are tiny, and they have run into trouble with rival booksellers like Barnes & Noble, which have refused to stock their titles. But whether these imprints succeed or fail, they demonstrate that Bezos has begun to wrap his mind around what it would mean if his company squeezed so much value out of the book business that publishing became in effect one long amateur hour.

So, is the Washington Post purchase a step in the same direction, an effort on Bezos’s part to invest directly in the content that fuels his billion-dollar pipelines? The short answer is nobody knows. By all accounts the deal came together quickly, and it may well be that Bezos himself is unsure just what he wants to do with the Post. For a man worth $25.2 billion, as Bezos is, a $250 million newspaper truly can qualify as an impulse buy. Perhaps this is simply the billionaire’s answer to collecting old-fashioned typewriters. Let’s hope that’s not the case because whatever you may think of Bezos and others who broke the pre-Internet business model, the fact is it’s broken – and who better to fix it than the man who helped break it in the first place?

Bezos, who has never worked in the news business, may be less attached to the dying print model than most print-news lifers and thus more willing to embrace digital-only innovations. As a man who has made his living tapping the powers of the interwebs, he may be better able to see that strict paywalls, which limit linking and bring in few dollars, are a dead end for most news organizations. As a CEO who recently bought out the reader hub GoodReads, he may be more open to recasting the newspaper as a community gathering spot, a sort of localized wiki combining conversation, community news, and event listings with ad revenues supporting a small, professional news staff. Most important, as a manager who has excelled at the long game, spending years investing in infrastructure for Amazon rather than diverting profits to shareholders, Bezos might be more willing to lose some money while figuring out how to marry news quality with profitability.

Or maybe not. Maybe the guy just wants a $250 million toy. But let’s hope not, because if that’s the case we stand to lose a lot more than a grand old newspaper that once helped take down a president.

Three and a half years ago in some brief comments on Michael Lewis’ seminal memoir of Wall Street in the 1980s, Liar’s Poker, I noted,While the period that Lewis chronicles is interesting in its own right, its impact is somewhat diminished by the many corporate scandals and Wall Street improprieties that have occurred since the book was first published. Against this backdrop, Liar’s Poker is no longer an exceptional story that defined an era, it is merely another moment in the cycle of Wall Street corruption and ensuing retribution that continues today.In a remarkable piece for Portfolio magazine this week, Lewis revisits Liar’s Poker amid the wreckage of Wall Street and readily admits that the book now seems “quaint,” tragically so:I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”And:In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?In the long piece, Lewis posits, convincingly, that the obit for Wall Street that he wrote more than twenty years prematurely is finally relevant, though rendered absurd by the cataclysmic collapse.The essay is a must read. In it he profiles a few who will, when the dust eventually settles, be known as – not the heroes; there are no heroes – the ones who saw it coming. And at the end he sits down with the legendary Gutfreund, whose career Liar’s Poker ruined, for the first time since Lewis left Solomon Brothers back in the 1980s.Kottke also highlighted the Lewis article today and he points out that this essay is likely material (along with several others Kottke points to) for a forthcoming book that Lewis intends to write about the death of Wall Street as we knew it. There’s little doubt that this new book will be the obit that Liar’s Poker was meant to be.