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Sept. 16, 2015, 10:34 a.m.
Business Models
Mobile & Apps

From two-day shipping to news: A cheaper Washington Post is now an Amazon Prime benefit

That Bezos synergy has finally kicked in. How much will it help the Post’s quest to shift from a local newspaper to a national and global news powerhouse?

The shoe has finally dropped: Amazon will be offering a subscription to The Washington Post as a benefit for Prime members, our own Ken Doctor reports for Politico. Amazon’s CEO Jeff Bezos is, of course, the owner of the Post, having bought it two years ago, so one imagines the biz-dev negotiations weren’t too hostile. Here’s Ken:

While Amazon has never released the number of its Prime memberships, the latest estimates range from 25 to 40 million. That’s a powerful installed base of customers to expose to the Post offer. The initiative, long in the works, bolsters the Post as a revivified national and global news source, one more competitive to the New York Times, among others. In addition, it opens a new skirmish in the platform wars of 2015, as major platform Amazon puts the Jeff Bezos-owned Post front and center while Facebook Instant Articles, Apple News and Snapchat Discover re-work the mobile presentation of news…

Since Amazon CEO Jeff Bezos bought the Post two years ago, we’ve speculated on how and when he would hook up the power of Amazon to the Post. The most logical connection: Amazon Prime. What began as a $79-a-year, guaranteed-two-day delivery program has grown into one of the country’s biggest membership plays. The Post will be the sixth major benefit offered Prime memberships, after “free” shipping, movies and TV, music, photo storage and a Kindle lending library. Prime membership now costs $99 per year…

In the Prime foray, we see the wider Bezos strategy now playing out more clearly. Unsurprisingly, it is a profoundly Amazonian strategy: Build the customer base for years; reap the profits later. It is, we should note, also the driving philosophy of the Big Three of the digital news world, Vice, Buzzfeed and Vox Media.

“Growth is the fundamental goal,” Steve Hills recently told me. Hills is the Post’s president, who just last week announced his end-of-the-year departure after 28 years at the paper.

Read Ken’s piece for a lot more detail, but a few quick reactions:

— Post access for Prime members is cheap, but not free. Ken argues that won’t be much of a problem:

The new offer will be an easy one for Prime members to accept. Those signing up will get the Post’s National Digital Edition — its national and global coverage — free for six months. Then, they’ll be charged $3.99 per month — indefinitely. That’s a $48-a-year price point, and one that could shake up wider digital news pricing.

That is cheap. (Though not quite as cheap as the 19-bucks-a-year offer the Post was making this summer.) But the difference between free and cheap is a big one. Or, to frame it more accurately, the difference between “being a Prime member for $99 a year” and “being a Prime member for $99 a year and paying another $48 a year for The Washington Post” is not insubstantial. A lot of this will come down to pricing psychology: How well can Amazon convince people to let the price tag fade into their mental backgrounds?

washington-post-amazon-prime(Note that the Post’s press release about the deal says simply: “Amazon Prime Members Enjoy Digital Access to The Washington Post for Free.” Not “Free For A Few Months Until We Start Charging.” You can get a free trial of Amazon Prime too, but I doubt Amazon would headline a press release “Amazon Customers Now Enjoy Access to Amazon Prime for Free.” Also: That press release also doesn’t mention the name Jeff Bezos anywhere, which is odd.)

Amazon also tells Doctor that “this is a limited time offer,” though it’s unclear what that means — it’s hard to imagine them stepping away from a free-trial model anytime soon.

Perhaps the most interesting issue here, from Amazon’s perspective, is why limit this subscription deal to Prime members? I doubt many people will sign up for Prime just to get a better deal on the Post. It’s possible it’ll help with Prime member retention, though I suspect that benefit will be small. But what about the many millions of non-Prime Amazon customers — should they get a deal too? Will they?

Prepare not to know how well this works. Amazon doesn’t release any hard data around Prime or its Kindle business, and I fully expect the Post to do the same. Bezos has made it clear he sees no need to share that sort of business information publicly or with outside audit groups.

The New York Times should be a little more nervous today. The Washington Post, back in the Graham days, famously decided not to commit to national distribution as the Times had. As Sarah Ellison put it in Vanity Fair three years ago:

From the moment he became publisher, in 1979, [Donald Graham] insisted that the newspaper must concentrate on its Washington readers. But not everyone got the message. Inside the Post, there was always a powerful tension between Graham’s view and the view of the newsroom, which, starting with [Ben] Bradlee and for a period of decades, sought to compete on a national stage with The New York Times — and to a significant degree succeeded.

And indeed, the Post made outsized profits in the those final pre-Internet days by building a deeply local product in a city that also happened to be the capital of the world’s superpower. But the Times’ play for a national (and global) audience has reaped dividends. The local news business is a deeply troubled one.

Since buying the Post, Bezos’ strategic moves have largely been about recapturing that national market. His partnership deals with local newspapers have sold the Post as a membership benefit to subscribers around the country. The new apps they’ve developed are focused on a national audience. (The Prime deal won’t include most local news, which means it should limit cannibalization of D.C. subscribers.) Bezos hasn’t talked much about his Post strategy publicly, but see what he said in this Business Insider talk around 46:45:

The big change we’re making at the Post is, the Post was always, even though it had a national and global reputation, the product was a local product. And that was by design, and I think for the time, it was a very good strategy, and the Post as a business was super successful for decades. But that is what we’re changing. We are in the process of remaking the Post in that way so that it can also be — we will continue to do good local coverage in Washington, D.C. — but the Post has the good fortune to be the newspaper of the capital city of the United States of America. And that’s a great place to starting point to being a national and even a global publication.

In terms of strategy, that’s a direct shot at the Times, which has been dominant in that national-general-interest-premium-publisher space. Adding in the scale of other newspaper publishers is one thing, and not a driver of revenue. Adding in a potential national (and global) audience via Prime is a big boost to that effort.

— This is a technology strategy as well as a business one. If you want to produce a national, digital, general-interest news product, you don’t want to be hamstrung by newspaper design, newspaper workflows, and newspaper structures. You want to create something new. That’s just what the Post has been doing, and my Press Publish interview with the Post’s Cory Haik is, in retrospect, a nice window into the sort of restructuring they’ve done to prepare for this moment.

Photo illustration by Lorie Shaull used under a Creative Commons license.

POSTED     Sept. 16, 2015, 10:34 a.m.
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