Is a Bezos vs Schmidt War Brewing?

By Doug Barney August 07, 2013

The news that Amazon CEO Jeff Bezos, using all his own money, is buying The Washington Post for $250 million is pretty huge.

But this computer journalist vet (29 years served so far to be exact) thinks the biggest stories are yet to come. Bezos told employees he has no plans for hands-on management, and that initially it will be business as usual.

He also pointed to some potentially huge changes down the line once he gets his arms around his new purchase. “The Internet is transforming almost every element of the news business: shortening news cycles, eroding long-reliable revenue sources, and enabling new kinds of competition, some of which bear little or no news-gathering costs. There is no map, and charting a path ahead will not be easy. We will need to invent, which means we will need to experiment,” Bezos said.

Image via Shutterstock

Know who else is in the content business, at least in a roundabout way? Google. Even if Bezos never ever started moving the Post more fully into the world of digital, he’s still on a collision course with Google and its outspoken chairman Eric Schmidt.

The source of potential and serious conflict? Completely different views of the value, use and creation of content.

Google doesn’t run newspapers like the Post and The New York Times. Instead, it searches for their content, sells ads against that content, and also aggregates this all through Google News. It doesn’t pay a dime, yet brings in billions of Web ad revenue. And perhaps just as dear to Bezos' heart, Google is trying to make the world’s books available for free, even though it didn’t write any them.

Now Bezos has put his fair share of companies, bookstores and bookstore chains clean out of business and has put the hurt on many a Mom and Pop shop with low margin merchandise. But when it comes to books, Amazon authors still get paid. The difference is the delivery method, with eBooks supplanting real ones just like Apple replaced physical music media with iTunes. And in both cases the content costs essentially the same as its physical counterparts.

I can’t imagine Bezos being pleased that not only is Google competing against Amazon’s books, but now he also has to face the fact that Google is probably making more off the Post’s content than the Post itself.

Bezos doesn’t strike me as an aggressive, in your face kind of guy. Yet clearly he competes as fiercely as anyone in high tech. Just ask Borders if it had fun going to head to head with Bezos. Oh yeah, Borders went under!

Many publishers have grumbled about Google’s behavior but have not had Bezos’ tech and publishing background. Not only can Bezos articulate the issues, he can do something about them.

He also has way more than just the Post to protect, as he got a nice selection of smaller newspapers in the deal as well.

Old vs. New Media

Let’s compare old versus new media by looking at The Times and Google. In its latest quarter The Times Company made a bit north of $20 million, a fair shake better than the same quarter a year ago when it lost $87.6 million. Revenue of the latest quarter was $489.8 million.

So how did Google do? Far better. Net income for the latest was $3.23 billion, with the bulk of these profits still deriving from advertising.

Total revenue? A more than adequate $14.11 billion. That is a run rate closing in on $60 billion a year. Not bad for an entirely media free enterprise.

I’m sure these number are going to gnaw away at Jeff Bezos until he tries to do something, at least a little something, about it.

Friendly Fire

Bezos and Eric Schmidt are currently far from enemies, as both run investment funds that have poured money into the same startup – Beamit Mobile.

Direct competition can turn even the best of friends into total antagonists. Let’s see how long this one takes.

Edited by Alisen Downey

TechZone360 Editor at Large

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