The Washington Post Company Needs a Good Business Person to Operate the Company

Bad Investments, Move To Conservative Slant Produce Losses

The Dismal Political Economist has long been critical of the Washington Post.  Because it is the premier newspaper in the nation’s capital and because it has almost no competition, the Post has a long history of leadership in journalism.  But recently the Post has tried to become more of a platform for Conservative opinion writers, and its news and political department, with the exception of such great people like Chris Cillizza are now moving to the political right rather than renewing leadership from factual reporting and honest opinions.

The Business Plan is not working.  The Post parent company has reported third quarter earnings, with these results.  For the print media

Circulation at the newspaper also fell, at a slower pace than last year but accelerating since the beginning of this year. The Post’s daily circulation declined 5.4 percent in the first nine months of 2011 compared with the prior year and 4.4 percent on Sundays. It did not disclose the third-quarter rate alone. For the nine months ended Oct. 2, weekday circulation averaged 518,700 and Sunday circulation averaged 736,800. . . .

Overall, the newspaper division reported an operating loss of $9.9 million in the third quarter of 2011, compared with an operating loss of $1.7 million a year earlier. For the first nine months of 2011, the division posted $25.6 million in operating losses, compared with $29.8 million in losses a year earlier.

And even the on-line edition of the Post’s newspaper is not doing well.

Online activities didn’t fare much better. Revenue generated by the online news — including washingtonpost.com and Slate — fell 14 percent to $23.3 million in the third quarter. The drop was sharpest for online display advertising, down 17 percent; online classified ad revenue fell 5 percent.

Maybe readers just don’t love the 637 new Conservative columnists the Post has added to try to appeal to the Republicans. 

But a serious concern for the Post company is its for-profit education division.  For profit colleges have been hit by new regulations, following revelations that they engaged in disreputable recruiting practices, leaving students highly in debt.  As a result the Obama Administration was able to get much stronger regulation of for-profit schools put in place and the result

 was the shrinking of the Kaplan education division, which has revamped its admissions policy to comply with Education Department regulations and has implemented a risk-free trial period for enrollees to counter criticism of its recruiting practices.

Operating income at Kaplan’s higher education unit plunged by 79 percent to $25.1 million. In the third quarter, new enrollments fell 30 percent from the year before; new enrollments fell 42 percent in the first nine months of the year compared with 2010.

The Post company has also made a series of bad investments, and so is in the process of writing down their value.

“There are so many good competitors in the student lead aggregation business, and Avenue100 and Course Advisor will never be worth what we paid” for them, Post chief executive Donald Graham said in response to a question at a Sept. 9 session for shareholders.

And finally, in an incredibly stupid move, one which will ultimately place the Post company in the Hall of Fame of Business Blunders, the company is buying back shares, effectively reducing its capital and weakening the company for the future. 

The Post Co. continues to buy back its own shares. In the third quarter ended Oct. 2, it purchased 137,534 shares for $47.9 million, or an average of $348.28 a share. The number of shares outstanding dropped 12 percent over the previous year.

Moves like this are intended to placate shareholders who might otherwise be upset and the diminishing value of their investment.  As for shareholders who are incompetent enough to tolerate this level of mis-management, well they deserve what they are going to get in the future. The stock is about 40% of where it was just four years ago.  Any bets on where it will be next year?.