2013/08/27

Chris Behrenbruch: «Why on earth are economists driving the innovation policy debate?»



«I recently read Joshua Gans’s “moral case for innovation” where he laments that an economic case can’t be made for innovation in Australia.

»It made me want to crack open the whisky bottle in commiseration. It’s not just that I’m weary of listening to brilliant but misguided people like the Grattan Institute’s John Daley harp on about the fact Australia couldn’t possibly have an innovation-led economy because we are too busy digging stuff out of the ground, are too far from major markets (really?) and rely too much on “purchased” innovation from abroad.

»It’s not just that it’s tiring to see “innovation” thrown in as an adjunct term to “job creation” in election propaganda. It’s not just because unions see Ford’s departure as the death of Australian manufacturing.

»It’s because the innovation debate is led by economists, and economists don’t know much about innovation. Evidence of this is their creation of wishy-washy new disciplines such as ‘innovation economics’ to account for human capital beside more traditional notions of capital and resource utilisation. In other words, the economists had to start to factor in dreaded externalities, or they didn’t have anything useful to say.

»Contrary to Gans’s assertions (and at the risk of sounding a bit neoclassical), I think economists can contribute to fundamental policy arenas that can help to create the right ecosystem for innovation to prosper.

»Australia’s competitiveness is ripe for reform.

»The biggest challenge for innovation in Australia is cultural, and not grounded in economics. We don’t want it badly enough because we’re not generally poor and there’s little sense of nation building. The “tall poppy” syndrome is alive and well and there is limited culture of risk-taking. We don’t value education. We don’t identify with the major markets on our doorstep. But to top it off, leading the dialogue we’ve got dyed-in-the-wool economists who make their careers thinking about “resource rents”.

»We’ve bored innovation into submission. If we want a new generation of entrepreneurs, let’s start with a glass half-full view of what our superb country offers.»





BRW







Caitlin Fitzsimmons: «Steve Ballmer’s successor must create culture of innovation at Microsoft»



«Leaving the office: Steve Ballmer is set to exit Microsoft in 12 months. Photo: Bloomberg»


«As the board of Microsoft looks for a successor to chief executive Steve Ballmer, they should seize the opportunity for cultural change.

»Innovation is the lifeblood of a technology firm and hiring talented people and filing patents is only half the equation – the other half is imagination and culture.

»Ballmer, who will retire within 12 months but remain in charge until a successor is announced, was Microsoft’s consummate salesman and few could doubt his passion for the job.

»He deserves credit for doing a decent job in tough times – he followed founder Bill Gates as CEO just as the turbo-charged growth of the 1990s ended and weeks before the end of the dotcom crash.

»Under Ballmer’s leadership, Microsoft trebled revenues, but it also came late to trends like web search, smartphones and cloud computing.

»Microsoft owned the 1990s but Google and Apple were the technology megastars of the early 21st century. It attempted to catch up in 2008 with a failed bid to buy Yahoo!, a company that was then also past its prime and is now worth much less.

»Microsoft still has a solid business, while companies like BlackBerry are scrambling to survive, but if it wants to reclaim the mantle of innovation, its culture needs to change.

»Ballmer’s successor should abolish “stack ranking”, the employee performance management system used at Microsoft.

»Many people believe this system, which ranks all employees along a bell curve, did more to destroy the company’s culture than anything else.

»Within every team, a certain percentage of employees are declared as top performers, good performers, average, below average or poor. Those at the top received bonuses and promotion, while those at the bottom were often sacked.

»Former employees report that this led to a poisonous culture where collaboration was anathema because employees were directly competing with one another. People would avoid working alongside strong performers and routinely sabotage each other’s efforts and withhold information.

»A culture of innovation needs constant maintenance and can be undone by complacency and eroded by a lot of small decisions taken in the name of efficiency.

»Google, Apple losing their edge; Yahoo! searching for serendipity

»There are troubling signs that Google could be losing its way on innovation.

»Google drove a lot of innovation in the early days by letting employees spend 20 per cent of their time on their own pet projects. By giving staff autonomy and breathing space, Google benefited immensely; products such as Adsense, which accounts for about a quarter of revenue, came out of “20 per cent time”.

»Now it seems Google’s commitment to “20 per cent time” is waning. It is no longer seen as a right for all staff but requires management approval in many cases and it has also reportedly been eroded by a culture of relentless efficiency and increasing workloads. Google also closed Google Labs, which showcased many of the projects, in 2011.

»Meanwhile, the jury is out on whether Apple’s innovative culture is surviving under new CEO Tim Cook . Much of Apple’s innovation was driven by a cult-like culture under charismatic leader Steve Jobs. Cook’s more consensus-driven approach could lay down a good foundation for the long term, but the Apple of the future will inevitably be different.

»At Yahoo!, chief executive Marissa Mayer is recreating a culture of innovation by buying start-ups and demanding employees stop working from home and come together in the office to allow the serendipity of unplanned collaboration.»





BRW







2013/08/22

Andrew Reid: «How Technology Complicates, Benefits Innovation»



«Innovation is a huge industry. Often characterized by R&D, it’s a $603 billion market. According to research by Booz & Company, that’s how much money 1,000 public companies spent on research and development in 2011 alone. All eyes are on innovation and how it can help a business profit, but innovation isn’t what it once was and here is why.

»When I started my business 13 years ago, innovation was about taking an idea and making something great out of it — and it was far easier to do. Creative thinkers would come up with a blockbuster concept, get some investors on board and boom — take off. As the dot-com bubble pushed computing into millions of people’s daily lives at work and at home, it also brought with it endless possibilities of technological innovation that a decade later has infiltrated almost every household and every single type of business imaginable. Jumping forward to 2013, the capacity for a business to come up with something fresh, useful and meaningful is limited and today’s market is saturated with ideas, tools, apps — you name it.

»Innovation is a crowded space where it’s difficult for a person or business to come up with something unique and yet, valuable. Nevertheless, innovation is the talk of the town. It’s hard to find an article without the word in it and impossible to find a company not looking to be part of the conversation. The problem is, the term is often glorified and misused. And, innovation itself is suffering because its friend, technology, made things a bit harder.


»Organic Ideas Hard to Find

»Yes, they may be, but it’s not so bad. Companies can now get it right the first time. For centuries, ideas just happened — they’d come out of a brainstorm, scientific hypothesis or abstract thought. Times have changed and it’s a Catch-22. We’re in a world where brands have the ability to pin point exactly what new products and services will resonate best with target audiences and what those innovations should look like. Companies have a tremendous amount of information available to them. They have the power to monitor consumer shopping behavior, user browsing history, carting and clicking habits. Brands can now also tune into what customers are saying through a number of listening posts. From social media channels to private communities, brands can peek into the minds of millions of consumers at a time.

»Unlike ever before, companies can leverage technologies and techniques to mitigate risk and fine tune innovations. The upside for organic ideas is that now they can be tested directly with customers, non-customers and other stakeholders. So, while technology has indeed made it a bit more complicated to innovate, it’s also made easier, better and more profitable.


»Customer Engagement is in Trouble

»Some may disagree, but businesses aren’t actually talking to their customers. They’re swimming in a pool of data that they think represent real customer insights. By counting on information from CRM, BI, marketing automation and other tools to help map out individuals and identify their wants and needs, companies think they’ve got a handle on consumer perceptions, when in fact they’re pretty far away from this valuable information that can genuinely initiate innovation.

»In order to be an innovator, a business has to capitalize on the customer data available through powerful analytics tools and couple that information with real consumer insights available through social media, web forums, communities and so on. While data tools and technologies give businesses the ability to get inside the consumer mind, it’s also made it easy for them to disconnect from real customers. As online shopping and browsing behavior continues to grow, customers are increasingly out of sight, but that does not mean they should be out of mind.


»Out of the Box-Thinkers are Frightened

»Post-recession, companies are still playing it safe. The technology industry has taken a beating and great minds that have the intellect to contribute are skeptics. Even worse, investor purse strings are tight and the days of tossing money at what may sound like a good idea are hard to remember.

»Still, things aren’t so grim. Thanks to the ongoing passion of young people, companies and technology itself, innovation remains to be all around us and just waiting to burst into the hands of consumers. From the release of the first 3D printer to Samsung’s newly commercialized waterproof phone to HapiFork, the new dieters dream that helps folks lose weight while actually eating, innovation is happening when people dare to think big.

»Yes, innovation is the 1970s prom queen and her days may be long gone, but that shouldn’t discourage you — it should motivate you to do things a little differently and think bigger. Test ideas, talk to customers and think outside of the box. What may seem strange today has a solid shot at being the next big thing tomorrow.»





Innovation Insights, a Wired blog







2013/08/13

Qindexing: «Upgrading Chinese economy»



«Having experienced rapid development for more than three decades, the most important task is economic structural adjustment, to realize both the quantity and the quality of sustainable growth.

»In China, maintaining high-speed economic growth is not only an economic issue, it is also a social and political issue. In the first half of 2013, the number of university graduates increased to a record 6.99 million, while GDP growth declined to 7.6 percent, which is the lowest in the past three years. Maintaining stable economic growth is necessary as a continuing slowdown could lead to many problems in society.

»But at the same time, the extensive mode of economic growth over the last 30 years has led to serious structural imbalances, high energy consumption, low efficiency and a low technological level. China’s economy urgently needs restructuring.

»In fact, realizing the leadership’s goals to double the 2010 GDP and double the per capita income for both urban and rural residents by 2020, which is the foundation for building a moderately prosperous society in all aspects by 2020, will be realized if the average economic growth rate is 6.9 to 7.1 percent over the next eight years.

»This is actually the government’s bottom line for the growth rate. If the restructuring leads to the economy slowing below this, the central government will certainly introduce stimulus packages.

»But an overheated economy will not be accepted by the government either. If the economy grows too fast based on the current economic structure, it will aggravate the current imbalances, which in turn will increase the resistance to structural adjustment and undermine the economy’s healthy development in the long term.

»Therefore, it is necessary to set a reasonable range for economic growth, setting a floor rate that can still maintain stable growth and realize the employment goal, as well as a ceiling rate to prevent inflation.


»As Premier Li Keqiang said at a conference in July, “We should not change policy orientation according to any temporary change in the economic index, otherwise it will have an impact on the hard-won opportunities and results of structural adjustment, nor should we lack vigilance and preparation for the slowdown in economy when it drops out of the reasonable range.”

»To be more specific, the government should prevent the economy from cooling too much and from overheating. Although there are still overheating issues in some industries because of the unbalanced development in Chinese economy, the slowing growth trend cannot be easily avoided according to the current global and domestic economic situation, so the possibility of overheating in the macroeconomy has largely declined.

»It is “cold-proofing” the economy that will be tougher. Although the economy achieved a 7.6 percent growth rate in the first half of 2013, which is above the expected goal of 7.5 percent, it has slowed a lot compared to the double-digit growth rate in 2011. So keeping the growth rate above the bottom line is an important task for economic regulation, especially as the global economy remains weak, and the country’s demographic dividend is gradually declining and the middle-income trap could be approaching.


»As was outlined at the 18th National Congress of the Communist Party of China in November, government administration should be separated from the management of enterprises, State assets, public institutions, and social organizations, and a well-structured, clean and efficient service-oriented government should be built up. Premier Li Keqiang has always supported clarifying the boundary between the government and the market, and he wants the government to have clearly defined functions that satisfy the people.


»The government acquiring public services from the market can strengthen the fundamental role that the market plays in allocating resources, and help to build a more market-oriented socialist market economic system, in which the government can carry out its own duties by providing a legal and fair market environment for the public, while the market can use prices as the leverage to better distribute resources and regulate production and consumption.

»Facing the challenge of realizing economic growth in the course of restructuring, a clear boundary between the government and the market can stimulate the function of both, which accords with the economic development principle and will further upgrade the economy in the long run.

»The government is accelerating the change of the country’s economic development mode focusing on economic structural adjustment. This is an inevitable choice if the country is to realize further development and the only way to realize the nation’s rejuvenation.

»Upgrading the economy means first changing the mode of economic development from an extensive to intensive pattern, boosting its scale and efficiency. The driving force for economic growth should be technical innovation rather than the input of resources. There should be a technical innovation system with corporations as the main body that is market-based and features cooperation among enterprises, universities and research institutions. Innovation, fundamental research and the transformation of scientific research achievements should rank top with science and technology contributing more to the economy.

»Moreover, the structure of the national economy should be further optimized, with the service sector leading the economy and industry being the backbone.

»The imbalances and unsustainable issues in the economy can be eradicated with more effective allocation of resources, a clear boundary between the government and the market, and a fairer income distribution system.

»The vision for an upgraded Chinese economy is concrete not abstract, and it is dynamic instead of static because the upgrading of the economy is not restricted. It can realize stable growth along with the restructuring, and achieve the twin targets set for 2020.»





China Daily











Yolanda Redrup: «The future of payment technology: New systems that could help your business»



«As the business environment has evolved into a global market, payment systems have been changing rapidly in the past two years.

»New-age technologies now aim to better service customers, help businesses expand internationally and offer more consumer insights.

»Many Australian businesses have been slow to adopt new technologies, and their payment technology is unable to meet consumer demands and service international customers efficiently.

»Speaking to the Australian Payments Clearing Association last year, Reserve Bank of Australia governor Glenn Stevens said elements of Australia’s payments infrastructure are “a bit dated”.

»“It is very clear that both individuals and businesses are demanding greater immediacy and greater accessibility in all facets of their day-to-day activities,” Stevens said.

»“This includes payments.”

»These new emerging systems have the capacity to offer more customer insights, help you establish a better relationship with your customers and allow you to easily accept international payments.

»SmartCompany spoke to four payments professionals about innovative changes in the sector that small businesses should know about:


»PayPal’s latest innovation

»Most people have heard of digital payments system PayPal, but what many businesses aren’t aware of is PayPal’s latest innovation which changes the way businesses engage with customers and takes its payments system offline. PayPal can now be used in Australian cafes, restaurants, bars and retailers through a digital wallet which allows people to pay on the spot without cash or card via a mobile application.

»PayPal has worked with point of sale software providers such as Kounta, MICROS, Island Pacific and Vend to integrate PayPal payments into point of sale (POS) solutions.

»PayPal’s digital wallet gives customers a range of new freedoms such as ordering and paying for their morning coffee from the train, or if the customer has forgotten their purse or the restaurant doesn’t accept card, they can pay from their phones while dining.

»PayPal spokesperson Adrian Christie told SmartCompany this allows SMEs and sole providers to accept payments via mobile phone. PayPal is opening up the application program interfaces (APIs) and the POS providers can integrate this into their solutions.

»“We’re opening up on two fronts by giving tools directly to the merchants and also partnering with ePay providers,” he says.

»The technology is being used in 150 cafes and bars across Sydney and a recent partnership with EatNow will mean PayPal users will soon be able to order from 2,000 restaurants Australia-wide.

»PayPal Australia managing director Jeff Clementz said in a statement the aim of the technology is to foster a more direct relationship between businesses and their customers.

»“Mobile has driven dramatic shifts in the path to purchase, providing Australian retailers more opportunities to interact with their customers and engage with them at a number of touch points beyond the traditional store front,” he said.

»PayPal hopes the technology behind the digital wallet will be applicable to more businesses in the future and will also be usable across any digital device.

»“Just look at the fact you still have parking metres and you have to queue for cinema tickets, this isn’t necessary. A digital wallet allows people to transact on a tablet, mobile, computer and even Google Glass in the future,” Clemetz said.


»Kounta

»Kounta, a scalable digital POS solution which works like a cash register, can be securely accessed from any device, anywhere, and across a range of channels including in-store, online and mobile. The software supports new mobile and online payment methods like PayPal and Xero, but it is also compatible with traditional equipment and it can accept cash payments.

»Kounta founder and chief executive Nick Cloete told SmartCompany it’s ideal for small businesses.

»“It’s designed to be a low cost subscription based model at $50 a month, and we’re quickly approaching 1000 merchants,” he says.

»“Recently we also opened up Kounta so that any merchant in the world can use it and set it up.”

»Cloete says Kounta was created out of an “obvious need” for a local low cost payments system solution which would give “offline brick and mortar stores an online experience”.

»Cloete believes payment systems need to create an interaction rather than a transaction. A new feature of Kounta is that businesses can send marketing emails and promotions to their paying customers, as well as allowing their customers to earn loyalty points and rewards.

»“Our customers have the capability to link sales to their consumers and through this build up their customer list. From there they can use that customer list however they want to send out promotions or deals,” he says.

»“Kounta tracks each of the customers and sees exactly what they purchased, which store they purchased it from and who the staff member was who served them.”

»Cloete says businesses can utilise these analytics to better their returns.

»“We can provide to our merchants with customer purchase details at the impact point. Merchants can track what the high selling items are, or who are the bestselling staff, and then this can be used to provide some sort of benchmarking for the businesses, as well as providing comparative points to others in their industry,” he says.

»Cloete says Kounta becomes most powerful when you connect it with other online payment technologies and analytics services.

»“It’s flexible and scalable to any size business whether it be single store, multi-store or a franchise-sized business.”


»Pin Payments

»Pin Payments is an all-in-one payment system aimed at start-ups and small businesses which eliminates merchant accounts, making it easier and cheaper for businesses to sell to international customers.

»Co-founder of Pin Payments Grant Bissett told SmartCompany he’d been working in the tech industry for more than 10 years when he realised Australian merchants “needed to be brought up to date”.

»Typically to accept credit card payments from a global audience requires a merchant account (an account which allows businesses to accept payments from payment cards), but Pin Payments provides an API-driven multi-currency system with no need for a merchant account, as the funds are transferred directly to your bank account.

»“API’s let one piece of software talk to another and if your payment system doesn’t offer this integration it makes customers go away from your website to make the purchase. Businesses are losing sales because of this,” he says.

»“Selling in a foreign currency such as USD is not impossible without it, but it’s practically unachievable for new and small businesses. Without API integration it also means payments can’t be connected to newer technologies like mobile apps.”

»To afford merchant account fees, Bissett says small businesses would need to make concessions and adjust their targets to afford it, as well as the setting up process being “time intensive”.

»“Pin Payments offer credit and debit card payments in USD and AUD. Everything is built in and automated to your regular bank account. You don’t have to set up a merchant account and there is no security deposit required,” Bissett says.

»“We also have fraud detection software and other security measures built in.”

»Proceeds from the businesses sales are transferred to the business’s bank account each day for transactions made seven days prior. This settlement schedule is designed to allow customers to make refunds and also stops businesses needing to pay a security deposit.

»In the four months since launching, Pin Payments has 400 active merchants using the new technology and there are more than 1900 currently registered as using the trial system.


»Braintree

»US-based payments system company Braintree started selling in Australia at the end of 2012 and has just opened its first office here. It is used in 130 currencies and powers more than US$10 billion a year.

»Braintree helps online and mobile businesses around the world accept credit card payments and in Australia it helps start-ups to establish merchant accounts. It also supports all major coding languages and mobile operating systems.

»The company’s international general manager Klas Bäck says the inspiration for the system was the difficulty start-ups faced finding modern payment solutions which allow international transactions.

»“We are filling this void by making next-generation payment capabilities – such as one touch purchasing, mobile payments and foreign currency acceptance – much more accessible for online and mobile commerce companies worldwide,” he says.

»“Our service replaces the traditional model of sourcing a payment gateway and merchant account from different providers.”

»If a business decides to switch to a different payments system after using Braintree, one advantage of the cloud-based system is the data is portable.

»“Braintree believes your data belongs to you. If a business ever needs to leave us, they can easily take their customer data with them,” Bäck says.

»Braintree’s customers include 99designs, the ABC, Microlancer and WooBoard.»





SmartCompany







2013/08/06

«Amazon founder Jeff Bezos buying Washington Post for $250M»



«Jeff Bezos, the Amazon.com founder who helped bring books into the digital age, is going after another pillar of “old media”: The Washington Post.

»Bezos, 49, struck a deal announced Monday to buy the venerable broadsheet and other newspapers for $250 million. The surprise news was a startling demonstration of how the Internet has created winners and losers and transformed the media landscape.

»Bezos pioneered online shopping, first by selling books out of his Seattle garage in 1995, then by selling just about everything else. In doing so, he has amassed a net worth of $25 billion, based on the most recent estimates by Forbes magazine.

»Meanwhile, The Washington Post, like most newspapers, has been losing readers and advertisers to the Internet while watching its value plummet.

»The newspaper, celebrated a generation ago for breaking the Watergate scandal, has been forced in recent years to scale back its ambitions, cut its newsroom staff repeatedly and close several bureaus.

»Bezos is buying the newspaper as an individual. Amazon.com Inc. is not involved.

»Bezos said to Post employees in a letter distributed to the media that he’d be keeping his “day job” as Amazon CEO and a life in “the other Washington” where Amazon’s headquarters in Seattle are based.

»But he made clear there would be changes, if unforeseen ones, coming.

»“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,” Bezos wrote. “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.”

»Washington Post Co. chairman and CEO Donald Graham called Bezos a “uniquely good new owner.” He said the decision was made after years of newspaper industry challenges. The company, which owns the Kaplan college and test preparation business along with six TV stations, will change its name but didn’t say what the new name will be.

»Bezos said in a statement that he understands the Post’s “critical role” in Washington and said its values won’t change.

»“The paper’s duty will remain to its readers and not to the private interests of its owners,” Bezos said in his letter to Post employees.

»He said he would follow in the footsteps of longtime publisher Katharine Graham, who died in 2001, in pursuing the truth and following important stories, “no matter the cost.”

»“While I hope no one ever threatens to put one of my body parts through a wringer, if they do, thanks to Mrs. Graham’s example, I’ll be ready,” he wrote.

»Katharine Weymouth, the newspaper’s publisher and CEO and a member of the Graham family that has owned the newspaper since 1933, will remain in her post. She has asked other senior managers to stay on as well.

»“Mr. Bezos knows as well as anyone the opportunities that come with revolutionary technology when we understand how to make the most of it,” she said in a letter to readers. “Under his ownership and with his management savvy, we will be able to accelerate the pace and quality of innovation.”

»The news surprised industry observers and even the newspaper’s employees.

»“I think we’re all still in shock,” said Robert McCartney, one of the newspaper’s Metro columnists and a 31-year veteran. “Everybody’s standing around the newsroom talking about it. ... I don’t think much work’s getting done.”

»The email hit staffers’ inboxes at 4:17 p.m. Eastern time. It summoned them to a meeting 13 minutes later.

»Graham spoke at the staff meeting of how he has known Bezos for more than a decade, and described him as a decent and patient man, said McCartney.

»Graham told the staff he is convinced Bezos is committed to quality journalism and has no political agenda. There was a long standing ovation from the staff after Graham and Weymouth’s remarks.

»“Hard to imagine the Post without the Grahams,” wrote East Asia Correspondent Chico Harlan in a tweet. “Don emailed his writers, knew their names.”

»Writer Gene Weingarten tweeted, “If Don Graham says this was the right thing to do, I trust him.”

»Fredrick Kunkle, a metro reporter and a union leader at The Post, said there is also apprehension among staff. “The Graham family has been revered in this town, rightly so,” he said, adding he saw at least one person at the meeting wipe away tears. “We all have a lot of questions.”

»Carl Bernstein, who helped crack the Watergate scandal as a reporter at the Post in the early 1970s, expressed hope on Monday: “Jeff Bezos seems to me exactly the kind of inventive and innovative choice needed to bring about a recommitment to great journalism,” he said in a statement.

»Allen & Co., an investment banking firm which held a high-level conference for media and technology executives in Sun Valley, Idaho, last month, was named as an adviser to the deal. Bezos and Graham have been known to frequent the conference.

»To observers, the Amazon chief is eminently qualified to be a newspaper owner: He’s rich, he’s innovative and he’s willing to live with slim profits. That’s proven by his running of Amazon since its foundation. Last month, Amazon.com Inc. reported an unexpected loss in the April-June quarter even though revenue grew 22 percent to $15.7 billion.

»“Some other buyers might see the Post as a thing to drain money out of,” said Joshua Benton, director of the Nieman Journalism Lab at Harvard University. “There’s little reason to think (Bezos would) fall into that category.”

»Rick Edmonds, a media and business analyst at The Poynter Institute, a journalism school, compared Bezos’ purchase of the Post to billionaire John Henry’s $70 million purchase of The Boston Globe, which was announced Saturday.

»The newspaper transactions remove established publications from publicly traded parent companies that had to answer to shareholders who demanded good quarterly financial results.

»“This means putting the Post in the hands of a wealthy individual who can take as long as he needs and spend as much money as he wishes in keeping the paper strong,” Edmonds said. “That’s a much better situation than a company with other faster-growing businesses trying to justify that same investment.”

»Alan Mutter, a media consultant and former newspaper editor, said this deal marks the first time a newspaper has been bought by a “digital native,” not someone entrenched in the print medium.

»“Here’s a guy who’s going to re-envision the newspaper from top to bottom and we’ll see what we get,” Mutter said.

»The soon-to-be-renamed Washington Post company will retain Slate magazine, TheRoot.com and Foreign Policy magazine, as well as the Post’s headquarters building in downtown Washington.

»Newspaper revenue has shriveled during the past eight years even as many publishers charged readers more for their print editions and began imposing fees for digital access, too.

»The Post Co.’s annual newspaper revenue has plunged 39 percent from $957 million in 2005 to $582 million last year. Meanwhile, the company’s newspaper division has swung from an annual operating profit of $125 million to an operating loss of $54 million last year.

»Readership of the print editions has also plummeted during the past decade. In 2002, The Washington Post’s paid weekday circulation averaged nearly 768,000 copies, according to regulatory filings. By last year, the Post’s weekday paid circulation had fallen to an average of just under 481,000, a 37 percent drop.

»The hard times are reflected in the Post Co.’s stock price, which hit a high of $999.50 near the end of 2004. The shares closed Monday at $568.70, a 43 percent decline from the peak.

»Newspaper analyst Ken Doctor of Outsell Inc. said the Grahams likely realized that the family lacked the financial wherewithal to endure the turbulence still facing the industry.

»“As they look out beyond 2013, it’s clear print advertising is going to continue to decline and it’s causing pressures they didn’t expect,” Doctor said.

»In contrast, sustaining annual losses of about $10 million for a few more years is more tolerable to Bezos and other billionaires such as Warren Buffett, who has also been buying newspapers in the past few years, Doctor said.

»Benchmark Co. analyst Ed Atorino said the sales of the Boston Globe and Washington Post demonstrate that some savvy business leaders still see hope for newspapers.

»“Apparently there are people in this country who think these newspapers are worth saving and hope that advertising will eventually stabilize and they can begin to make money again,” Atorino said. “If the advertising doesn’t come back, then game over.”»



Ryan Nakashima, AP Business Writer, StarTribune.com

Photo: Reed Saxon, Associated Press, StarTribune.com