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Not quite Washed Out

Washington Post’s sale to Amazon founder CEO Jeff Bezos marks an important change in the news media business in America.

“Comparing WaPo’s price to Tumblr & Instagram is stupid. Guess what? Great journalism is a worse business than social networking! Who cares?” A tweet from The Atlantic’s Andrew Golis.

Here’s why we should care.

The Washington Post brand – a role model for journalism around the democratic world, and an aspiration in countries that don’t enjoy free press like Singapore and China – was once considered priceless. It has now been assigned a value. Even the Hindustan Times a thinly traded stock, has a value of Rs 2,250 crore today that is based only on their profit and loss, and doesn’t factor in real estate or brand. WashPo’s value at Rs 61 to the USD is 1,550 crore.

This is relevant because it marks a shift in the way news media companies are now being valued, and will probably continue to be.

Newscorp, Disney and New York Times didn’t value Wall Street Journal, ABC (and ESPN) or the International Herald Tribune like private equity (PE) funds at 25 times profit after tax (PAT), they believed they were bidding for brands. Twenty years ago, when the New York Times bought over Boston Globe, they valued it based on current revenues, expected future revenues from joint ad selling, cost efficiencies from scale, and, importantly, value of the Globe’s brand: possibly calculated by assigning a certain dollar value to each paid subscriber.

World over, news companies weren’t valued just based on their profitability, but on intangibles such as their ability to influence public perception, discourse and political agenda, and their brand recall as well.

And for good reason. It’s no small feat for a brand to be recognized by every household in America. McDonald’s, Ford, Elvis Presley during his time, these are brands every American has heard of. Washington Post, New York Times, ABC, CBS, and other media companies, with a fraction of the turnover of McDonald’s or Ford, are names known to every American. How do you assign a value to that?

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