Washington Post Company Now Skooling U

The economy is cyclical, so say many economists. So, where in the cycle is the Washington Post? Coming out of bankruptcy at auction in 1933, after years of un-profitability, it took several decades to become profitable and of consequence, arriving as such in the early 70's with the golden boys of reporting - Woodward & Bernstein.

Yet, now, over half of The Washington Post Company (NYSE: WPO) income comes from something other than the news.

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Why, The Wasington Post (affectionately referred to with the colloquial acronym 'TWP') is getting a majority of it's income from Kaplan - you know, the folks who skooled you in how to ace the SAT's? They do other testing, of course, but so many people have them to thank for doing better than they otherwise would have on the SAT's. (Photo illustration, at left.)

In my mailbox today arrived my December 2007 issue of Washingtonian, and on page 26, (online here, "Practice Tests, Not News, Bring in the Big Bucks for the Post") I learned this neat little fact - As of their latest financial statement, Kaplan's 50.3% of their revenues, and the newspaper is only 21%. The remaining 28.7% comes from Newsweek and Cable TV and television stations. The piece also revealed that Newsweek's got problems too, with a 16% drop in advertising.

Here's their 3rd Quarter Financial Statement, which states (in part):

Revenue for the third quarter...up 8%...The increase is due mostly to significant revenue growth at the education and cable television divisions. Revenues were down at the Company's newspaper publishing, magazine publishing and television broadcasting divisions.

Several months ago, Washingtonian queried their own readership (online here, "Saving the Washington Post—the Latest from Washingtonian Readers") about how the Post could save itself:

"... Literate readers 'love the content,' but they don’t love it enough to buy the newspaper...the notion of making the Post a charity case—as if it were a nonprofit media outlet—is a hoot, but it won’t pay the bills."

What about the illiterate readers? Do they at-least love the pictures?

Yet, the Post acts as if it's a charity case, paying freelancers under $200 a day, with an all-rights to TWP-branded uses transfer. Why's that? Oh, because if they want to re-use your photograph without paying you, or quite possibly to also be able to sell it as stock and keep 100% that income (if they start a TWP stock source, quite possibly). Or, perhaps, they're looking for free content for Newsweek and their testing material, and, perhaps, their website.

So, if you're freelancing for the Post, expect fewer assignments. If you're staff at the Post, that buyout they were offering some may well have been a good idea, if you could have taken it. The same financial report reveals a bit more:

"The increase in operating income for the first nine months of 2007 is due primarily to $47.1 million in pre-tax charges associated with early retirement plan buyouts at The Washington Post during 2006. Excluding this charge, operating income was down for the first nine months of 2007 due to a decline in division revenues..."

Thus, those of you who took the buyout (aka "early retirement package") made them look better because of the tax benefits that enured from your doing so. I hope you didn't think it was because they cared, but I am guessing you already knew that from working there, and made the smart choice for yourself.

Believe it when many suggest that the layoffs are coming next, both on the text-side and the photo/illustration-side, and they'll replace "expensive staffers" with the freelancers who've been working with the same rights transfers as the staffers, for over 50% less than it costs to maintain one staffer.

So, it looks like that cyclical "un-profitability-cycle" is coming back around.

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