What now for the WashPo?

I guess that most normal people, upon learning that Jeff Bezos has bought the Washington Post, will just shrug and move on. For folks in the universe that I inhabit, in contrast, it’s a really intriguing development. This is the first time that someone who really understands the digital world has acquired a leading newspaper. So this story is not just about the future of a single US paper. It may have useful lessons for the entire industry. The shrewdest comments on the development that I’ve seen so far come from the Reuters columnist, Jack Shafer. Here’s an extract:

In acquiring the Washington Post, Bezos enters a business that is not radically different from the ones he already owns. Reporters and editors like to think their literary arts are central to newspapering. But it’s better to think of a newspaper as a coordination problem that manufacturing and distribution solves daily: Copy, art, and advertising is beamed from newsroom to printing plant, bundled newspapers flow from the plant to trucks, are transferred to carriers, and are delivered to your front door. Nobody knows more about deadline deliveries and distribution than Bezos’s Amazon, which has spoiled several nations with its reliable service. I can’t imagine what plans Bezos has for the print edition of the paper—if I did, I’d be worth $25.2 billion—but I’m confident that he will maximize the value of the existing Post delivery system in novel ways. It would not surprise me to see him use the Post network of trucks and carriers to enter the local delivery business as a pilot project. Obviously, he’s learned a lot from same-day delivery he could share with the paper.

Although most of us think of Amazon as a retailer, the computer sector has long regarded it as a tech company, competing with IBM, Microsoft, Google, and others as a seller of “cloud” computing power through its Amazon Web Services subsidiary. It’s also a computer devices company, via its Kindle readers. The sort of computer resources and ingenuity Bezos can bring to the Post—or more properly the washingtonpost.com—rival that of almost every other regional purveyor of news, entertainment, communications, and advertising. Any competing web property, cable systems, mobile phone system, or broadcasting operation in the Washington area should be on notice: Bezos means to use this foothold to go after the most lucrative parts of your businesses in the one of the richest corners of the country. He’ll spend you to death.

LATER: Another good piece — this time from Emily Bell. Excerpt:

At the end of a week that saw the Boston Globe sold for $70m by the New York Times Company, to Red Sox owner John W Henry, it seems that the lock gates transferring newspapers from a gilded past, through an unsustainable present, to to an unknown future have creaked open. Newspapers are now restored to their former status as playthings of the rich, rather than market-driven profit centers.

Even more interesting, perhaps, is the transmission of west coast wealth to the crisis-torn content economy of old-fashioned east coast influence factories. The cultural divide between the thought processes of the engineering-oriented Silicon Valley and the words-based elites of the East, in politics and media, is vast. The low esteem in which each holds the other is often breathtaking to observe.

It was a “no contest” contest, an unfair fight, in which the new economy of the west coast understood how to build relationships with people, sell them what they wanted, charm the stock market – and do it at a scale and speed that could not be matched by analogue businesses.

This is what Bezos has been best at, and his enforcement of a cost-cutting regime has found Amazon on the wrong end of newspaper articles about its workplace practices. Bezos is more personally successful in Silicon Valley than most of his peers, with a fortune of $28bn, but from a background that has brushed more with the world outside Palo Alto. He was a Princeton computer science graduate rather than a Stanford PhD; he worked on Wall Street for a while before heading west and founding Amazon; he has made his vast fortune by shipping books, and tangible objects, atoms rather than bits and bytes. And he has successfully monetised the act of charging people for words on electronic devices, through the Kindle.

STILL LATER: A really good sceptical piece from John Cassidy of the New Yorker:

I have a nagging, if possibly unfounded, suspicion that his primary motivation in buying the Post is to protect Amazon’s interests in the political battle, which is sure to come, over the company’s monopolistic tendencies. Why do I suspect that? In part, because I am a skeptic. But also because it’s just about the only explanation that makes sense.

For the past fifteen years, Internet companies like Amazon, Google, and Facebook have been rightly lionized as triumphs of American entrepreneurship. As the Web matures, though, they are gradually coming to be viewed in a different light, as quasi-monopolies that need at least a modicum of oversight. Because of the presence of network effects and other sources of increasing returns to scale, there is a natural tendency for successful online companies to increase market share and, eventually, to dominate a specific market. Google dominates search and, through You Tube, it also dominates online video. Facebook dominates social networking and, through Instagram, microblogging. And Amazon dominates online retailing.

Any monopoly position in the market comes with the capacity for abuse. And behind Bezos’s public image as a smiling geek there is a ruthless business strategist. In the book market, Amazon has followed the classic monopolist’s script of cutting prices to build up its market share and eliminate competition. Now that its competitors are struggling or gone, there is some evidence Amazon is raising prices, although the company denies this. In other areas, too, the online retailer has thrown its weight around like an old-fashioned monopolist. As Amazon expanded across the country, it has sought to avoid collecting and paying sales taxes on the goods that it sells, thus preserving an unfair price advantage over brick-and-mortar competitors. (For more on this, see the recent cover story in Fortune “AMAZON’S (NOT SO SECRET) WAR ON TAXES.”)

At this stage, one of the main threats to the fortunes of companies like Amazon, Google, and Facebook comes not from potential competitors but, rather, from the political authorities that are gradually awakening to their market power. Google’s search business has faced antitrust investigations in the United States and Europe. The Justice Department’s competition arm is moving to regulate Apple’s iTunes store. And Facebook and other online companies are facing questions about how they protect the privacy of their users.

So far, Amazon has gotten off easy.