Rakesh Agrawal's blog

The Washington Post racked up some very impressive results today, winning six Pulitzer prizes, a record for The Post. The winning stories included an expose on miserable conditions at Walter Reed, coverage of the Virginia Tech shootings and reporting on private American contractors in Iraq who operate under a different set of rules than American forces. Columnist Gene Weingarten’s Pulitzer-winning piece about violinist Joshua Bell performing to indifferent crowds in a Metro station is a personal favorite.

These stories are what make the Post one of the nation’s best newspapers. In his letter to shareholders in The Washington Post Company’s annual report earlier this year, Don Graham wrote:

[The Post] is a news organization full of reporters and editors who’ve shown they are willing to look hard and long for important stories — information people do not want you to know about.

Graham specifically called out the Walter Reed coverage:

We also publish a newspaper that does a good job of telling the news and works occasional wonders: last year, Dana Priest and Anne Hull broke the story of the mistreatment of some Iraq and Afghanistan veterans at Walter Reed (alongside the excellent treatment for which the hospital is known). The Army’s immediate response (including the resignation of the Secretary of the Army and a change of command at Walter Reed) improved the wounded soldiers’ care and demonstrated the impact of the stories.

Unfortunately, great coverage doesn’t sell newspapers like it used to. Paid circulation is off more than 10% in the last four years, despite continued population growth in its distribution area. The Post, like many newspapers, is offering buyouts to newsroom employees.

One of the Post’s greatest assets is its industry-leading Web site. Weingarten’s piece is significantly enhanced online by the video of Bell’s performance and an online discussion. The site also allows the Post to reach readers that the print edition never could. Weingarten writes in his online discussion, “My favorite global letter so far, came from Marnie Smith of Des Moines, Iowa, who was alerted to this story in the Washington Post through an email from her daughter, who lives in Bishkek, Kyrgyzstan.”

The Post reaches more than 7 million readers a month through its Web site. But those readers are much less valuable than a print subscriber.

As an investment, Washington Post stock is down only 9.58% over the last year. That’s outstanding, compared with a 46.53% drop for Gannett and a staggering 65.73% decline for McClatchy.

How’d it pull off that feat? Despite its name, the The Washington Post Company isn’t really a newspaper company — the bulk of its revenues come from the Kaplan education division; the newspaper division only accounted for 21% of revenue. From the company’s annual report (pdf):

Fifteen years ago we were accurately described as a media company. Over that time Kaplan has grown into a powerhouse, a multidisciplinary and increasingly international education business unlike any other education company in the world. For the last six months of the year, Kaplan’s revenue was almost half of the company’s, at 49%. Kaplan will continue to grow stronger in 2008. The Washington Post Company is now an education and media company (this isn’t “re-branding”; it’s reality), and the accent on education could get a lot stronger in the future.

These numbers are only going to get more lopsided. In the fourth quarter, newspaper revenue dropped 6%, while education revenue increased 21% (including acquisitions). Compared with 2006, online revenue increased 11%, but was still beaten by Kaplan (+21%).

Again, from the annual report:

As the company has grown, The Post’s business results are no longer as significant as they once were. This is both bad and good: it’s bad for shareholders that the newspaper no longer provides the profits it once did. It’s good that the money the newspaper made went into education and cable investments, most of which have proven successful.

If Wall Street had its way, the company would likely be split in two. Investors cheered when Scripps announced such a separation.

The Post’s ownership structure, with the Graham family controlling a majority of the seats, makes such a separation unlikely.

Disclosure: I worked at Washingtonpost.Newsweek Interactive and at the Star Tribune (a formerly McClatchy newspaper).