Washington Post CEO Offers Up the Secrets Behind a Successful Media Company (page 1 of 2)

A self-described "third generation inheritor of a 19th century business," his professional trajectory was surely not a workable model for the audience members whose education, he felt, stressed entrepreneurship. (The conference was organized by Columbia Business School, Fuqua School of Business at Duke, MIT Sloan, NYU Stern and Wharton.) Graham's maternal grandfather bought the Washington Post at a bankruptcy sale in 1933; his father was its publisher from 1946 until his death in 1963 when his mother, the legendary publisher Katharine Graham, took over. Starting in 1971, he was groomed for leadership in various positions within the company, leapfrogging from a reporter's job at the Washington Post at age 26 to executive vice president and general manager of the newspaper at 31, publisher at 34 and so on.

And as for what he had to tell the audience about media today, he said at the outset: "There are several trends in the media industry, of which the Washington Post Company participates in zero."

But opting out, it turns out, was Graham's point.

The other conference participants - representing broadcast, cable, satellite, and the internet; film, music, sports and advertising; and investment banking, media consulting and corporate finance - were all preoccupied with three broad themes: international expansion, industry consolidation and multiplication of mediums.

Graham's focus was elsewhere. A key to the success of the Washington Post Company, he said, is management's refusal to join most of corporate America in its obsession to meet or beat Wall Street analysts' quarterly earnings estimates. "We don't do quarters," he said. "Quarterly earnings are not in the top 100 things you should care about if you want to value the company." Putting his money where his mouth is - he owns about 37% of the company - he added, "If you care about that sort of thing, you shouldn't own our stock."

The Buffett Way
The Washington Post Company adopted its "no quarters" stance under the guidance of Warren Buffett, who bought $10 million of stock in the company during the recession of 1974 and joined the company's board that same year. "My mother realized that he was the smartest businessman she had ever met," said Graham. Buffett's input "has been worth billions to the company."

Buffett's influence is also evident in the conservative and coherent group of companies that comprise the Washington Post Company: In addition to the Washington Post newspaper, the company also owns Newsweek, as well as interactive versions of both publications, six local television stations devoted to local news and information programming, Cable One ("the nation's smallest cable company," says Graham, proudly) and Kaplan, Inc., the educational and career services company. On revenues of $2.8 billion for the 2003 fiscal year - a 10% increase over 2002 - the company had net income of $241 million, up from $204 million in 2002.

Half jokingly, Graham said that the way the Washington Post Company did business was "so unusual, I'm not sure any lessons can be drawn from what we do." And yet, in the overall context of the conference, Graham's resistance to "doing quarters" took on added resonance.

The reason: A common message from virtually all the conference panelists is that MBAs who enter the media industry, in whatever capacity, will need to place bets on new technologies and business models.