Pierre Omidyar's $250 million investment in a nonprofit digital journalism start-up is just the latest example of a billionaire spending a ton of money to keep the struggling business of journalism alive.
He's following in the path of Amazon's Jeff Bezos with The Washington Post and Rupert Murdoch with News Corp (although he has split the publishing assets off from Fox's entertainment assets, leaving the company with $2.6 billion in cash and no debt).
The list goes on and on—billionaire investor John Henry bought The Boston Globe from the New York Times Company this summer, and in 2012 Aaron Kushner, who made his fortune in the greeting card business, bought the parent company of The Orange County Register, while Facebook co-founder Chris Hughes bought a majority stake in The New Republic. It hasn't always turned out well—Barry Diller called buying Newsweek in 2010 a "mistake" and sold it to IBT Media in August. But it's been a trend going back to William Randolph Hearst.
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So why are these capitalists so interested in pouring money into what's arguably a dying business? The print news business is so embattled, even a blue chip brand like The New York Times are having difficulty growing their digital ad revenues—the Times' decreased 2.7 percent in the second quarter.
The market is increasingly fragmented—with an explosion of niche options—making it much harder to draw readers to traditional publications. The fact that the field has been deprofessionalized—anyone with an Internet connection can write a blog or Tumblr feed—means the competition is literally limitless. Still, deep-pocketed, high-profile individuals are opting to pour hundreds of millions of dollars into these money-losing businesses, often without any goal of earning a return.
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Omidyar, who made his billions founding eBay, is teaming up with journalist Glenn Greenwald, who famously broke news about the NSA with Edward Snowden's leaked documents for The Guardian. Omidyar explained in a blog why he's so interested in journalism as a tool for driving citizen engagement, government transparency and accountability. He said he wants to use journalism to "convert mainstream readers into engaged citizens." Specifics of this business are missing, but he's clear that the endeavor is not for profit.
Here's journalism's appeal:
—Government watchdog: Bezos said of his investment that "journalism plays a critical role in a free society." Omidyar, who attempted to buy The Washington Post, said he has a "growing interest to preserve and strengthen the role journalism plays in society." Perhaps it's no coincidence that both are leaders in the tech field where the government is increasingly demanding data about citizens. One might infer that such a tech titan, wanting to protect the independence of his field, could see value in supporting journalistic investigation of data mining by governments.
—Gatekeepers are gone: Technology enables a new, much wider reach. Before the first Internet revolution, which saw the introduction of Web-only platforms like Inside.com, journalistic ventures couldn't get off the ground because it was costly to build circulation and a brand. And a "newspaper" would be limited to its usually focused geographic reach. Now, news is global, and technology enables scoops to easily go viral. Thanks to Twitter and Facebook finding "distribution" is a nonissue—it comes naturally for the biggest, most surprising stories.
—Potential for innovation: Print journalism often draws the criticism that it's bogged down in decades of tradition, costly infrastructure and pathetic digital architecture. Both Bezos and Omidyar have talked about the potential to use their digital expertise and an outside perspective to innovate. Bezos said in his letter about The Washington Post purchase: "We will need to invent, which means we will need to experiment."
For these billionaires, it's not that expensive. Omidyar is spending $250 million, but according to Forbes, he's worth $8.5 billion—a drop in the bucket, for an opportunity to see a tangible output.
—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin.