By Glenn Greenwald
The Washington Post this morning published a lengthy article detailing the fortune -- and now the trouble -- generated for its parent company, The Washington Post Co., as a result of its acquisition of Kaplan Higher Ed. While The Post continues to lose money, Kaplan -- particularly its sprawling network of for-profit "universities" which the company began building in 2000 -- generates huge profits for the company, profits on which the Post Co. depends almost completely for its sustainability.
Indeed, the newspaper has become little more than a side vanity project for the Post Co. and the Graham family which continues to dominate it; it is now, at its core, in the business of profiting off of lower-income students who pay for diplomas, often obtained via online classes. "The fate of The Post Co. has become inextricably linked with that of Kaplan, where revenue climbed to $2.9 billion in 2010, 61 percent of The Post Co.'s total," the article detailed; "the company is more dependent than ever on a single business,' [CEO Donald] Graham wrote in last year's annual report, adding that the newspaper had never accounted for as large a share of overall company revenue as Kaplan does today."
The article is largely devoted to recounting the corruption and abuses which pervade the for-profit education industry in general and Kaplan in particular (saddling poor people with debt in exchange for nothing of real value). But what I found most notable is how dependent is this industry -- including The Washington Post Co. -- on staying in the good graces of the Federal Government. Because these schools target low-income students, the vast majority of their income is derived from federal loans. Because there have been so many deceptive practices and defaults, the Federal Government has become much more aggressive about regulating these schools and now play a vital role in determining which ones can thrive and which ones fail.
Put another way, the company that owns The Washington Post is almost entirely at the mercy of the Federal Government and the Obama administration -- the entities which its newspaper ostensibly checks and holds accountable. "By the end of 2010, more than 90 percent of revenue at Kaplan’s biggest division and nearly a third of The Post Co.’s revenue overall came from the U.S. government." The Post Co.'s reliance on the Federal Government extends beyond the source of its revenue; because the industry is so heavily regulated, any animosity from the Government could single-handedly doom the Post Co.'s business -- a reality of which they are well aware:
The Post Co. realized there were risks attached to being dependent on federal dollars for revenue -- and that it could lose access to that money if it exceeded federal regulatory limits.
"It was understood that if you fell out of grace [with the Education Department], your business might go away," said Tom Might, who as chief executive of Cable One, a cable service provider that is owned by The Post Co., sat in at company-wide board meetings.
Beyond being reliant on federal money and not alienating federal regulators, the Post Co. desperately needs favorable treatment from members of Congress, and has been willing to use its newspaper to obtain it:
Graham has taken part in a fierce lobbying campaign by the for-profit education industry. He has visited key members of Congress, written an op-ed article for the Wall Street Journal and hired for The Post Co. high-powered lobbying firms including Akin Gump and Elmendorf Ryan, at a cost of $810,000 in 2010. The Post has also published an editorial opposing the new federal rules, while disclosing the interests of its parent company.
The Post is hardly alone among major media outlets in being owned by an entity which relies on the Federal Government for its continued profitability. NBC News and MSNBC were long owned by GE, and now by Comcast, both of which desperately need good relations with government officials for their profits. The same is true of CBS (owned by Viacom), ABC (owned by Disney), and CNN (owned by TimeWarner). For each of these large corporations, alienating federal government officials is about the worst possible move it could make -- something of which all of its employees, including its media division employees, are well aware. But the Post Co.'s dependence is even more overwhelming than most.
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