On Thursday, Warren Buffett announced he will spend $142 million to purchase 63 local and regional newspapers from the Richmond, Virginia-based Media General chain—and the Berkshire Hathaway chairman says he’s ready to buy more. “Any time we can add properties we like, to management we like, at a price we like, we’re ready to go,” Buffett told the Omaha World-Herald, which he also owns. On its face, sinking money into newspapers seems a counterintuitive investment strategy in this era of layoffs, shutdowns, and we-need-a-business-model hysteria. Does Warren Buffett see something the rest of us don’t?
Actually, it’s not hard to understand what Buffett sees in these papers: they are largely entrenched, long-lived dailies and weeklies that draw their advertising from local businesses. The Southern communities they serve are not, by and large, hotbeds of broadband access and online news entrepreneurship; for their older, Internet-ambivalent residents, newspapers remain an important source of news and information. As Erik Wemple put it: “While the big regional and national newspapers have elevated the crisis of newspapering to a countrywide obsession — complete with constant updates on circulation losses, drops in advertising revenues and the like — small weeklies and dailies have been plodding along. Not printing money, mind you, but making a living.”
Casual observers tend to view the news industry as a monolith, when, in reality, it’s comprised of various segments, some quite different than others. The New York Times has relatively little in common with a paper like The Goochland Gazette, one of Buffett’s new acquisitions. Whereas the Times wants to be the paper of record for the English-speaking world, the Gazette serves the 21,717 residents of Goochland County. It’s theoretically easier for a small paper like that to make money, because the circumstances under which it operates are more tightly defined.
Buffett, perhaps the least spectacular billionaire in the history of money, made his fortune investing in boring assets that are nevertheless financially sound. He’s done the same thing with the Media General purchase. The Times might win more awards, but the Gazette might ultimately be a more stable financial bet.
Yeah, but what will Buffett's purchase mean for the quality of journalism at these small publications, which most likely were understaffed and mediocre at the best to begin with? I live in a relatively small city with a less-than-mediocre newspaper and the general lack of quality coverage affects many aspects of life here. It really matters. If Buffett poured resources and talent into those little publications, he could improve life in a good slice of America.
#1 Posted by Harris Meyer, CJR on Fri 18 May 2012 at 03:39 PM
He just bought the News and Advance here in Lynchburg...
Now why would Warren Buffet want to buy a chain of right-leaning papers in a swing state just before an election?
I wonder....
#2 Posted by padikiller, CJR on Fri 18 May 2012 at 04:12 PM
It looks like Peters is a bit bullish, naive, or both, about the value and profitability of community newspapers today (let's not forget that CNHI is still doing forced furloughs, as one counterexample), and a newspaper romantic.
"Community" newspapers in general are fixing to slide more on ad revenue losses in the future. Why? At least basic level websites are getting easier and cheaper to build. Heck, more and more businesses may be doing DIY websites for free with Wordpress, or perhaps Blogger. Add that to a FB page, and (and I speak from some degree of experience), they can say, "no, we don't need to advertise as much."
The one interesting part of this purchase will be to see Buffett institute paywalls. I believe that will probably be the largest such move at the "community" newspaper level.
Beyond that, Buffett could well be eyeing dollar signs in other ways. And, per people who know about his ownership of the Buffalo News, this isn't good news, in all likelihood, for these individual papers.
http://socraticgadfly.blogspot.com/2012/05/warren-buffett-is-not-always-genius.html
#3 Posted by SocraticGadfly, CJR on Fri 18 May 2012 at 08:40 PM
SocraticGadfly, sorry to tell you but you know nothing of the actual workings of community dailies and/or non-dailies. They are virtual news monopolies in their circulation areas, have the most-viewed news websites and generate consistent profits. Radio? Television? They get their news ledes for their noon and 6 p.m. broadcasts by reading that morning's paper.
Buffett knows that. He's paying rock-bottom prices and likely will be investing heavily in these properties to cement their content leadership positions in addition to giving his accountants something to depreciate in the near- to mid-term.
This is the absolute best thing for these properties, period.
#4 Posted by jlanderson, CJR on Sat 19 May 2012 at 12:00 PM
Buffet isn't stupid.
He isn't worried about the measly $160 million he spent to "buy" the bulk of Media General's newspaper business... He's more interested in the loan sharking he did to keep the company out of bankruptcy.
As part of the deal, Buffet is lending the company nearly half a billion dollars at 10.5% interest... That works out to $42 million a year in interest income and the refinancing of Media Generals existing debt makes Buffet the first creditor in line to bottom feed in the event of a default - and gives him a shot at scooping up the 80% of the company's TV business that isn't part of the deal.
The financing agreement also puts Buffet directly on the board...
Not a bad place to be for guy who started his career with a paper route.
#5 Posted by padikiller, CJR on Sun 20 May 2012 at 09:19 PM
Perhaps some of the skeptics do not realize that journalism is and remains an honorable career. The smaller newspaper allows the Constitution to remain alive and well and provide for millions of readers to understand their respective community that much better.
#6 Posted by Jim Fuller, CJR on Mon 21 May 2012 at 04:16 PM
Who would want Warren Buffet to control the content of their local paper ?
Validate your 2nd Amendment Rights.Carry.
#7 Posted by aebe, CJR on Wed 23 May 2012 at 03:31 PM