SPJ 2020 Journalism Conference • Sept. 12-13, 2020



Warren Buffett optimistic about the newspaper business

By eijnews

By Ryan Murphy
The Working Press

Terry Kroeger, chief executive officer of BH Media Group, spoke in the Journal newsroom on Thursday along with the company’s chief financial officer, Duane Polodna (left), Journal Publisher Jeffrey Green and Journal Managing Editor Carol Hanner.
Courtesy of journalnow.com

When billionaire Warren Buffett shelled out $142 million earlier this year for 63 newspapers, some observers questioned why he would spend money for a group of paper-and-ink publications in a world where online readership is the fastest growing group.
His history with newspapers runs deep, dating to a boyhood job delivering his hometown daily, the Omaha World-Herald and major investments in the 1970s.
So, when Buffett, chairman and CEO of Berkshire Hathaway, bought the World-Herald last December, the Fitch ratings agency said the purchase was done solely out of nostalgia. Adam Brown of Forbes opined that perhaps “keeping newspapers afloat” was one of the billionaire’s hobbies.

Warren Buffett, chairman and CEO of Berkshire Hathaway Inc.

The Working Press couldn’t reach Buffet for comment.
His purchase of 63 mostly smaller newspapers owned by Media General in June, made good business sense, said Terry Kroeger, chief executive officer of BH Media Group, which oversees all Berkshire Hathaway-owned newspapers.
In addition to the earlier purchase of the Omaha World-Herald, some of the more recognized papers now owned by Buffett include the Richmond Times-Dispatch in Virginia, the Winston-Salem Journal in North Carolina and the Morning News of Florence, S.C.
“I think that newspapers generally are still very solid businesses,” Kroeger said. “They’re capable of producing good cash-flows in conjunction with producing what we call remarkable journalism.”
At an average of about $2.3 million per publication, Kroeger says the papers acquired in June were “very reasonably priced.” The sale included every Media General newspaper, except for the Tampa Bay Times (it used to be the St. Petersburg Times) and that paper’s associated properties.
Kroeger emphasized that many of the papers aren’t strictly print operations. They also have multimedia components, like web-based video and tablet apps, as well as a major web presence.
That sense of optimism in the future of newspapers was tempered by a note from Buffett to editors and publishers of the newly purchased papers. Buffett warned they need to rethink their approach to the web.
“The original instinct was to offer free in a digital form what they were charging for in print,” Buffett said in the statement. “This is an unsustainable model and certain of our papers are already making progress in moving to something that makes more sense.”
In general, many newspapers are suffering financially because of the economy and steep declines in advertising and circulation. Many readers are canceling their paid subscriptions in favor of reading the news free of charge on the web.
In its ninth annual State of the News Media report, The Poynter Institute recorded a 10-to-1 ratio in print advertising losses versus ads gained by digital media. The group also found a 4 percent decline in print newspaper readership in 2011, following a 5 percent drop the previous year.
News websites, however, saw the greatest overall growth and some newspapers, like The New York Times, have had success erecting online pay walls that keep readers from accessing content unless they pay for it. The Times said in March that 455,000 users had paid for access to its news site. Print subscribers get free access to digital content, but it costs between $15 and $35 per month to access the online content.
Buffett and Berkshire Hathaway are not strangers to the newspaper business. Besides the recent World-Herald purchase, the group is a major investor in The Washington Post Co. and The Buffalo News.
Buffett’s note also made clear a desire for BH to acquire even more papers in the future.
“Berkshire will probably purchase new papers in a few years. We will favor towns and cities with a strong sense of community … If a citizenry cares little about its community, it will eventually care little about its newspaper,” he wrote.
The emphasis on smaller, community-oriented papers is a strategic business decision, said Paul Gillin, a veteran journalist who in 2007 took to the web to chronicle “the decline of newspapers and the rebirth of journalism” on a blog called Newspaper Death Watch. He says major metro papers aren’t as attractive to investors like Buffett.
“The smaller papers are declining more slowly (than large city dailies), their readers are more loyal and they have a better opportunity because they have the ability to connect with local advertisers,” Gillin said.
He also noted that the long-term nature typical of Buffett’s investments is encouraging for the newly acquired newspapers, and pointed to The Buffalo News, the New York paper Berkshire Hathaway has owned since 1977.
“Warren Buffett is a value investor and he sees value in newspapers,” Gillin said. “He has found value in properties that other people seem to find useless.”
Joe Mathewson, a professor in the Medill business reporting program at Northwestern University in Chicago, thinks Buffett must have been happy with the progress of his other newspaper investments to make such a wide-ranging purchase, given the state of the newspaper industry.
Buffett’s reputation as a deliberate, conservative and successful investor may put him in a position to succeed where others have failed: making money off of the web, Mathewson said.
“Nobody’s done it very well or very successfully,” he said. “I assume Buffet has figured out how to turn that investment into a profit.”
The billionaire has a reputation for buying properties and not interfering with the ground-level production, something he and his company have been very vocal about since the Media General deal was made public. However, his note to the publishers made clear he has some ideas about the papers’ direction.
Mathewson said Buffett may have to step in at some point to ensure his investment pays off.
“I can’t help but wonder whether he’s not going to bear down on these papers to make money,” he said. “I can’t imagine he’s going to carry this many newspapers just because he likes newspapers.”




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