Commentary

Warren Buffett Stumped By Newspaper Trends

One of history’s most successful investors is powerless to reverse the long-term secular decline in the newspaper business, judging by an interview with Berkshire Hathaway chairman Warren Buffett published by USA Today.

With characteristic frankness, the “Oracle Of Omaha” admitted to being stumped by the local newspaper business, but also vowed he was in for the long haul.

In the interview with USA Today columnist Rem Rieder, Buffett conceded,  “We haven’t cracked the code yet. Circulation continues to decline at a significant pace, advertising at an even faster pace. The easy cutting has taken place. There’s no indication that anyone besides the national papers has found a way.”

On that note, Buffett said he thinks cutbacks have already had a big impact on the quality of many newspapers, further diminishing their chances of a successful turnaround: “They don’t tell me as much news as three years ago, let alone 10 years ago. They are a fair amount worse off, and not one is bucking that trend, even in prosperous communities. There’s less and less in the newspaper.”

According to Buffett, a large part of newspapers’ difficulty transitioning online can be traced back to the original decision to give away digital content for free, which he characterized as a mistake.

Despite the negative overall trends, Buffett declared that has no intention of parting with his recent investments in the category: “We would never sell a newspaper... I want to be the last guy standing.” Berkshire Hathaway’s media group currently owns 32 daily newspapers and 47 weekly newspapers across the U.S., most of them in small and mid-sized markets.

While Buffett generally eschews vanity or pet investments, bemused BH shareholders have accepted that the investment guru has a special fondness for newspapers, which they appear ready to indulge in view of their relatively small size compared to his bigger corporate investments.

To put the BH Media business in perspective, during one of his newspaper acquisition sprees from 2012-2013, Buffett spent $344 million to buy 28 daily newspapers.

By contrast, 2013-2015 also saw BH’s $23 billion takeover of Heinz ahead of the latter’s $40 billion merger with Kraft. The newspaper deal was just 1.5% the size of the Heinz deal.

9 comments about "Warren Buffett Stumped By Newspaper Trends".
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  1. Neil Mahoney from Mahoney/Marketing, May 31, 2016 at 6:48 p.m.

    The answer's easy.  Newspzapers no longer have relevant content for most people.  The sports page, comics and puzzles are the only things that interest me.  News & opinion are all over TV channels, and the quality of them is questionable at best.

  2. Ed Papazian from Media Dynamics Inc, May 31, 2016 at 7:14 p.m.

    Sounds like Warren is clueless about media, in general,  not just newspapers, despite all that money he controls.

  3. Daniel Ambrose from ambro.com, corp., May 31, 2016 at 8:14 p.m.

    The problem for newspapers is that they don't understand their markets very well...and they never had to.  Subscription rates are very low, and demand is not terribly elastic.  Consumers will pay more -- on a subscription basis -- for the content in print or online.  We know this because when we raise sub prices 10% we get less than a 10% drop in copies.  HOWEVER, to be really successful newspapers need to invest in HIGH QUALITY content.  But they are used to being able to re-write press releases and call that an article.  Consumers know the good stuff when they see it.  Hence they pay for Netflix when there are 100 channels of "free" tv on their cable system.  Local readers care about really insightful local content and will pay.  But no newspaper believes that yet.  Subscription revenue is the answer because advertising revenue in any digital medium is hard to come by.  There is too much competition for digital ad revenue and consumers have too much control not to block ads that are too much (as we now see).

    Right now newspapers are very clumsy with their pay walls...but that can be improved.  Newspspers much distribute a lot of free content in order to attract 100 readers, a small portion of whom will gladly pay for more and better access.   

    Newspapers never got paid by all their readers...so lets do a better job of getting the content out there, engaging the readers, and up-selling them to a subscription.

  4. Henry Blaufox from Dragon360, May 31, 2016 at 8:56 p.m.

    Buffet wouldn't be the first wealthy power player to be attracted to the perceived glamour and power of the newspaper business. 

  5. Matt Paxton from The News-Gazette Corp., June 1, 2016 at 9:56 a.m.

    I don't think there is one 'answer' for the newspaper industry, but I agree that insightful, local content is key, and creating that isn't cheap. Successful community newspapers are just that, an integral part of that community. It needs editors and writers who know the community, know a lot of people in it, how it ticks, and how it thinks. That's hard to do when there is a lot of turnover in the newsroom. 

    All of us in the industry were excited when Warren Buffett decided to invest in newspapers. We saw it as a validation of what we percieved as unappreciated value. I still think that value is there, and I wish Mr. Buffett would double down and invest a bit more in those papers. We are surrounded by BH papers, and I see a lot of great work done by them. BH is our contract printer, and we've never had a better looking newspaper. 

    I believe that well-run community newspapers that deliver lots of local news and information have a good future. But Mr. Buffett's claim that he's in it for the long haul needs to be more of a guiding principal for the future of the industry. 

  6. Ed Papazian from Media Dynamics Inc, June 1, 2016 at 11:40 a.m.

    I have long believed ---and said do about 20 years ago----that newspapers will evolve to the point where there are no more printed weekday daily editions, merely streamlined online versions with the latest news and timely info, plus printed weekend editions that focus almost entirely on local and regional issues/happenings and do so in-depth. That's an area which other media haven't really intruded, as yet, ---the upscale city magazines being somewhat of an exception.

  7. Ed Papazian from Media Dynamics Inc, June 1, 2016 at 1:16 p.m.

    Of course, I meant "said so" in my first sentance, not "said do". My kingdom for an editing option on Media Post.

  8. Bob Gordon from The Auto Channel, June 1, 2016 at 6:51 p.m.

    Thanks Warren - I believe that without newspapers there will be no democracy...the millennials have no desire to learn or discover but to click to a truncated tweet of the news...the fact is they don't give a shit about very much... they are at the forefront of the ad blocking movement because for their whole lives they have been handed everything without effort...but as we all know that is changing...I hope I live long enough to see how our nation pulls itself out of this malaise .

  9. Paula Lynn from Who Else Unlimited, June 16, 2016 at 1:02 p.m.

    Oh, it goes so much deeper than any of all written here. It is a cross between self destruction and draining profits and bonuses. Rearranging deck chairs is one of the their main accomplishments, hiring incompetents, killing profit making revenue generators...oh, there is so much more than "the internet" that began the downfall of newspapers. It is not an opinion. This is what I know. And Bob Gordon, you are correct and sometimes I believe it has been by design as we hear threats to curb and redirect the press (Washinton Post with more on the way).

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