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.