No matter what else happened, the Oracle of Omaha, arguably the most successful investor in history, believed in the long-term viability of the newspaper business. And Buffett put his money where his mouth was — buying up a few dozen local papers – always meant that there was a light at the end of the tunnel.
Until now. Because it turns out that sometimes the Oracle, well, changes his mind. In an interview with Politico Playbook, Buffett voiced a newly skeptical attitude about the industry’s prospects, noting that the relative success of a few big national newspapers isn’t a realistic model for local newspapers.
Buffett was typically blunt, stating:
"Newspapers are going to go downhill. Most newspapers, the transition to the internet so far hasn’t worked in digital. The revenues don’t come in. There are a couple of exceptions for national newspapers — The Wall Street Journal and The New York Times are in a different category. That doesn’t mean it necessarily works brilliantly for them, but they are a different business than a local newspaper."
Ominously, he noted that local newspapers continue to see circulations and advertising revenues decline, despite their advantageous position as the sole source of local news in many communities, which should have helped shield them from the worst of the secular downturn.
But local newspapers continue to decline at a very significant rate.
"And even with the economy improving, circulation goes down, advertising goes down, and it goes down in prosperous cities, it goes down in areas that are having urban troubles, it goes down in small towns – that’s what amazes me. A town of 10 or 20,000, where there’s no local TV station obviously, and really there’s nothing on the Internet that tells you what’s going on in a town like that, but the circulation just goes down every month."
Buffett was quick to add that he still loves newspapers personally, preferring the print edition over online versions. However, his statements to Politico seem to be an admission of, if not defeat, then at least disappointed expectations.
The Berkshire Hathaway chairman gave no indication that he plans to sell or shut any of the 32 local newspapers owned by the company, which are, after all, a tiny part of his holdings. For their part, Berkshire Hathaway’s investors seem content to allow Buffett continue his experiment with local newspapers, perhaps viewing it as a harmless if idiosyncratic hobby, considering the company’s generally strong performance over the decades.
But that could change if its weaker results last year turns out not to be an anomalous blip.
After all, even the Oracle’s acolytes will eventually get impatient.