Warren Buffett changes his mind about newspapers: ‘Newspapers are going to go downhill’
In 2012, Buffett’s firm Berkshire Hathaway bought most of Media General’s newspapers, but he now finds that ‘even with the economy improving, circulation goes down, advertising goes down, and it goes down in prosperous cities’
The Oracle of Omaha, Warren Buffet, has changed his mind about newspapers. Having once seen a good investment, buy low sell high and all that, he now is less positive about the industry.
Speaking to Politico Playbook, Buffet told of his fe found pessimism about the industry:
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. 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. And when circulation goes down, advertising is gonna go down, and what used to be a virtuous circle turns into a vicious circle. I still love newspapers! You’re talking to the last guy in the world. Someday you’ll come out and interview me, and you’ll see a guy with a landline phone, reading a print newspaper.
Nothing convinces one of the poor state of the newspaper industry than actually buying and running a newspaper.
In 2012, through his holding company, Berkshire Hathaway, Buffett bought most of Media General’s newspapers for $142 million. Media General wanted to get out of print and concentrate on broadcast, a decision several owners of newspapers also decided was a good idea. In fact, Media General’s deal with Meredith was undermined mostly basically because Meredith still owned print magazines, they eventually merged with Nexstar Broadcasting Group.
Buffett continue to invest in newspapers, acquiring The Martinsville Bulletin and the Franklin News-Post in Rocky Mount, Virginia, from Haskell Newspapers just last year. Earlier this year Buffett’s company, BH Media Group, acquired The Free-Lance Star of Fredericksburg, Virginia, bringing to 32 the number of newspapers under its ownership. The biggest title in the chain is the Omaha World-Herald, Buffett’s hometown paper.
But followers of what the billionaire investor says, especially through the year-end Berkshire Hathaway letter to Berkshire Hathaway shareholders, have noticed that he has been pretty silent about his newspaper investments.
Initially, Buffett explained his investment in newspapers as an endorsement of their value to readers.
“Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town — whether the news is about the mayor or taxes or high school football — there is no substitute for a local newspaper that is doing its job,” Buffett said early on in the investment.
The newspaper industry liked to hear that one of the world’s most famous investors had faith in the value of the newspaper industry. In fact, just this year, David Chavern, Newspaper Association of America president & CEO David Chavern touted Buffett’s investment in newspapers.
“If you want to know who still believes in a future for news media, just turn to some of our most respected businessmen: Warren Buffett. Jeff Bezos. John Henry. Glen Taylor,” Chavern wrote.
But Buffett’s investment was more likely simply a sign that the value of newspapers had fallen, and so it might be possible to come in with a small investment and sell out later at a profit. Compared to some business prices, newspaper prices have fallen. Buffett’s comments today are probably just a signal that his firm won’t be in the market for more newspaper acquisitions, and might even like to sell to someone like Gannett.
Maybe Buffett might consider an investment in online media. Gawker is set to be sold under the auctioneer’s gavel on August 16.