By walking in when everyone else runs screaming out, Warren Buffett built a US$44 billion fortune and earned the title 'greatest investor ever.' He reminded everyone this week that he's not for changing, promising to buy 63 newspapers for US$142 million. The acquisition, from Richmond, Virginia-based Media General, will boost Buffett's stable of daily papers to 26. He says he's now looking for more small and mid-sized community papers.
The size of the deal, of course, is miniscule. Buffett's holding company, Berkshire Hathaway, has US$400 billion in assets and owns railroads, retailers, vacuum cleaner companies, and almost everything in between. (Though, notably, he's no fan of a certain social media juggernaut; he recently told CNNMoney it was "mathematically impossible" for Facebook to be considered a good investment now). As investments go, US$142 million isn't even a rounding error for Berkshire.
What's significant is that the Wizard of Omaha sees more upside in a grab bag of tiny local papers than he does in the 900-million member "rocket ship" that is Facebook.
Setting aside the merits of social media, the big question is about the profits Buffett might see in newspapers. It bears remembering that the industry that has been shedding readers as fast as it has advertisers. And the decline has claimed more than just the minnows. The Seattle Post-Intelligencer, a Washington State institution for nearly 150 years, stopped its presses in 2009. So did Denver's Rocky Mountain News, a paper that had reached its 150th birthday.
And yesterday, the New York Times reported that New Orleans' 175-year-old Time-Picayune would scale production back to three days a week. The daily survived the worst that Hurricane Katrina could throw at it, but it had no answer for a circulation that had halved (to 132,000) in the past seven years.
Said the Times, "The Times-Picayune changes were followed hours later by an announcement of a similar initiative at three Newhouse papers in Alabama — The Birmingham News, The Press-Register of Mobile and The Huntsville Times. They, too, will print only three days a week and undergo staff cuts."
The path ahead appears no more promising in Canada. Earlier this month, the Globe and Mail announced plans to cut costs by asking employees to take unpaid summer leave of up to 12 weeks. "The union is on one hand glad we're not talking about permanent layoffs because they've seen what's happening in the rest of the industry," said CEO Phillip Crawley in Globe reporter Steve Ladurantaye's article on the announcement. "I don't know how long this slowdown is going to last, and I hope by this fall we're back to a regular level of business and everyone is back to work on a new year. At this stage I couldn't give you an accurate forecast of that." (Full disclosure: I worked at the Globe and Mail between 2006 and 2011.)
The Globe's belt-tightening follows years of similar moves at the National Post and the Postmedia Network. If papers of considerable clout and cachet can't sustain operations without dramatic cuts, can community papers with far less money or digital savvy have any chance to survive? In an age when tablets and smart phones are only soaring in popularity, the future of printed papers would appear bleak at best.
What is Buffett seeing that people with the most to gain from the sector's survival seem to be missing? In short, that small is beautiful. With the Media General buy, he loaded up papers in smaller centres with a distinct sense of place. As he told the AP, "We will favour towns and cities with a strong sense of community, comparable to the 26 in which we will soon operate. If a citizenry cares little about its community, it will eventually care little about its newspaper."
The Globe's belt-tightening follows years of related moves by The National Post and the Postmedia Network chain. If papers of clout and cachet can't sustain operations, do community papers with nowhere near the money, scope or digital resources have any chance to survive? In an age when tablets and smart phones are only growing in popularity, the future of printed papers would seem bleak at best.
What does Buffett see that the people with the most to gain in this sector are missing?