Finally, some good news has come out about newspapers: America’s premier investor Warren Buffett is buying them.
Last week, the Oracle of Omaha bought the Bryan-College Station Eagle, a 20,000 circulation Texas daily.
Last month, he purchased 25 dailies and 38 weeklies from Media General for $142 million in cash.
And that came on the heels of his purchase of his hometown Omaha World-Herald.
As recently as 2009, Buffett was saying newspapers were bad investments, even though he has been a long-time stakeholder in the Washington Post and the majority owner of the Buffalo (N.Y.) News.
After the purchase from Media General, however, Buffett said, “We will favor towns and cities with a strong sense of community.”
That statement contains more wisdom than some people will understand. When he bought the group of papers from Media General, one paper he omitted from the purchase was the Tampa Tribune, a paper struggling in a city with a competing daily.
For Buffett, even though he likes newspapers and has a long history with them, the deal still has to make sense financially — the price has to be right and the risk has to be minimal.
It’s also true that not all communities are the same. In rural areas in particular, like Central Minnesota, the sense of community is much stronger than in metropolitan areas. Little Falls is different from Pierz, and Pierz is distinct from Royalton. And ask anyone in Swanville and they will tell you how their community differs from Upsala.
Buffett told shareholders of his Berkshire Hathaway Corp., “If a citizenry cares little about its community, it will eventually care little about its newspaper. In a very general way, strong interest in community affairs varies inversely with population size and directly with the number of years a community’s population has been in residence. Therefore, we will focus on small and mid-sized papers in long-established communities.”
Another interesting development occurred at about the same time that Buffett was placing his growing faith in newspapers. The initial public offering for Facebook went flat. It’s hard to understand how an entity with 800 million users cannot make money, but Facebook continues to struggle with that concept, and investors remain leery.
Many of the newspaper industry’s problems have been self-inflicted. As Buffett wrote, “We must rethink the industry’s initial response to the Internet. The original instinct of newspapers then was to offer free in digital form what they were charging for in print. This is an unsustainable model.”
What’s more, some purchasers of newspapers have invested strictly for financial gain. They have paid more than is warranted for a publication and then, faced with the financial realities, have made painful cuts to stay in business. As news coverage is cut, readers drop away and a downward spiral begins. They act befuddled like a shirt manufacturer who sees sales drop when half the buttons disappear after the first washing.
The fact is that newspapers are a quasi-public trust, and Buffett understands those who cut news coverage are playing a dangerous game. The public’s trust in a publication as the go-to source for local information builds over time.
I feel extremely fortunate to be managing the Record, which, our last audit reports, has regular readership of 89 percent of the households it serves. By contrast, the best read daily in America, the Des Moines (Iowa) Register, has 72 percent readership.
I also feel fortunate to be working for our parent company, ECM Publishers Inc., founded by former Minnesota Gov. Elmer L. Andersen. As somebody said at a meeting I was at last week, “I don’t think Elmer got into the newspaper business just to make money.”
Like Buffett, Elmer understood the public purpose of newspapers as a central clearinghouse of information where people go to get the news they need in order to lead productive lives and participate in their community.
I believe those who predict the demise of well-run newspapers are mistaken — at least in my lifetime.
Tom West is the editor and general manager of the Record. He may be reached at (320) 632-2345 or by e-mail at [email protected].