Berkshire Hathaway Spends Millions on Dailies
The print industry may be lagging with a recent study showing an extreme decrease in jobs in the industry in the past decade alone, but that hasn’t stopped one man from investing millions.
Over the past 15 months, Berkshire Hathaway acquired 28 local newspapers under the direction of billionaire CEO Warren Buffett. The $344 million deal included newspapers from cities with only one major publication. These single-print towns still rely heavily on their local publications for hyper-local news coverage that generally can’t be found anywhere else.
In his annual shareholder’s letter Buffett announced his reasoning for investing millions in daily prints. He states that although “circulation, advertising and profits of the newspaper industry overall are certain to decline,” that he believes that “papers delivering comprehensive and reliable information to tightly-bound communities … will remain viable for a long time,” as long as they have a “ sensible Internet strategy.”
Buffett goes on to explain that although the “properties we purchased fell far short of meeting our off-stated size requirements for acquisitions,” that he loves newspapers, and “if their economics make sense,will buy them even when they fall far short of the size threshold we would require for the purchase of, say, a widget company.”
Buffett believes that with a heavier focus on internet presence, that these smaller publications can be economically viable, even profitable. He uses The Wall Street Journal and the Arkansas Democrat-Gazette as examples of newspapers that went to a pay model early and are still retaining their readership. He also points to his company’s past successful newspaper ventures, including The Buffalo News purchased in 1977, and the Omaha World-Herald in 2011, as reasoning for his multi-million dollar purchase.
“Among newspapers in America’s 50 largest metropolitan areas, our Buffalo and Omaha papers rank near the top in circulation penetration of their home territories.”
Although the News and World-Herald had a revenue loss of 3% this past year, Buffett argues that the six smaller prints that Berkshire Hathaway has owned throughout 2012 had unchanged revenue for the year.
But Buffetts love for dailies isn’t deterring his goal of buying economically sustainable companies. One paper that the company acquired in a bulk purchase from Media General was “significantly unprofitable under that company’s ownership” and Buffett couldn’t save the paper. He explained to his shareholders that the company “will not continue the operation of anybusiness doomed to unending losses.”
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