Newspapers haven’t ‘cracked code,’ Buffett says
Oracle of Omaha says viable business plan needed for survival
When I talked to Warren Buffett three years ago, he confided that he had a forbidden passion. “It’s almost unnatural how much I love newspapers,” he said.
And he was acting on that love. Four years after saying that he wouldn’t buy newspapers “at any price,” the financial guru had started snapping them up.
In his 2013 letter to shareholders, he and right-hand man Charlie Munger declared that they “believe that papers delivering comprehensive and reliable information to tightly bound communities and having a sensible Internet strategy will remain viable for a long time.” It was a powerful vote of confidence for a reeling industry totally disrupted by the digital revolution.
So three years in, I wondered, how is Omaha’s favorite Oracle feeling about those beleaguered ink-on-paper broadsheets and tabloids he adores? In a telephone interview Tuesday, Buffett sounded decidedly less bullish about their future. His ardor is undiminished, but he fears newspapers don’t love him back.
“We haven’t cracked the code yet” as far as a viable business plan is concerned, he told me, speaking about his own holdings and the industry as a whole. “Circulation continues to decline at a significant pace, advertising at an even faster pace. The easy cutting has taken place. There’s no indication that anyone besides the national papers has found a way.”
Buffett reads five newspapers — actual newspapers, not websites or apps — a day, and he says “you could sell me a sixth.” But, he says, the continuing financial pressures have taken a toll on the objects of his affection.
“They don’t tell me as much news as three years ago, let alone 10 years ago,” he says. “They are a fair amount worse off, and not one is bucking that trend, even in prosperous communities. There’s less and less in the newspaper.” Buffett, who has owned The
Buffalo News since 1977, stresses that all of his newspapers are profitable. But the trendlines are discouraging. “If you have a prob-
lem in five years, you have a problem now,” he says.
Despite the challenges, Buffett wants to make clear, “I love newspapers. I’m a guy looking for any robin.”
And, he adds, “We would never sell a newspaper ... I want to be the last guy standing.”
Buffett, whose holdings include his hometown Omaha World-Herald, says he wouldn’t rule out buying additional newspapers. He points out that his BH Media Group acquired its 32nd daily, The Free Lance-Star in Fredericksburg, Va., at the beginning of the year. (It also owns 47 weeklies.)
“Hope is not gone,” Buffett says. But before anyone decides to purchase a paper, he says, “you have to look very hard,” adding with a laugh, “and you probably have to love newspapers.”
Warren Buffett is hardly a naif, and he bought up his newspapers with his eyes open. The “code” that he likes to allude to involves figuring out how to make much more digital revenue, “blending the digital and print model,” as Buffett puts it. What concerns Buffett is that “it’s three years later, and we’re still figuring out a solution.”
He adds, “I’ve got to see the answer. Wishful thinking won’t do a thing.”
As for the future, he says, “In most cases there are some years left to crack the code. But we haven’t done it. Maybe (the industry) started too late.”
Buffett feels strongly that newspapers made the mission much tougher when they began giving away their content on the Internet. “We missed the boat not charging for digital,” he says. Once people “expect to get something for free, it’s hard to change.”
As he added newspapers to his portfolio, Buffett concentrated on small- and medium-size dailies, believing the problems of big regional papers were too severe. But he fears he was being too optimistic: Aside perhaps for the handful of national papers, the newspaper challenge “goes right on down the line.”
Buffett also figured that the newspaper business would begin to stabilize, that it would stop hemorrhaging readers and ad dollars. “What surprised everybody is that the rate of decline has not slowed for circulation or advertising,” he says.
For newspapers to succeed, Buffett believes, they have to be essential, providing information readers can’t get anywhere else. But the rich smorgasbord of content on the Internet complicates that task enormously. Obituaries and high school sports remain among the few newspaper-only strongholds, Buffett says.
The Oracle was very close to the Graham family, which owned The Washington Post until 2013 when it sold the paper to Amazon founder and CEO Jeff Bezos. Buffett is very impressed with the massive increase in the Post’s digital audience under Bezos. If it can figure out how to monetize all those people, “that could lead to an equation that works.” But he stresses that national news outlets are very different animals than local and regional papers.
As for his own digital habits, Buffett does a lot of search during the day and at night is likely to check out The Wall Street Journal and ESPN. BuzzFeed, I ask? Not so much was the reply. At the end of our conversation, Buffett had a reminder that was also a request for a favor.
“I’ve got an 800 number,” he said, “if you crack the code.”
“In most cases there are some years left to crack the code. But we haven’t done it. Maybe (the industry) started too late.” Warren Buffett