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Economy

Buffett offers bleak outlook for US newspapers

2009-05-04

[Mail and Globe] Warren Buffett is fond of newspapers -- he reads five a day -- but the billionaire investor warned shareholders of his Berkshire Hathaway that the reeling industry may never recover because it lacks a sustainable business model.

At Saturday's annual meeting of Berkshire, which owns the Buffalo News and has a big stake in the Washington Post, Buffett said that as readership falls, so does the attraction of newspapers for advertisers, and for investors in the companies that publish them.

"For most newspapers in the United States, we would not buy them at any price," Buffett said. "They have the possibility of nearly unending losses. I do not see anything on the horizon that sees that erosion coming to an end."

Many US newspapers have lost 20% or more of their advertising revenue as changes in technology and reading habits shrink circulation and more readers to get their news online. Several newspapers in large US cities have closed in recent months, and the future of the money-losing Boston Globe, owned by the New York Times Company, remains up in the air.

"Twenty, thirty years ago, they were a product that had pricing power that was essential," said Buffett. "They have lost that essential nature."

Buffett said Berkshire would hold on to the Buffalo News, a daily newspaper in the New York state city of the same name, if only because Berkshire buys businesses for the long term and does not sell simply because the companies hit a rough patch.

He did not rule out having to squeeze out excess costs, including possible job cuts, or eventually shuttering the paper if it goes too deeply into the red. "On an economic basis you should sell this business. I said I agree 100% but I am not going to do it," he said. "The union has been cooperative in having an economic model that will at least give us a little bit of money."

Posted by:Fred

#9 Wow, ya think?

Posted by: DMFD 2009-05-04 19:35

#8 lord garth

Buffet reads lots of MSM-papers, but doesn't get any news on-line so no wonder he's a bit behind, so are the MSM.

Posted by: Bright Pebbles the flatulent 2009-05-04 15:46

#7 But amidst all that hard commercial evolution - in which the internet played a large role - I wonder how much of the dynamic was in fact the editorial problem. That is, the descent of mainstream news into a fairly uniform, often grossly distorted, easily deconstructed or even debunked flow of tendentious b.s.

One can thank the newspapers' additction to the Associated Press.

Posted by: Pappy 2009-05-04 13:03

#6 Steal from the interwebs. Add and LOL Cat section.
Obits in LOL Cat are sure to be an ad magnet.

Posted by: .5MT 2009-05-04 12:10

#5 More to your (and Warren's) point, Steve, a friend in the biz told me a few months back that it was mostly fairly simple. The web stole their classified ad business; the change in the underlying commercial scene (consolidation) and in advertizing channels severely reduced the large ads flow from legacy department stores; and the new big would-be spenders on the block (big-box and specialty stores like BestBuy, etc.) never became the market they should have because WalMart pioneered alternative ad channels and the others followed. He readily acknowledged that newsrooms also generally lacked a commitment or passion to deliver on major papers' remaining niche advantage - local and regional news. He has dealt with papers all over the US, South America, and the Far East for decades.

But amidst all that hard commercial evolution - in which the internet played a large role - I wonder how much of the dynamic was in fact the editorial problem. That is, the descent of mainstream news into a fairly uniform, often grossly distorted, easily deconstructed or even debunked flow of tendentious b.s. And I'm excluding the last few years and esp. the last year, in which things have simply fallen completely off the rails in this respect.

Meanwhile, though of course I wished I'd been able to invest $10K with Buffett 30 years ago, I'd no sooner listen to his public policy or political wisdom than I would to that of my friend's dog. Perhaps that 5-newspaper-a-day thing helps explain the gulf between his financial sense and his striking lack of sophistication on other matters.

Posted by: Verlaine 2009-05-04 10:03

#4 Newspapers survived by being an essential portal. They bundled and sold news. Even if all you wanted was the sports section you had to buy the whole paper.

News is now unbundled. You can pick and choose what and where to read on the internet. The bundlers thus are dying. This started first with trade publications -- does anyone read Computer Shopper anymore? -- but is now extending to mainstream newspapers. As web broadcasting becomes more popular and easier to access, the over-the-air broadcasters will get whacked.

Buffett is right: the model has exploded. People don't want to buy bundled news, they want to pick and choose. Add to that the editorial policies that drive away a lot of potential customers and it's no surprise that newspapers are dying.

Posted by: Steve White 2009-05-04 09:37

#3 I think it is like Pandora's Box, as far as the internet and free flow of information. They try any fairness doctrine now, the donks will have a full fledged revolt on their hands and I guarantee they will lose everything the next election.

Too many people know too much and are used to the full freedom.

Posted by: DarthVader 2009-05-04 08:37

#2 Twenty, thirty years ago they, and the mass media, had a lock on public opinion and could, as shown during the Vietnam war, have a huge impact.

Now, with the internet and practically instant, and so far unfettered, access to information (even if its only Wikipedia) they no longer have perfect control over what the public sees and hears.

The newspapers are the first - the broadcast is soon to follow. People are beginning to realise that the media is full of bullshit.

That is unless Obama and the Democrats give a big whopping bailout and even that will fail until they can also give the media their old monopoly on information - and that means restriction on the internet such as the 'Fairness Doctrine'.

Posted by: CrazyFool 2009-05-04 00:30

#1 Is Buffett just NOW noticing this?

Next maybe he'll shock us by predicting that computers will get faster.

Posted by: lord garth 2009-05-04 00:11

00:00