Buffett says his firm likely to buy more newspapers
Warren Buffett says Berkshire Hathaway intends to buy more newspapers, and has put the Omaha World-Herald's president, Terry Kroger, in charge of Berkshire's division handling its expanding newspaper business.
Buffett wrote a long letter dated Wednesday to the publishers and editors of Berkshire's dailies, now including his hometown World-Herald, which Berkshire bought last year; the Buffalo News, bought in 1977; Media General newspapers that Berkshire bought earlier this month; and shares of the Washington Post Co. According to recent reporting in the Wall Street Journal, Berkshire also bought last year some debt of Lee Enterprises, which owns the Journal Star, Beatrice Daily Sun and other dailies. That debt was convertible into stock. The letter was posted Thursday on Jim Romanesko's news media blog.
"Berkshire will probably purchase more papers in the next few years," Buffett wrote. "We will favor 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. 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."
Buffett professed his lifelong love of newspapers in the letter, and added his family's history in the medium: his father edited the Daily Nebraskan, where his father met his mother, whose family owned a West Point daily. Buffett delivered newspapers in Washington, and in college worked in circulation at the Lincoln Journal, the afternoon paper that since merged with the Lincoln Star.
"Today, I read five newspapers daily," Buffett wrote. "Call me an addict."
Buffett also offered advice to the newspaper executives: "Though the economics of the business have drastically changed since our purchase of The Buffalo News, I believe newspapers that intensively cover their communities will have a good future. It’s your job to make your paper indispensable to anyone who cares about what is going on in your city or town.
"That will mean both maintaining your news hole — a newspaper that reduces its coverage of the news important to its community is certain to reduce its readership as well and thoroughly covering all aspects of area life, particularly local sports. No one has ever stopped reading when half-way through a story that was about them or their neighbors."
He also addressed the great issue facing all newspapers, how to use the Internet without allowing it to kill the revenues that sustain the operation: "We must rethink the industry’s initial response to the Internet," he wrote. "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 and certain of our papers are already making progress in moving to something that makes more sense. We want your best thinking as we work out the blend of digital and print that will attract both the audience and the revenue we need."
He told the editors and publishers that Terry Kroeger at the World-Herald "will oversee our newspaper operations (excluding Buffalo)."
"Like you and me, he knows that our future depends on remaining the primary source of information in certain subjects of great importance to our readers," Buffett wrote. "Technological change has caused us to lose primacy in various key areas, including national news, national sports, stock quotations and employment opportunities. So be it. Our job is to reign supreme in matters of local importance."
He reassured the executives that their newspapers "will operate from a position of financial strength" becuase of Berkshire's capital and liquidity.
He acknowledged that his small publishing sector is a small part of Berkshire's grander empire. "But the papers are every bit as important to me — and, for that matter, to society as other businesses we have purchased for many billions of dollars," he wrote.