Commentary
Warren Buffett Is Bearish On Newspapers
- by Erik Sass , Staff Writer @eriksass1, March 7, 2017
In recent years, it seemed like Warren Buffett was the only cheerleader left for the newspaper industry among big investors. Even better, he was willing to put his money where his mouth was. He bought a few dozen local papers, based on his belief that their community connections would help them weather the tough digital transition.
But now, it looks like even the Oracle of Omaha is having his doubts.
In an interview with CNBC last week, Buffett held out hope for a few big national newspapers that have the reach and resources to manage the long-term transition to digital distribution. But he warned that the future is in jeopardy for the vast majority of local, regional and metro daily newspapers.
“There are only two papers in the United States that I think have an assured future because they have a successful Internet model to go with their print model, and that’s The Wall Street Journal and The New York Times,” which have both developed “an online presence that people will pay for,” according to Buffett.
He added that The Washington Post, with the resources of Amazon founder Jeff Bezos behind it, may also clear the digital hurdle.
However, Buffett then painted a dire picture for the rest of the business, noting: “There are 1,300 daily papers left in the United States,” down from “1,700 or 1,800 not that many years ago.” These publications, serving mostly small and mid-sized communities, “haven't figured out a way to make the digital model complement the print model in such a way as to guarantee the future.”
The trend lines are clear, he added: “Circulation is going down significantly.” On the advertising front, “it used to be dozens and dozens of pages of help wanted ads [but] it’s basically disappeared, and no one has found the answer to that yet.”
This is a discouraging change in tone for Buffett, whose holding company, Berkshire Hathaway, acquired over 30 small and mid-sized newspapers in 2012-2016, reflecting his belief that “newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town -- whether the news is about the mayor or taxes or high school football -- there is no substitute for a local newspaper that is doing its job… Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents.”
There is little argument about Buffett’s assertion that the future of the newspaper business rests largely on convincing readers to pay for content through digital subscriptions, online paywalls, or some other means.In the case of The New York Times Co., circulation revenues -- powered by print and digital subs -- made up 51% of the company’s bottom line in 2016, up from 27.5% in 2006, while advertising fell from 65.5% to 42%.
Erik Sass is editor of Publishers Daily. You can reach Erik at eriksass@gmail.com.
HOW TO SAVE NEWSPAPERS…
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Buffet is right -- "the future of the newspaper business rests largely on convincing readers to pay for content." So far this has been difficult for all but the largest and most sophisticated (and just barely successful, even for them). What is needed is a rethinking of the value proposition and how that informs the relationship with subscribers.
An example of such a rethinking is FairPay, as described in my post "Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership" at http://bit.ly/1KXJLYL. (FairPay is an open architecture in the public domain, not a product.)
Getting people to pay a significant amount----far more than their current subscription price----for local newspaper content seems like a tall order and I doubt that there is enough happening every day on the local front---except for sports and the weather----for a hometown daily to capture a lot of revenue in this manner. On the other hand, there is potential for once-a-week Sunday editions to cover local and regional happenings in sufficient depth and with credible expertise as well as serving as ad platforme for local department stores, banks, utilities, food and drug chains, etc. as this level of coverage is not routinely duplicated by other media---notably cable TV and online sources. The path forward is probably to abandon the daily contests and switch into more of a local weekly magazine format, tied in, of course, with a robust website and digital advertising.
The money to pay for everything at a newspaper comes from ads. Period. Management has been and still is sabatoging ad sales. The Philadelphia Inquirer just did it again. Lowered the commission and took away accounts from seasoned and proved sales people and gave those accounts to the others including new people who they pay more in commissions and income. Meanwhile, accounts get lost in the shuffle which they do on regular account shuffling. There are so many examples of how management have turned down accounts = money which are being sold under the paper's own profit structure. The money goes down hill and the reporting and the community involvement and promotion disappears. All I hear is everyone beating the wrong drum.
Well, duh. They don't refer to the obituary section as "subscriber countdown" for nothing.
people are dying every day and while they no longer are potential subscribers, most have to pay for their obituaries. I wonder how much revenue this generates.Â