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Warren Buffett Buying Newspapers by the Bushel

Warren Buffett
(New York Times photo)

The world’s ultimate value investor – Warren Buffett – has apparently decided that there’s untapped value in newspapers. His Berkshire Hathaway has just purchased 63 of them along with a 3% stake in Lee Enterprises, and Buffett says he plans to buy more. Newspaper lovers should applaud Buffett’s interest. A self-described newspaper “addict,” he believes in an intensely local editorial focus and a sustainable business model. His interest in the newspaper industry could be a boost for paywalls. “The original instinct of newspapers 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,” he wrote in a letter to publishers.

The New York Times traveled to Buffalo to check out The Buffalo News, which Buffett has owned since 1977. It found a profitable operation that has scaled down intelligently over the years through buyouts rather than layoffs. Buffett has little personal involvement in daily operations, but his philosophy of investing in local coverage and skimping on overhead is evident everywhere. Media Audit says The Buffalo News has the second highest audience penetration of any newspaper in the country. Part of this could be because the Rust Belt population of the area is older than the typical demographic, but it’s still remarkable that more than 70% of Buffalo households have read the paper within the last month.

If anyone can figure out how to make a newspaper profitable, it’s Warren Buffett. He built an estimated net worth of $44 billion by buying distressed businesses at the bottom. His interest in this industry would indicate that there are better days ahead.

US Newspaper Ad Revenue Continues Sickening Plunge; Online Growth All But Halted

First-quarter 2012 total expenditures totaled $5.18 billion, down 6.86% from $5.56 billion a year earlier. Online revenues grew by just 1% to $816 million, which was the smallest for any quarter since 2009 and not nearly enough to offset the 8.2% drop in print revenues, to $4.36 billion. The Newspaper Association of America previously revealed that print revenues (in absolute dollars) fell by half between 2005 and 2011. And there is no end in sight.

Oregon Publisher Puts Happy Face on Frequency Cut

“There are a lot of new things to like about today’s Observer,” writes Kari Borgen, publisher of the Observer of Union and Wallowa counties in Oregon. Borgen goes on to celebrate the Observer‘s new design, added features and bonus puzzles, among other goodies. What she fails to dwell upon is the fact that the issue that “seems bigger and feels heavier to you today” is that way because frequency has been cut from five days to three. The Observer eliminated Tuesday and Thursday editions and now publishes only on Monday, Wednesday and Friday. No one has yet gotten around to updating the About page with this information.

Tribune Co. Edges Closer to Bankruptcy Exit

Details of the legal wrangling between stakeholders, negotiations with the FCC and the likelihood of judicial approval of a restructuring plan will leave your eyes crossed, but the bottom line is that the company’s three-year stay in Hotel Chapter 11 may finally be nearing a conclusion. There’s still regulatory and legal wrangling to be resolved, including a petition to transfer Tribune Co.’s broadcast licenses to a group of banks and hedge funds that will own the company. There’s also a challenge from a group of junior bondholders who are challenging the restructuring plan and who might sue 35,000 former Tribune Co. shareholders to recover more than $2 billion in claims.

Whatever happens, the likely outcome is that Tribune Co. will be carved up and sold off piecemeal by the banks and hedge funds that assume ownership. The real value of the company is in its portfolio of 23 TV stations and some other equity investments. The newspaper business is barely a rounding error on the balance sheet. The story in the Tribune notes, “Before the Zell deal, Tribune Co. entertained offers topping $2 billion for the Los Angeles Times alone, but today, according to a recent valuation analysis by Tribune adviser Lazard Freres & Co. the entire publishing group of eight newspapers, including the Times and Tribune, is worth about $623 million.”

By the way, the Chicago Tribune is considering a novel approach to paywalls. Instead of charging for access beyond a certain number of articles per month, the paper would charge for bonus content, as ESPN does. The tactic has worked well for sports addicts, but observers question whether it can succeed in local news. It hasn’t done so anywhere yet.

Blowing Up the Article

The always-provocative Mathew Ingram writes about why we need to reconsider the concept of the article in publishing. This traditional approach to packaging information is rooted in the limitations of printed media where hyperlinking was impossible. Now, however, we have the ability to deliver only what’s new and link to the rest.  Jeff Jarvis has been beating this drum for some time and in a post entitled “News articles as assets and paths,” he suggests that articles will devolve into component parts that can be mixed and matched according to need.  Why reinvent the wheel with hundreds of words of background every time we update a story? Simply provide the new information and link to the rest. Jarvis has even suggested that new kinds of media organizations could emerge that specialize in different kinds of assets, such as news, multimedia or background. An example of the latter is Wikipedia, which is a great source of background information for many timely events. Reddit is building this model with its Ask Me Anything forum, which has become a coveted destination for book authors. Basically, Reddit is becoming a specialist in Q&A assets.

Media Consolidation: The Infographic

Everyone is doing infographics these days, and we’ve never seen a bandwagon we couldn’t hop on. This one was actually created by Frugal Dad last November, but it popped up on Business Insider last week. Some of the information is out of date. For example, GE no longer owns NBC, so the sixth company is now Comcast. And Time Warner got rid of AOL. But the main point still holds: Media consolidation has reached a pinnacle, with only six corporations controlling 90% of media in America. And 250 million bloggers and Twitter users controlling the rest.

Source: Frugal dad

Tom Foremski could be excused for trashing the business model Henry Blodget has used to get Business Insider over the profitability hump, but he chooses to trash journalism traditionalists who criticize Blodget instead.

The trigger was this profile of Business Insider deputy editor Joe Wiesenthal in The New York Times. Wiesenthal has an obsessive personality. He rises at 4 a.m. and routinely works till 9 p.m. He files 15 news items in an average day and sends 150 tweets. His first tweet each morning is “What did I miss?” He is the ultimate new media journalist.

Have a look at Business Insider. It’s nothing like a traditional financial newspaper. It’s got headlines like “14 Common Ways People Cheat At Golf” and “Everything You Ever Wanted To Know About Russian Mail Order Brides.” The home page is about 20 screens long and adorned with cheesecake photos of models in bikinis next to headlines about the Greek financial crisis. It’s Huffington Post meets Weekly World News. It’s offensive to everything traditional journalists believe a news outlet should stand for. And it’s turning a profit.

Broken Rules

A lot of journalists hate operations like Business Insider because it violates so many rules. It reports information that hasn’t been verified, mixes reportage with editorializing and blatantly caters to its readers’ prurient interests. Dan Reimold, a journalism professor at the University of Tampa, posted a critique of Wiesenthal on the Associated Collegiate Press blog, arguing that Wiesenthal’s approach to journalism – and his lifestyle – are something no aspiring reporting should emulate. “It doesn’t seem like Weisenthal has conquered the news cycle.  He is a pathetic slave to it,” Reimold wrote.

Reimold’s post drew a pointed response from Henry Blodget, the disgraced former equities analyst who was banned from the securities industry after the dot come bubble burst and who has reinvented himself as a publisher. Blodget argues that Reimold is addicted to an old model of long-form journalism that isn’t relevant in the manic, always-on Web 2.0 world. “The skills required to do what a great real-time digital journalist does are different than those required to do what a great magazine writer does,” Bodget writes. “Doing what Joe Weisenthal does is extraordinarily difficult. That’s why there are so few Joe Weisenthals.”

Tom Foremski is a traditional reporter who understands and respects the new  journalism, and he’s got the street cred to command respect. A veteran of the newspaper industry, Foremski most recently worked at the Financial Times, but in 2004 he quit to become a full-time blogger. His story at Silicon Valley Watcher is good reading.

Foremski backs Henry Blodget on this debate. “Criticism of Business Insider’s largely lightweight journalism by journalism professors is valid only when it’s debated within the context of the economic reality of the news business,” he writes. For good measure, he adds “My chief complaint about journalism professors is how distant they are from a real newsroom.”

As we’ve noted before the pay structure of today’s online news industry is dramatically lower than that of the dying print industry. Demand Media pays freelancers as little as a nickel a word, and Huffington Post gets most of its content for free. Staffers at The Politico typically start their work day before dawn and may file thousands of words per day.

This sucks, but it’s part of the evolution of a more sustainable model. Foremski doesn’t endorse the way Business Insider treats its employees, but he clearly thinks that cursing the onrushing tide is a waste of breath. “Journalism professors should be railing against the failure of the industry to establish a business model that works, and rallying students to learn new techniques in producing quality journalism in quantity,” he writes.

We agree. Remember that the newspaper world of the 1930s and 1940s was no model of integrity. Publishers routinely invented news to support political agendas and the concept of seeking both sides of the story was a novelty. Reporters also didn’t make much money.

That business evolved through trial, error and consolidation, and we expect much the same process to occur in the new online world. Whether that results in a 40-hour work week and six-figure salaries is still to be determined (although we doubt it), but the challenge for people who are committed to journalism today is to find a way to preserve it within a new business climate. Tom Foremski is an important voice in that crusade.

Incidentally, Business Insider claims that Reimold has accepted an offer to come to New York for a day and do Joe Weisenthal’s job. It apparently hasn’t talked to him directly or confirmed anything but is basing its report on an offer that Reimold posted on his blog. How very new media of it.