Buffett buys local newspaper group
Thu, 1 Dec, 2011
The news that Berkshire Hathaway, the investment company controlled by legendary investor Warren Buffett - one of the two or three richest people in the world - is to buy the Omaha World-Herald Company (Financial Times, 30 November 2011) does not in itself seem of great significance.
Yet Buffett - despite starting out as a paperboy in his youth and owning a quarter of the Washington Post - has recently cautioned against investment in newsprint.
Newspapers, he suggested as long ago as 1991, were on their way out. In his letter to shareholders five years ago, he argued that newspapers had lost their position as the primary purveyors of news and information and, accordingly, were no longer reliable profit-generators.
The press might continue to attract "vanity investors" but, Buffett cautioned, "there's no rule that says a newspaper's revenue can't fall below its expenses and that losses can't mushroom."
Behind this warning lay a belief that alternative channels - broadcasting, cable and, most of all, the internet - had become the dominant news media.
So what does Buffett's decision to pay $200m for a local newspaper group (including its debt) betoken? He says it's because the Omaha World-Herald Company, which has long been owned by its employees, past employees and a foundation established by Peter Kiewit, a former owner, "delivers solid profits and is one of the best-run newspapers in America."
Yet I can't help but think that there's something else behind the investment.
Maybe Buffett has had a Damascene conversion to print and now thinks he can make an indebted newspaper publisher turn a profit. Maybe he wants to be able to continue reading his local newspaper (Buffett still lives in his family home in Omaha). Maybe he believes the internet is on the way out and that local newspapers are coming back into fashion. Or maybe what he really wants is the profitable bit of the company - by all accounts, a direct marketing company, World Marketing, which has operations across the US from Los Angeles to Atlantic City.
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