Is there a degree of false comfort to be found in the fact that an investor known as “the Sage of Omaha” has decided that daily newspapers in 2013 are a decent financial bet? Even self-made multibillionaires can get it wrong.
Proving that no story is ever simple, Warren Buffett, the third-richest man in the world at the last count, was back in the market again this week, picking up the Tulsa World, Oklahoma’s second-largest daily.
Curiously for anyone who glanced at last week’s Irish newspaper circulation figures and came away convinced the industry has entered a death spiral, Buffett’s media purchases across several US states have been of the inky kind, not the Huffington Post variety. Does he know something the rest of us don’t?
This latest acquisition brings the number of daily titles in Buffett’s company Berkshire Hathaway to 28. He’s not just a fan of dailies: BH Media Group’s holdings stretch to 40 other newspapers and magazines that publish less frequently.
It’s no “soft-headed business decision”, Buffett insists – news publishers selling solid information can deliver a good return-on-investment, he reckons. Not only that, he’s a believer in the survival of the print medium.
“I do not have any secret sauce,” he told the New York Times last year. “I think newspapers in print form, in most of the cities and towns where they are present will be here in 10 and 20 years.”
Like baked beans and railroads, Buffett has decided newspapers are a value business. They’re “keepers”. Or, at least some of them are – last November he closed a troubled recent purchase, the News and Messenger in Virginia, following an “exhaustive review” by a subsidiary after which it was “unable to come up with a scenario that would result in a likelihood of profitable operations”.
This is the kind of wording that accountants might not too long from now apply to certain newspaper groups on this side of the Atlantic and no one would be much surprised.
Given Buffett’s print enthusiasm appears undimmed, it’s worth looking at why, out of approximately 1,400 daily newspapers in the US, he cherrypicks the ones he does.
Three broad themes emerge. His titles are, in the words of Associated Press, “small- or medium-sized”. The Tulsa World has a weekday circulation of 95,000 and shifts 133,000 on Sundays which, if transplanted into the Irish market, would give it national scale. It also looks relatively healthy when you consider the population of Tulsa’s greater metropolitan area is shy of one million.
Secondly, his chosen titles possess what Buffett regards as strong community ties – their niche is their locality. He’s waxed lyrical to the Daily Beast about the value of covering high-school basketball and the counterproductive nature of replacing original reportage with cheaper generic content.
The third notable feature of his titles is their lack of direct competition – the Tulsa World has been the only daily newspaper in the city since 1992. Buffett is stepping into a market that has already shed its fat.
The Irish print landscape seems over-served in comparison. Rationalisation doesn’t solve all woes, however. The family-owned company that sold Buffett the Oklahoma title for an undisclosed sum seems happy to get out of the game.
Tomorrow, Buffett will publish his annual letter to shareholders, in which he has hinted he will expand on his contrarian views on the future for newspapers, as well as, presumably, his thoughts on Heinz tomato ketchup. It is the latter that will be of more interest to the Berkshire constituency, given his outlay on fast moving consumer goods substantially outweighs his spend on media.
Certainly, the usual explanation for buying newspapers does not apply in this instance. Buffett is far too rich to be remotely bothered with the idea of purchasing newspapers as a means of buying influence – that’s for lesser, more insecure media moguls. The Omaha World-Herald still happily features the “Warren Watch” column it ran before Buffett bought his hometown paper in 2011. This seems an altogether relaxed, benign form of media ownership.
Buffett has never been quite like other billionaires, though. He is actually keen to pay more tax, going so far as to propose a minimum 30 per cent tax rate for millionaires. His peers on the Forbes list must think he’s proper crazy. Some media watchers do too. But it’s a mistake to simply dismiss his newspaper strategy as the sentiment of an octogenarian who grew up checking the stock prices in a daily rag and has never forgotten how he grew rich on that information.
