POSTED ON MARCH 6, 2013:
The Buffett Review
Acquisition of Tulsa World has precedent
Warren Buffett's recent buying spree of newspapers doesn't surprise Geoff Kelly, editor of the weekly Artvoice in Buffalo, N.Y.
"They're bargains right now," Kelly said.
Buffett's BH Media Group announced on Feb. 25 plans to purchase The Tulsa World from the Lorton family, ending an era of local ownership for Tulsa's daily newspaper.
Though the purchase price wasn't disclosed, Rick Edmonds, a media business analyst with journalism nonprofit The Poynter Institute, said the industry has largely welcomed Buffett at a time when many newspapers have cloudy economic futures.
"To have an investor of his standing give a vote of confidence to the business was useful," Edmonds said. He noted that newspaper stocks have risen some after dramatic plunges in value. "He's probably seeing some of the same things investors are seeing."
Buffett, 82, shared his thoughts on newspapers March 1 in his annual letter to shareholders in Buffett's Berkshire Hathaway conglomerate.
"Charlie and I love newspapers," Buffett wrote, referencing Charlie Munger, a high-ranking leader in Buffett's business, and, perhaps (or perhaps not) incidentally, also an octogenarian at age 89.
Buffett defended the newspaper business, even while acknowledging concerns. After noting how newspapers once "were the primary source for an incredible variety of news, a fact that made them indispensable to a very high percentage of the population," he conceded that "the world has changed."
"Stock market quotes and the details of national sports events are old news long before the presses begin to roll. The Internet offers extensive information about both available jobs and homes. Television bombards viewers with political, national and international news. In one area of interest after another,
newspapers have therefore lost their 'primacy.' And, as their audiences have fallen, so has advertising," Buffett wrote.
But he wrote that newspapers "continue to reign supreme" in delivering 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," Buffett wrote.
As far as his business philosophy in operating newspapers, Buffett notably criticized papers for offering free online access to news. "How could this lead to anything other than a sharp and steady drop in sales of the printed product," he wrote.
Former Paperboy, Now Billionaire
"Charlie and I believe that papers delivering comprehensive and reliable information to tightly-bound communities and having a sensible Internet strategy will remain viable for a long time. We do not believe that success will come from cutting either the news content or frequency of publication ... Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet," Buffett wrote.
Buffett also took pains to state that the individual papers will be "independent in their news coverage and editorial opinions," noting, "I voted for Obama; of our 12 dailies that endorsed a political candidate, 10 opted for Romney."
Kelly said that after Buffett took over The Buffalo News in the 1970s, he hasn't had much of an overt influence.
"He's been, as an owner, fairly hands off," Kelly said. But Buffett did put in place a hand-picked publisher.
In Tulsa, however, news of the sale came with the announcement that longtime Tulsa World employee John Bair would become publisher.
Kelly said that while the Buffalo paper for years was marred by a low-quality printing press, being Buffett-owned allowed them to finally make an investment without much pain as far as any financing or debt.
"Buffett just wrote a check," Kelly said.
Apart from his investment in the Buffalo paper and stock holdings with the Washington Post Co., Buffett didn't begin scooping up newspapers until 2011, with the purchase of the Omaha (Neb.)World Herald.
John Heaston, publisher of The Reader, a weekly newspaper in Omaha, Neb., said he hasn't noticed much of a change since Buffett acquired the paper.
"He doesn't like really getting involved in his businesses. That's just kind of classic Buffett," Heaston said.
Omaha, of course, is home to Buffett's Berkshire Hathaway Inc., Buffett's business conglomerate which owns a diverse group of businesses -- the vast majority of which have nothing to do with newspapers.
Buffett's ownership of newspapers has expanded now so that he can be said to own his own chain of newspapers. BH Media Group will own 28 daily papers once the Tulsa World deal is finalized. "There was a period not so long ago where papers were not being sold, and it really did seem as though there weren't any groups interested in going into the business in a big way," Edmonds said.
Buffett clearly has a longstanding affinity for newspapers, noting in his letter to shareholders last year that he delivered 500,000 newspapers as a teen and establishing a "Newspaper Tossing Challenge" at the annual shareholders meeting, just for fun.
However, Buffett has shown a willingness to put an end to a failing business. In Manassas, Va., The News and Messenger, which had been around for 143 years, didn't make it to see year 144, with "business conditions" cited as the reason for closing the paper.
In closing his remarks on newspapers in his letter to shareholders, Buffett noted that he "will not continue the operation of any business doomed to unending losses," but added that all other daily papers he owns "should be profitable for a long time to come."
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