That said, this leads to statement No. 2 about him.
Warren Buffett is not always an enlightened business owner.
Proof? He's been in newspapers for some time, as owner of the Buffalo News. As its owner, he has acted like Mitt Romney, or Chainsaw Al Dunlap. I don't know what he's done in Omaha, but I'm sure it's not been totally enlightened in terms of labor/employment issues.
Beyond that, it sounds like he's an old-fashioned newspaper romantic.
“In towns and cities where there is a strong sense of community, there is no more important institution than the local paper,” said Buffett, chairman and CEO of Berkshire, in a press release. “The many locales served by the newspapers we are acquiring fall firmly in this mold, and we are delighted they have found a permanent home with Berkshire Hathaway.”These types of people, even if they are also Chainsaw Als, are likely to get their hats handed to them in today's newspaper world. Even in smaller towns, there's no room for "romantic" newspaper owners today.
Somewhat more proof that here:
Buffett has often said that newspapers were an excellent business when the owner of a newspaper had “the only megaphone in town.” In 1992, before digital media arose, he said newspapers are “enormously valuable.”The one good thing? He sounds like he favors paywalls.
But in 2009 he said, “For most newspapers in the United States, we would not buy them at any price. They have the possibility of going to just unending losses.”
Then, when Berkshire bought The World-Herald for $200 million in December, he said, “I saw good financial performance,” plus the benefits of a good local economy in Omaha and a desire to continue local control of the community's newspaper.
“I think newspapers . . . have a decent future,” he said at the time. “It won't be like the past. But there are still a lot of things newspapers can do better than any other media. They not only can be sustained, but are important.”
At Berkshire's shareholders meeting May 5, Buffett was asked by a shareholder whether The World-Herald purchase involved “self-indulgence,” given the fact that Buffett loves newspapers and reads several each day.
Buffett replied that while newspapers are no longer the only source for some types of news, such as stock prices and major league sports scores, they still deliver news and advertising information that people can't find elsewhere. He said he wanted to buy more newspapers in cities where people are interested in their communities.
Beyond that, Buffett could at least be honest about not being in it for the papers. He's in it for loan sharking:
Morton said Berkshire's loan, which carries 10.5 percent initial interest, “addresses Media General's long-term capital needs and provides the company with significant financial and operating flexibility.”It sounds like the interest rate assesses how much Buffett really things newspapers are worth. And that, he's hoping to play vulture capitalist with some Media General physical assets if loan payments are late. That said, MG does printing for outside newspapers, including regional issues of the WSJ.
I still think he's not a genius, though. The value of those outside print contracts is likely to keep declining. So is the value of MG reserves, etc., which means even a "repo" for a loan default might not garner that much.
That said, if he puts the whole group of newspapers on paywall, this will have the great advantage of being the first great "experiment" with this at the community newspaper level.
Update, June 6: He's now bought 3.2 percent of Lee, whose "flagship" is the St. Louis Post-Dispatch. I'm guessing that this is another financialization move, related to its recent emergence from Chapter 11. So again, I say, he's not bullish on papers. He's bullish on newspaper financing/money manipulation, or else he is an idiot. (He's still holding on to that Kaplan Post, after all.)
And, it looks like Columbia Journalism Review's Justin Peters is a bit bullish, naive, or both, about the value and profitability of community newspapers today (let's not forget that CNHI is still doing forced furloughs), and a newspaper romantic.
"Community" newspapers in general are fixing to slide more on ad revenue losses in the future. Why? At least basic level websites are getting easier and cheaper to build. Hell, more and more businesses may be doing DIY websites for free with Wordpress, or perhaps Blogger. Add that to a FB page, and (and I speak from some degree of experience), they can say, "no, we don't need to advertise as much."