So, Warren Buffett has decided the time is right to buy local newspapers. Not content with snapping up 63 daily and weekly newspapers of Media General, it seems he is eyeing more acquisitions. Could this be good for the media jobs market in the US?
Why would anyone want to buy local newspapers? Why, in particular, would the world’s most successful investor want to buy local newspapers? The perceived wisdom is that it is a shot business, with a very limited future.
Partly it is sentiment – Buffett loves newspapers, as he explains in a letter to his new editors. But Buffett doesn’t really do sentiment: he does loyalty, and long-term investment through Berkshire Hathaway, the company he founded back in the 1950s.
In a slightly cynical article for Forbes, Jeff Bercovici argues that Buffett is anything but misty-eyed in this deal. He has, Bercovici argues, saddled Media General with considerable debt, at a very health interest rate for Berkshire Hathaway, and managed to get his hands on several valuable assets beyond the newspapers for only $142m. While this may be true, Buffett’s track record suggests that he would not have entered into the deal unless he considered it to be healthy and sustainable for Berkshire – of which the newspapers are now a valued part.
What is clear is that Buffett is passionate about the future of his new acquisitions; and in his letter, he lays out a prescription for their continued success:
I believe newspapers that intensively cover their communities will have a good future. It’s your job to make your paper indispensable to anyone who cares about what is going on in your city or town. That will mean both maintaining your news hole — a newspaper that reduces its coverage of the news important to its community is certain to reduce its readership as well and thoroughly covering all aspects of area life, particularly local sports. No one has ever stopped reading when half-way through a story that was about them or their neighbors.
Maybe Mr Buffett was reading James Ashton’s column in the Evening Standard last month, in which he talked about his parents’ decision to stop buying their local newspaper:
The title that once understood the heartbeat of its town now scraped by carrying one, maybe two stories in it about the place it was supposed to be closely covering.
The rest of the pages were padded with articles from towns several miles away that were part of the same newspaper group, and they bore little relevance to what was going on down the street. This isn’t a story about the internet stealing readers. Instead, they now pick up local gossip from an enthusiastic freesheet that is pushed through their door.
Or maybe he was reading my blog, triggered by Ashton’s column (though I admit this is less likely).
Whatever, it is to be hoped that regional press in this country take their lead from the Sage of Omaha and recognise that, while centralising newsrooms can achieve economies of scale in the short term, in the long run it merely hastens the death of the papers that they publish.