Sunday, December 4, 2011

Buffett muses on future, and value, of newspapers

Warren Buffett talked to shareholders of his new acquisition, the Omaha World-Herald. His remarks are somewhat disparate but of interest. It does sound a bit like he's trying to persuade himself he did the right thing.

"A few of you may have heard me talk about the economics of the newspaper business, which have changed dramatically in recent years. It was an extraordinary business for a long time. ... But of course it's a different game now. ...

"I think newspapers, if they partially solve one of the three big problems they face, have a decent future. ... (The daily newspaper is) still primary on a lot of things, but it doesn't have the universality of primariness that really made the paper such an incredible bargain and a necessary purchase for everyone. It is a high-cost form of distribution, as you're doing everything from cutting down trees all the way to getting a product in my hands early in the morning, and there are a lot of steps in that and a lot of people involved. ...

"And the third problem is, papers are giving away free what they are trying to sell. That's a business model you have to think through carefully over time. Those problems have now been recognized, to some extent there is a counterattack. I think ... an attack on the third factor can make most operations economic, (although) not with the economics of 20 or even 10 years ago.

"So far, I would say the evidence is there will be many papers who can deal with those problems. It is still an enormously useful product to a great deal of people. ...

"The great majority (of newspapers) are making money. The question is whether the trends take those papers into a position of loss. I don't think it has to happen, but I don't think it's 100 percent sure it won't happen. ... From what I see, I think The World-Herald will earn a reasonable return on the money we're laying out for it. It doesn't have a comparable future economically to certain other businesses we have. So be it."

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