Warren Buffett’s Berkshire Hathaway is buying Media General’s newspapers, which means that the Daily Progress is changing hands. It was 1995 when Media General Bought the now-120-year-old newspaper from Worrell Enterprises, a local, family-owned business, and by most measures, the newspaper has not fared well since. The entire print journalism industry has been in a slump since advertising dollars began moving online a decade ago. It’s not clear what the future financial model will be for local journalism, and the whole industry seems to be waiting for somebody to swoop in and figure it out. Berkshire Hathaway—technically, BH Media Group—is buying 63 newspapers for $142M.
Buffett already owns a few newspapers, including the Buffalo News and the recently purchased Omaha World-Herald, and owns the largest share of the Washington Post. Buffett has said that he sees newspapers’ value as a community hub, and that their most valuable function is providing information that isn’t available elsewhere, something that many newspapers—including the Progress—have been struggling with. He’s also said that it’s a mistake for newspapers to give away so much material online for free.
What all of this will mean for the Progress remains to be seen, but it’s a fair guess that this is good news. Media General has basically been supervising a slow collapse of their print properties, with no apparent ability to arrest or reverse that collapse. Buffett is perhaps the deepest of deep-pocketed investments out there, known for shrewd, long-term, community-focused thinking. The future of the Progress is looking a lot brighter.
All I can think is that he’s getting old enough to be senile. Buying NEWSPAPERS in 2012? WTF? I still read ’em but I’m weird.
If the reincarnation of the DP is just a calendar of events and press releases from the local government and chamber – it will fail no matter how deep Buffett’s pockets are. Follow the example of the Hook – hire a sharp editor, good writers, and be willing to go after the truth by investigating – that’s what’s been missing and that’s why I and my friends read the Hook, if we want to know what is really happening in town. By the way for the rest of this story:
http://www.readthehook.com/103958/warrens-way-berkshire-hathaway-buys-daily-progress
I wonder what (if any) affect this will have on the DP’s intricate associations with Cville Tomorrow?
What a tangled web this leaves in Charlottesville according to the Hook http://www.readthehook.com/103958/warrens-way-berkshire-hathaway-buys-daily-progress
I don’t know what it all means but it sure is interesting.
Buffet has been known over the years for value investing, but it strains reasonableness to find economic value in this deal. There is probably a buggy whip manufacturer that makes as much sense to buy. Buffet ignored the dot-com growth and was considered a genius for avoiding its implosion but I don’t see a contrarian angle here that makes this deal somehow good for BH, DP or the readership.
I think this may be a love affair for Mr. Buffett that is not sustainable once he retires.
Waldo, I’d be interested in your impression of Mr. Weschler’s entanglements. Wouldn’t his interest in the Daily Progress and Charlottesville Tomorrow be in competition with his ownership stake and board membership at the Hook and CvilleWeekly. This town has only so many add dollars to support news and in his role at Buffett’s Company, even if he has nothing to do with running the papers purchased , he certainly is answerable to the stockholders to maximize profits.
Duane, I think Jen is right—I think that this is basically charity on the part of Buffett. Whether this investment can survive Buffett’s tenure, I don’t think anybody can say.
$142M sure seems like a small price for 63 newspapers. Of those, 17 are dailies, with 400,000 copies circulated on weekdays. That’s a valuation of $355 per daily circulated copy. Now, what that means, I have little idea. For comparison, the Washington Post has a market cap of $2.52B, with a daily circulation of 507k, which is $497 per daily circulated copy, or 40% more than Media General’s (daily) print publications. I have to imagine that, once one were to figure in the weekly publications, it’s probably more like a 50% difference.
Jen, I don’t think I’m in a position to say anything honest about Ted Weschler’s entanglements. He’s a family friend, and we’re both members of the same monthly lunch club, which is to say that I suspect my judgment in the matter is badly skewed, no matter how honest I might believe myself to be!
Waldo, don’t forget the $400 million dollar loan that Buffett is giving MG as well. Whose to say with MG barely breathing that they will ever repay that loan. So, this may be a generation gap decision that proves short lived once the grand old man is gone and the Zuckerbergs of the world are in charge.
As far as daily news goes. I find the Hook website far superior to the DP any day of the week to learn what’s worth paying attention to in our town. And the journalism in their print edition is far superior to the daily paper. They actually investigate ( isn’t that what journalists are suppose to do ? ) and write in depth stories on important local issues that are often completely misunderstood by the other media in town.
In fact for me the Hook is the daily paper I quit my DP subscription long ago and just check out their website daily for news, arts and entertainment laid out in by far the best local website.
If Mr. Weschler is concerned with quality and value I’d say his investment in the Hook far outshines the Daily Progress.
But now he answers to a higher power.
Mr. Buffett’s reasoning for this purchase, as outlined in today’s New York Times, is interesting.
I believe Mr. Buffett has lost his objectivity on this decision. I’m surprised that Ted Weschler, with his experience with the Hook and CvilleWeekly, didn’t clue him in on this. Maybe Charlottesville is an anomaly, but in my humble opinion, the information hub of our community is not the daily paper, but our weeklies, and they are free. Why would we pay for either a daily, with no new information, or pay for the same online version when we can learn what is ” going on in our own backyard” for free and online from the Hook, CvilleWeekly and cvillenews websites for free.
I think our weeklies are the model for local news of the future not a – must pay for daily. I buy the New York Times everyday and some of my friends buy the Post and that’s where we get our national, sports and business news. But I’m not going to pay for local news and entertainment info that I can get for free.
I’d assume this to be true in Richmond and many of the other communities with papers that Mr. Buffett has purchased. Maybe this is one investment that he should have looked into a little more closely . The Times article says the Berkshire Hathaway executives showed up on Thursday at the Richmond Times Dispatch offices and the publisher there, in an interview states, that they planned to spend the next two days visiting many of the regional papers they had bought. I wonder if they will be surprised to learn that the dailies are not the ” hub of their communities ” and that creative bloggers like Waldo Jacquith and weeklies have filled that role for free.
from todays NYT:
Mr. Buffett said at the annual meeting that one of the biggest challenges facing the industry was how to convince customers to pay for news content online, when companies previously gave away the information.
“I don’t know of any business plan that has sustained itself that charges in one version and offers the same version free to people,” he said.
But Mr. Buffett also argued that local newspapers could still serve as the hub of their communities. While he won’t learn anything new about Afghanistan from The Omaha World-Herald, he can find out what is going on in his own backyard.
http://dealbook.nytimes.com/2012/05/17/berkshire-bets-again-on-newspapers-with-media-general-deal/
Buffett bought 63 newspapers in this deal, and 46 of them are weeklies.
I’ve got three objections to that. The first is that he didn’t just up and buy the Progress after performing an analysis of the Charlottesville market—he bought all of Media General’s newspapers. (Save for a few Tampa newspapers, which a separate buyer had already started the process of acquiring.) The second is that easily half of the news on this website comes from the Daily Progress. And the third is that—like any good investor—Buffett doesn’t buy companies that are doing brilliantly, intending not to change a thing. He buys companies because he sees opportunities to improve them. Such companies tend to be undervalued, and by improving them he makes a profit. I have to imagine that he has a vision for how daily newspapers can change to become more profitable, or else he probably wouldn’t have bought them.
It is getting more and more difficult to get online media content of value (and of course this differs for each person) without having to pay. I spent most of my national media time on the NYT website until their 20 article limit paywall sent me to LATimes. Now LATimes paywall starts at 1 article. At the same time I find myself on the iPad more often. About to buy the NYtimes coverage online by subscribing to the Sunday home delivery option. Just a matter of what you want. I can pass on “newspapers” during the week, but that Sunday edition is like crack.
As far as Buffet, I wish I had bought 10 shares 20 years ago. He would have my blessing to buy the Mumbai Times if he wished. And his investing has often been contraian. Perhaps he sees that the paywall is getting accepted and will become standard in the next 5 years for dailies.
Thanks Waldo, I didn’t realize he had bought so many weeklies.
I have read that Buffett thinks the way for a newspaper business to succeed in a town is to be the only megaphone. I wonder, since he didn’t buy our weeklies and since Weschler is overseeing the success of the Progress now ( which has been on death watch ), but also part owner of the Hook and Cville, if that will now mean the demise of our weeklies, or if Wechsler and Buffett’s Berkshire Hathaway will try to buy them outright. Either way I see competition. Buffett’s belief that the Daily Progress online should have a paywall will bump up against the weeklies free websites and print editions and with, as you said, Buffett’s deep pockets that competition will be lop-sided. And I think puts Weschler in a difficult position.
Whose bottom line will he support – the Progress or the weeklies.
Total Revenue of the U.S. newspaper industry in 2011 : $23,900,000,000
Total Revenue Of Google in 2011 : $36,500,000,000 . . .
Here’s the link to the Buffett quote I mentioned. I’m afraid this may bode ill for free weeklies and their websites in our community, and the others that now have a Buffett owned paper.
Buffett has often said that newspapers were an excellent business when the owner of a newspaper had “the only megaphone in town.”
http://newsfeedresearcher.com/data/articles_b20_2/berkshire-media-general.html#hdng2
Weschler needs to sell his shares to remove the appearance of a monoply in Cville media. Considering Weschler also has donated to Charlottesville Tomorrow to further entangle this web of relationships.
I’m curious, what’s wrong with the “appearance” of a monopoly? Also, are you aware that a monopoly requires anti-competitive practices and, if so, what anti-competitive practices “appear” to exist here?
I also think Weschler should sell his Hook-Cville shares but not because of a monopoly but because of divided loyalty. The DP and the weeklies compete against one another for revenue and I would assume Mr. Buffett, his new boss, would expect him to place the interests of the DP first . That would disadvantage the other owners of the weekly because he would be working at cross purposes – Seems very clear
Waldo an I missing something ?
There are two problems here. The first is the notion that there is a market for his shares in these publications. Unless he is to sell them at an enormous (or complete) loss, I’m dubious that he’d find anybody willing to buy those shares. The second is the assumption that the scope of this professional duties give him any control over the Daily Progress. Maybe they do, but I don’t think any of us have any way of knowing.
Any conflict of interest between Wschler / TheHook / Daily Progress etc should be settled between him and those entities. Really none of our business except to be aware of the conflicts if there are any.
Its not like they have a monopoly on any part of the news world, unless of course he secretly controls cvillenews.com…
“Really none of our business…”
Said no one on the internet, ever.
If Ted were paying me off, I’d be on a straight-up vacation now, instead of in Hatteras for the week…but still working half-time. :)
Well, I hope Mr. Wechsler’s statement at CvilleWeekly proves to be true. But, if we see a paywall go up at the now free weeklies, knowing Mr. Buffett’s oft stated penchant for paywalls, then I think one has to wonder if the competitive advantage goes to the DP and not to the weeklies. Right now the fact that they are free in print and online is their competitive advantage of being free, is why they exist at all, in my opinion. If they begin charging for either the print or online editions I doubt that they will last and we will be left with only the Daily Progress, and that would diminish the journalism in town markedly.
“The last thing I want to do is in any way, shape, or form have this investment or my support of Charlottesville Tomorrow or my involvement in The Hook and C-VILLE reduce in any way the vigor in which each of those organizations competes with the others. Because I really believe competition makes everyone better,” Weschler said.”
Waldo, it means you need to renegotiate the deal for secret control of cvillenews.com with Mr Buffett – he should at least let you work only one quarter of the time while on vacation …. :)
This may be a bit presumptious but, there’s every likelihood Mr. Weschler is set to fill a good chunk, of whatever future anticipated or unanticipated void occurs in Buffett’s World of newspaper conglomeration. Among the ranks of us on the outside of the Berkshire-Hathaway realm, this is only something we can wonder about and or even just be amazed at. You only go around in life once. Most of us made whatever decisions for where we are presently, back years ago.
It would be pretty futile and sound preposterous to say that a paradigm shift has happened, though it has. There’d be no surprise to see an increase in the amount of online newspapers continuing to errect paywalls. Fate has well placed Mr. Weschler far out ahead in the forefront of newsprints’ evolution. Who else is to say that in five to ten years, given the temperment and disposition of Mr. Weschler and his industry’s peers, that the Progress and Times-Dispatch won’t be (pay) free and brunt of operational expenses paid all by (return) advertisement? That’s barring an untimely electro-magnetic pulse event on the scale of being an act of God.
It is already interesting to see how subscriptions have moved from printed newspapers to their online counterparts. It’s becoming humorous to see that “I’ll pull my subscription” doesn’t have a sway of influence as it once did. Neither does “printing scandal sheets in the cellar.”
The NYTimes is reporting the New Orleans Times Picayune may be going to a three times per week publishing schedule, as did one of its sister publications in Ann Arbor. If BH can keep the DP publishing daily, I welcome their new corporate overlords.