Washington - Unfazed by predictions of the death of newspapers, billionaire Warren Buffett is pumping more money into print.
In the past year, one of the world's richest men and
sharpest investors has put some $300m into an industry that some
view as heading the way of the horse and buggy.
Buffett's Berkshire Hathaway holding company late last
year bought his hometown newspaper, the Omaha World-Herald, along with
related assets in a $200m deal some analysts viewed as a
He followed with a $142m deal last month to buy Media General, a chain of 63 newspapers.
He added $2m to Lee Enterprises, owner of the
St Louis Post Dispatch and Arizona Daily Sun. That is in addition to
other holdings, including The Buffalo News and a stake in The Washington
"I believe newspapers that intensively cover their
communities will have a good future," Buffett said in a message last
month to his newspaper employees.
He said Berkshire "will probably purchase more papers
in the next few years" and that he will "favour towns and cities with a
strong sense of community".
Still, the investment comes amid dire predictions for
the newspaper industry, which has been battered by sharp drops in print
circulation and advertising, and getting only modest revenues from
A research note from the financial firm Moody's earlier
this month gave the US newspaper industry a "negative" outlook, saying
that digital initiatives are failing to make up for "significant secular
"Although newspaper companies seek to capitalise
digital revenue through an array of channels, it's unlikely that these
gains will be large enough to offset print losses," Moody's analyst John
"A complete transformation away from print entirely
would eliminate the sizeable costs of print production and distribution,
but the revenue loss is still too great for companies to make the switch
Analysts say Buffett, the world's third-richest
individual with a net worth estimated at $44bn, is doing what he
does best: making a "contrarian" bet by investing in a company or sector
beaten down by negative sentiment.
"Newspapers are one-tenth of the price they were a decade ago," said Ken Doctor, a media analyst with the research firm Outsell.
Doctor said Buffett is finding value in these companies
because they often own hard assets, including real estate and broadcast
properties, and have a strong brand name in their communities.
"These are great community assets, they have great brands," Doctor told AFP.
"Buffett is, at base, an opportunistic investor... See a
business, or industry deep in the doldrums, and think you can leverage
money out of a deal, one way or the other, and you've got an
In an interview with The Washington Post, the
81-year-old Buffett said his move was "not a soft-headed business
decision". But the investor said he sees prospects best for newspapers
in smaller cities with "a feeling of community".
Still, to make the investment pay off, Buffett will
have to find a way to stem losses in the news business, and he has
indicated he will seek a new "digital strategy" for the companies.
"We must rethink the industry's initial response to the internet," Buffett said in his message.
"The original instinct of newspapers then was to offer
free in digital form what they were charging for in print.
"This is an
unsustainable model and certain of our papers are already making
progress in moving to something that makes more sense."
Dan Kennedy, a journalism professor at Northeastern University, said Buffett's strategy is not yet clear.
"If he means that newspaper companies should use their
websites to come up with complementary content - for instance,
breaking news, blogs, features that aren't in the paper, that sort of
thing - then he may be on to something interesting," Kennedy said.
"But if he's got some sort of 'back to print' crusade in mind, then I'm sceptical."
Doctor said: "We may find out, looking back, that
Buffett is just another greater fool, having believed his buy was close
enough to the bottom to justify.
"Or we may see the code broken well
enough on new business models."