Buffett Says Newspaper Bet Fueled by Arkansas Model
“The main exemplar for local newspapers is the Arkansas Democrat-Gazette, published by Walter Hussman Jr.,” Buffett wrote in an annual letter to Berkshire shareholders released yesterday. “Over the past decade his paper has retained its circulation far better than any other large paper in the country.”
Hussman’s newspaper was quick to charge for stories online as the industry shifted to the Internet, said Buffett, Berkshire’s 82-year-old chairman and chief executive officer. Advertising expenditures for print and online media in the U.S. have fallen every quarter since the start of 2007, according to the Newspaper Association of America.
Local newspapers that deliver reliable information to “tightly-bound communities” with a sensible Internet strategy will stay viable, Buffett wrote. Berkshire has acquired 28 daily newspapers for $344 million in the past 15 months. The company owns its hometown paper, the Omaha World-Herald in Nebraska.
“Newspapers have a pretty decent future,” Hussman, 66, said in a phone interview. “We’re really not interested in selling any of our papers.”
The Arkansas publication started charging for content online in 2001, “not to generate revenue, but to keep people from defecting,” Hussman said. That enabled it to maintain circulation while competitors have seen declines, he said.
Hussman’s decision to protect revenue from print operations and limit distribution online was criticized initially, said Ken Doctor, an analyst at Outsell Inc., a research and advisory firm for the publishing industry based in Burlingame, California.
“He was largely seen as someone who was old-fashioned,” Doctor said in a phone interview. “He was seen as someone who was trying to hold on to the way it used to be.”
In his letter, Buffett introduced a discussion of his media interests with the heading, “We buy some newspapers ... newspapers?” as the billionaire acknowledged that shareholders might doubt the wisdom of investments in the struggling industry.
Buffett wrote that he and Berkshire Vice Chairman Charles Munger “love newspapers and, if their economics make sense, will buy them.”
“Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet,” Buffett wrote.
Berkshire, built by Buffett over almost five decades into a $253 billion company with more than 80 operating units, is a longtime investor in Washington Post Co. and has owned the Buffalo News since 1977. Buffett’s firm agreed last month to buy Oklahoma’s Tulsa World newspaper and said in January that it had acquired the Greensboro News & Record in North Carolina.
Most of Berkshire’s media operations are housed in a new business unit, BH Media Group, run by Terry Kroeger.
“A pay model structure is imperative,” Kroeger said last year in an interview. “The only community paper I know of that did a good job of that is the Arkansas Democrat. Walter Hussman is basically our hero.”
U.S. newspaper advertising revenue totaled an estimated $19 billion in 2012, the lowest when adjusted for inflation since at least 1950, according to data compiled by Mark Perry, an economics and finance professor at the University of Michigan- Flint who tracks newspaper advertising.
Hussman said Buffett contacted him about the newspaper industry in a letter, then the two met last year.
“He offered to buy me a steak in Omaha,” Hussman said. “So I took him up on it.”
-- With assistance from Noah Buhayar in New York. Editors: Dan Reichl, Dan Kraut
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