In yesterday's edition of your Real Time Comments: top financier Warren Buffett's new book, plus a debate on whether we should be worried about Standard & Poor's threatened debt downgrade."Buffett is still bullish on the newspaper industry and thinks the web is overweighted,'' says Anonymous@8:33 p.m. "He owns Gannett stock and 18% of the Washington Post Co., as well as others." His new book is The Snowball: Warren Buffett and the Business of Life, and the reader says: "It's a fascinating read."
On the downgrade threat, Anonymous@10:54 a.m. said: "S&P doesn't downgrade on a whim, and Corporate would not have responded with a feel-good press release if this wasn't really serious." But Anonymous@11:20 counters: "The sky is not falling and Gannett is better positioned than most, if not all, the other large newspaper companies to survive the current unpleasantness in the newspaper business and the U.S. economy. That said, the question becomes, "Where're we going with all this?"
Join the debate, in the original post. Or, launch a new topic in today's edition of Real Time Comments.
Perhaps newspapers remain, for now, an efficient medium for delivery of advertising to a significant portion of the market. But with the ruthless staff cuts, do they remain effective in delivering real news and fulfilling the role of watchdog?
ReplyDeleteIf the answer to the latter is No, then the audience will continue to melt and advertisers will, eventually, migrate elsewhere.
Gannett and other newspaper chains are eating their own tails in a futile attempt to survive in lean times.
Buffett believes there is value still in the newspaper stocks.
ReplyDeleteBut its a long ride. Not a short ride.
I guess the point is Buffett was the ONLY investor to steer clear of the internet boom and many people thought he was old fashioned. He had the last laugh.
His fundamentals for investing have not changed.
But not all newspaper stocks are created equal. How the respective management at the newspapers migrate this recession will be critical.
The newspaper industry remains highly profitable by comparison with most other businesses. Bad as 2007 has been, the publicly reporting companies still produced an average operating-profit margin of nearly 16 percent in the first half of the year--a level many businesses can never hope to achieve. Still, the average profit margin has been in steady decline since 2002, when it was 22.3 percent.
ReplyDeleteThat newspapers have been able to maintain such high margins has not been due to improving business but to cost-cutting. But no industry can cut its way to future success. At some point, the business must improve.
Whether newspapers will be able to meld a combination of print and online into a sustainable and thriving business model is a large question. In newspapers' favor is the fact that they are the only form of media organized to gather mass amounts of news and to provide a forum for serious analysis of important issues. Anyone who loves democracy should hope this will continue.
Source: American Journalism Review Nov 2007
Buffett gets into businesses that produce piles of cash. He uses that cash to buy great businesses that have temporary trouble.
ReplyDeleteWhen the trouble passes, he gets richer.
He also is incredibly cheap. He has a retail furniture businesses in Omaha that is right out of the 1950s because he won't spend money to update conditions.
Newspapers -- the Buff News and Washington Post -- are perfect for his goals and temperment.
Hi all, first-time poster. I'm a non-Gannettoid, but have 22 years in the business (newsroom), most of that time with Newhouse. And, for much of that time, I've been a Berkshire shareholder.
ReplyDeleteI'm still awaiting delivery of "Snowball," so I can't comment on its text. But Buffett devoted over a page of his 2006 Chairman's Letter to the industry, and in reviewing that letter, I don't see a lot of bullishness. I'll hack away at some of the text in the interest of brevity, but still apologize for the length of this post:
"As long ago as my 1991 letter to shareholders, I nonetheless asserted that this insulated world was changing, writing that 'the media businesses . . . will prove considerably less marvelous than I, the industry, or lenders thought would be the case only a few years ago.' Some publishers took umbrage at both this remark and other warnings from me that followed. Newspaper properties, moreover, continued to sell as if they were indestructable slot machines.
"Now, however, almost all newspaper owners realize that they are constantly losing ground in the battle for eyeballs. Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed.
"In Berkshire's world, Stan Lipsey does a terrific job running the Buffalo News, and I am enormously proud of its editor, Margaret Sullivan. . . . Nevertheless, this operation faces unrelenting pressures that will cause profit margins to slide.
"True, we have the leading online news operation in Buffalo, and it will continue to attract more viewers and ads. However, the economic potential of a newspaper internet site -- given the many alternative sources of information and entertainment that are free and only a click away -- is at best a small fraction of that existing in the past for a print newspaper facing no competition.
"Unless we face an irreversible cash drain, we will stick with the News, just as we've said that we would. Charlie and I love newspapers -- we each read five a day -- and believe that a free and energetic press is a key ingredient for maintaining a great democracy. We hope that some combination of print and online will ward off economic doomsday for newspapers, and we will work hard in Buffalo to develop a sustainable business model. I think we will be successful. But the days of lush profits from our newspaper are over."
-- Berkshire Hathaway 2006 Annual Report, pp. 12-13.
The "Charlie" reference is to long-time Buffett sidekick Charlie Munger.
Now, re: Washington Post Co., that concern has been getting more and more of its money from its Kaplan, Inc. subsidiary -- the online education/test-prep folks -- as its newspaper, TV and magazine profits have declined.
And, as far as Buffett retaining both its full ownership of The Buffalo News and its fractional ownership of Washington Post Co., remember that when Buffett buys something, his preferred holding time for that company is "forever." He stayed in textiles (Berkshire in its original form was a New England-based textile manufacturer) far longer than he should have simply because he didn't like the idea of being just another "Larry the Liquidator." He still owns World Book Encyclopedia. He still owns, believe it or not, a trading stamp company. In other words, I would not equate Buffett's continued ownership of newspapers as bullishness on the industry.
Again, my apologies for the length of this, but I thought Buffett's words were worthwhile to this topic. Now, I'll go back to lurking!
Thanks for the site, Jim.