Buffett: Why you shouldn't cut news coverage

Berkshire Hathaway CEO Warren Buffett has pledged a hands-off policy in a new letter to the publishers and editors of his suddenly growing newspaper empire, written after his announced purchase of 63 daily and weekly newspapers from Media General.

Buffett

Buffett, 81, is known for delegating decisions to managers of his conglomerate's subsidiaries, so his promise to defer to local publishers and editors isn't all that surprising.

He's no novice in the newspaper business. Berkshire Hathaway has owned New York's Buffalo News since 1977. Plus, in addition to the Media General papers, Buffett says Berkshire will "probably purchase more papers in the next few years."

The entire three-page letter, released yesterday, is worth reading. But I especially recommend these two paragraphs, given Gannett's ongoing cuts in news.

"Though the economics of the business have drastically changed since our purchase of the Buffalo News," Buffett says, "I believe newspapers that intensively cover their communities will have a good future. It's your job to make your paper indispensable to anyone who cares about what is going on in your city or town."

He continues: "That will mean maintaining your news hole -- a newspaper that reduces its coverage of the news important to its community is certain to reduce its readership as well -- and thoroughly covering all aspects of area life, particularly local sports. No one has ever stopped reading when half-way through a story that was about them or their neighbors."

Buffett buying Media General dailies; stock soars

Berkshire Hathaway agreed to pay $142 million for Media General’s newspapers, as investor Warren Buffett bets community-focused publications will weather an advertising slump.

Buffett

Berkshire will also provide Media General a $400 million term loan with an interest rate of 10.5%, MEG said today in a statement. The deal includes all of the company’s newspapers except for the Tampa Tribune group, according to Bloomberg News.

In recent trading, MEG rocketed 37%, to$4.33 a share. Other newspaper publishers were mixed, however: GCI was down 2 cents, to $13.33.

Earlier: For many, Buffett says, advertisements are the "most important news."

Stock | On eve of meeting, checking GCI's pulse

Gannett's stock closed today at $13.82 a share, off 1.5% for the day -- and down 9% from May 3 last year, when shareholders last gathered for their annual meeting at Corporate's headquarters in McLean, Va.

The broader S&P 500 index was up 3% during the same period.

GCI's shareholders are to gather once again tomorrow, at 10 a.m. ET.

A sampling of other newspaper publisher shares since May 3:

• Media General: down 29%, to $3.57
• New York Times Co.: down 21%, to $6.31
• McClatchy: down 3.9%, to $2.72
• Lee: unchanged, at $1.13

Bulletin: GCI closes at $13.37, down 11% for year; but shares outperformed major publishing rivals

Gannett's stock just finished trading for 2011, a period when investor doubts about the industry's prosperity sent the company's shares on a roller-coaster ride -- ending with an 11.4% decline for the year.

Shares closed at $13.37. The year's decline from Dec. 31, 2010, seen across other major newspaper stocks, came despite a doubling in GCI's dividend and the first share buyback in years. Nonetheless, GCI outperformed five other companies with operations dominated by newspaper publishing.

Industry stocks lagged major market indexes. The Dow Jones Industrial Average finished the year at 12,218, up 5.5%. The S&P 500, a broader measure of overall market activity, closed at 1,258, virtually unchanged. The technology-rich NASDAQ closed at 2,605, down 1.8%.

Early in the year, GCI's investors appeared optimistic. Shares hit a trading high of $18.93 on Feb 7. But a series of weak earnings reports showed more revenue declines. GCI slid with few interruptions, bottoming out at $8.28 on Sept. 22, according to Google Finance data. (Table shows historical stock prices.)

GCI's weakness is, of course, of particular concern for the company's top brass. Plus, it hits them especially hard in their wallets: Millions of stock options granted to them by the board of directors remain worthless so long as GCI trades below $15 a share. And those options are a large part of their annual compensation. (Table shows 2010 pay to company's six highest-paid executives.

The Big Board
Closing prices of major newspaper publishers today, with the change from Dec. 31, 2010:

• Gannett: $13.37, down 11.4%
• Lee: 72 cents, down 70.7%
• Media General: $4.07, down 29.6%
• McClatchy: $2.39, down 48.8%
• New York Times Co.: $7.73, down 21.1%
• E.W. Scripps: $8.01, down 21.1%

Stock | In the home stretch, GCI bests weak pack

With just two weeks left in the year, Gannett's stock is on track to turn in the least-worst performance of six major newspaper publishers I follow, according to Google Finance's latest data. GCI recently traded for $12.78, down about 15% so far this year.

So long as GCI trades for under $15 a share, hundreds of thousands of stock options granted to senior executives this year and in 2010 are worthless. They represent a serious chunk chuck of their annual pay.

Moreover, falling prices renew pressure on the top brass to find ways to shore up shares, typically through cost-cutting such as the new round of first-quarter furloughs and always-possible layoffs.

Following are today's recent trading prices and year-to-date performances of those six publishers vs. the S&P 500 index and the Dow Jones Industrial Average. In this group, only the Dow is up YTD.

• Gannett: $12.78 a share; down 15.2%
• Lee: 69 cents; down 71.9%
• Media General: $4.08; down 29.4%
• McClatchy: $2.14, down 54.2%
• New York Times Co.: $7.54; down 23.1%
• E.W. Scripps: $7.78; down 23.4%
• S&P: down 3.4%
• Dow: up 2.5%

Stock | Pubs' shares rise amid Slim's NYT Co. move

Slim

From a new MarketWatch story: 

Mexican billionaire Carlos Slim increased his stake in newspaper publisher New York Times Co. to 8.1%, according to filings late Wednesday with the U.S. Securities and Exchange Commission. The move lifted New York Times stock 12% today. Slim acquired a 6.4% stake in New York Times in 2008.

The Big Board
Mid-afternoon prices for major newspaper publishers vs. the S&P 500 index and the Dow Jones Industrial Average:

• Gannett: $10.48, up 0.2%
• Lee: 75 cents, unchanged
• Media General: $1.34, up 11.7%
• McClatchy: $1.48, up 8.8%
• E.W. Scripps: $6.66, up 2%
• S&P: up 1.4%
• Dow: up 1.3%

Stock | GCI's shares just closed at $8.95, down 6%

[Updated at 5:38 p.m. ET with more closing prices.]

It was a terrible final minutes on Wall Steet overall. The Dow Jones Industrial Average fell 284 points, or 2.5%, to 11,125. The S&P 500 index tumbled 2.9%.

Earlier today, Gannett's stock traded at a new 52-week low: $8.94 a share, Google Finance says.

Other newspaper publishers' shares were mixed. Closing prices of major publishers:

• Gannett: $8.95, down 5.9%
• Lee: 82 cents, up 0.6%
• Media General: $1.96, up 2.1%
• McClatchy: $1.35, down 1.5%
• New York Times Co.: $6.18, down 6.9%
• E.W. Scripps: $7.06, down 5.6%

The NYT's closing price also was a record 52-week low, Google Finance says.

By the numbers: Key employment report out today

The U.S. Labor Department releases one of the most closely watched economic barometers this morning: the monthly employment report.

It's the government's first estimate for the number of jobs created in the United States in August, and right now expectations are low, according to this New York Times story.

"Wall Street analysts have a median forecast of just a 60,000 net gain in nonfarm payroll jobs, about half of the gain from July,'' the NYT says. "The unemployment rate -- which comes from a different survey, and reflects the share of people who want work and are actively looking for it but can't find a job -- is expected to remain 9.1%."

The report is released at 8:30 a.m. ET. Consumers react strongly to news about rising and falling unemployment rates. That drives their spending, and the fortunes of all companies -- including Gannett.

Wall Street's view
Investors are especially sensitive to the report. Stock trading resumes today at 9:30 a.m. ET. Yesterday, GCI's stock closed at $11.18, down 37 cents, or 3.2%.

Changes in major newspaper publishers' shares so far this year vs. the S&P 500 index, according to Google Finance:

• GCI: down 26%
• Lee Enterprises: down 74%
• Media General: down 80%
• McClatchy: down 67%
• New York Times Co.: down 19%
• E.W. Scripps: down 20%
• S&P 500: down 4.2%

Related: the Labor Department's report for July.

KTHV | Media General's Caplan appointed GM

From a statement Corporate issued today: 

The Broadcasting Division has named Michael Caplan president and general manager at KTHV in Little Rock.

Caplan most recently served as group leader for Media General's multimedia operations in Myrtle Beach/Florence, S.C. In that role, he oversaw multiple operating units, including TV, print and web properties.

Caplan succeeds Larry Audas, who in April was named president and general manager of Gannett's WFMY in Greensboro, N.C.

Urgent: GCI dives 7% at close, in market meltdown

[Updated at 5:28 p.m. ET with closing prices.] 

Gannett's stock closed at $10.06 a share today, down 74 cents, or 6.9%, as major stock indexes plunged, dragging down newspaper stocks across the board.

Today's was GCI's lowest closing price since Dec. 3, 2009, when shares finished the day at $9.85, according to Google Finance. (Graphic shows GCI prices over past two years.)

Earlier today, the company's stock traded as low as $9.94 a share, setting another new 52-week low.

Markets overall took a deep, deep dive in the first trading since Standard & Poor's downgraded U.S. debt. The Dow Jones Industrial Average plummeted 635 points, or 5.6%, closing at 10,810. The S&P 500 index fell an even steeper 6.7%.

Closing prices of select newspaper publishers:

• GCI: $10.06, down 6.9% 
• Lee Enterprises: $0.72, down 11.1% 
• Media General: $2.30, down 8% 
• McClatchy: $1.69, down 7.1% 
• New York Times: $6.95, down 8.2% 
• E.W. Scripps: $7.08, down 10.3%

Over the past 52 weeks, GCI has traded as high as $18.93 a share -- a benchmark set on Feb. 7, according to Google Finance. (Historical stock prices.)

Mail | Why is Gannett the only one with a blog?

As the news industry's fortunes shift daily, Anonymous@6 p.m. asked earlier this month: "Why is Gannett the only company with a blog like this, with real teeth and anger and even communication, even if much is suspect? . . . Jim isn't so singular that others couldn't do it. . . . Where is the Times blog, the Post blog, the Tribune blog, the McClatchy blog, an AP blog, a Bloomberg blog?"

Industry pundits have asked the same question about Gannett Blog, including Martin Langeveld, who wrote on the Nieman Foundation's Journalism Lab Blog: "Not every major newspaper group is favored with a meta-site where employees and others can get the latest news, leaks, gossip and analysis on their favorite company. Where are the rest of the watchblogs?"

I think the answer boils down to:

1.
Size. GCI offers a big potential audience. It's the largest employer among media outfits with a heavy focus on newspapers. Even after massive job cuts, GCI still employs more than 30,000 at nearly 100 newspapers, 23 TV stations, plus other subsidiaries.

Compare that to the McClatchy Co., which has about 8,500 employees and 30 dailies. The New York Times Co. has 7,400 at 17 papers, including its flagship New York Times. Lee Enterprises employs 6,800 at 49 dailies. And Media General employs 4,650 at 23 dailies and 18 TV stations.

News Corp., which publishes The Wall Street Journal and about 25 smaller U.S. community papers, plus owns Dow Jones News Service, employs about 51,000. But NWS' far-flung, diverse operations here and abroad -- from 20th Century Fox Studios to MySpace -- makes the company a bad apples-to-apples comparison.

Ditto for the Washington Post. Co., which employs 20,000. Yet, 14,000 are at its Kaplan educational services subsidiary. The rest are at The Washington Post; six TV stations, and a portfolio of other subsidiaries, including smaller print publications.

Tribune Co., whose titles include the Los Angeles Times and the Chicago Tribune, is privately held; I'm unaware of any current public data on its employment. And MediaNews Group, a GCI business partner in markets including Detroit, also is private; it owns 57 dailies.

2.
Geography. GCI's employees are scattered across 32 states, the District of Columbia, Guam and the U.K. Working far from each other, they're more likely to read a blog that allows them to share information in a single, common forum. In contrast, for example, the vast majority of the NYT Co.'s employees are in New York City, so have more opportunities to share information in person.

3. 
Turmoil. All the big news outfits included here have laid off hundreds, even thousands, of employees in recent years. McClatchy has just disclosed another round of layoffs.

Dubow

But GCI's restructuring since CEO Craig Dubow took charge has been greatest, because it's affected so many employees and shareholders. That's spurred a need for news and other information about the company's inner workings. After all, more than 20,000 jobs have been eliminated since 2005. The pension fund was frozen. Work has been consolidated, from ad production to finance and marketing.

4. 
Frequent posters. Many of my readers work in newsrooms, so they're adept at posting comments here with news, rumors and other tips to their fellow readers. To date, they've posted many of the more than 80,000 comments on this site.

And no wonder. GCI is the single-largest employer of newsroom staffers -- somewhere in the neighborhood of 3,000, I estimate. That's reflected in Gannett Blog's readership. Among more than 2,000 readers in my "Where do you work survey?" in the green sidebar, 23% say they work in a newsroom.

5. 
Management. Active, frequently updated blogs are labor intensive. A confluence of events made it possible for me to formally launch Gannett Blog when I took a buyout from USA Today in January 2008.

I had worked for Gannett 20 years, so already knew the company's history, as well as some of the key players. I'd been a business reporter during most of those two decades; that made it easy to navigate regulatory filings and other Corporate information. Many employees and shareholders -- though certainly not all -- view me as a trusted ally.

On the other hand, I'm a stranger to employees at the NYT Co. and News Corp. That might explain why I never gained traction on two blogs I kept for about six months last year: New York Times Co. Blog and News Corp. Blog.

The NYT blog drew just 6,800 pageviews from 2,300 unique visitors during the entire six months. The News Corp. site attracted even fewer: 2,800 pageviews from 1,100 uniques. In both cases, that is less than Gannett Blog attracts in a single day. (The two blogs are still online, waiting for a possible future audience.)

To be sure, there have been blogs about other news companies, including McClatchy and Lee, plus one devoted solely to the NYT itself. But they've been shuttered, or updated infrequently.

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