Wednesday, May 23, 2012

The 142 million dollar question!

The 142 million dollar question--"Why did Warren Buffet spend 142 million dollars on a bunch of newspapers when everyone knows that print is dead?"  Perhaps the answer is that Warren Buffet is not "everyone," in fact he is one of the smartest business people in American history. The secret of Buffet's success is his knack for seeing value that less astute observers miss. While most investors were listening to the "experts" he took a look at the financials of the publishing industry. In his typical understated manner, Buffet said  "I think the economics (of newspapers) will work out OK. It's nothing like the old days, but I think it will work out OK." One of the keystones of Buffet's investing strategy is his belief in buying businesses that provide good value to their customers and fill a marlet need. On this subject he said "Newspapers are still primary in many areas. They still tell me something primary that I can't find elsewhere." Warren Buffet takes a long-term view, buying firms that are positioned for consistent earnings and incremental growth. This is why he chose to prchase a firm heavily weighted toward community newspapers. Here's what the "sage of Omaha" said about our industry "In towns and cities where there is a strong sense of community, there is no more important institution than the local paper." The next time someone tells you that "print is dead", tell them that the most successful business person in the US strongly disagrees. 

1 comment:

  1. Hi, Jim!

    Very interesting. The reason people think newsprint is going away is because they are only looking at the big-name institutions. The fact is that the industry is changing, as is the entire media industry. Readers are looking for what's happening here and now. Big name, regional and national players don't offer that. Community papers do. Don't get me wrong, I read 2 regional and 1 national papers every day, because I'm looking for several points of view on certain hot topics. I actually look forward to reading my local weekly edition, because it tells me about my little world of right here, right now. That's powerful. Advertisers will pay a premium to be in something to which people are so attracted. It fills a geographic niche by reaching people only in a specific area. The demographics of the reader are more like the "Average Joe" or "Everyman". "Average Joes" spend more money in our community than either the poor or the rich, especially on everyday products. I'll leave the psychographics out of the picture, because people are afraid of pattern-seekers, but that also plays a huge part in the difference between how a regional/national paper is read and how a local community newspaper is read.