Posted on 05/02/2009 3:53:55 PM PDT by NormsRevenge
OMAHA, Nebraska (Reuters) - Warren Buffett is fond of newspapers -- he reads five a day -- but the billionaire investor warned shareholders of his Berkshire Hathaway Inc (BRKa.N) (BRKb.N) that the reeling industry may never recover because it lacks a sustainable business model.
At Saturday's annual meeting of Berkshire, which owns the Buffalo News and has a big stake in Washington Post Co (WPO.N), Buffett said that as readership falls, so does the attraction of newspapers for advertisers, and for investors in the companies that publish them.
"For most newspapers in the United States, we would not buy them at any price," Buffett said. "They have the possibility of nearly unending losses. ... I do not see anything on the horizon that sees that erosion coming to an end."
Many U.S. newspapers have lost 20 percent or more of their advertising revenue as changes in technology and reading habits shrink circulation and more readers to get their news online.
Several newspapers in large U.S. cities have closed in recent months, and the future of the money-losing Boston Globe, owned by The New York Times Co (NYT.N), remains up in the air.
"Twenty, thirty years ago, they were a product that had pricing power that was essential," said Buffett. "They have lost that essential nature."
Buffett said Berkshire would hold on to the Buffalo News, a daily newspaper in the New York state city of the same name, if only because Berkshire buys businesses for the long term and does not sell simply because the companies hit a rough patch.
He did not rule out having to squeeze out excess costs, including possible job cuts, or eventually shuttering the paper if it goes too deeply into the red.
(Excerpt) Read more at tech.yahoo.com ...
I like the coupons....
The government will not allow crap like the nytimes et al to fail.
Your hard work will support them whether you like it or not.
And yet, if you ask newspapermen if an alternative sustainable business model does, or even if one could exist, they will adamantly deny that such a thing is possible. To them, it is heretical. And therein lies the problem.
If I was going to start a newspaper today, it would have several new ideas. To start with, newspapers don’t need “journalists”, they need “reporters”. Even though most US universities offer them, journalism degrees are not just worthless, but undesirable.
Newspapers can survive only if they provide news not provided elsewhere, or in a form that would take hours to get elsewhere.
All newspapers are “local” newspapers, as well. Reporters need local beats, and to know the people in their beats. Local people need to see and read themselves in the paper.
Newspapers need profitability based on subscriptions, not advertising. People will pay more for a slender paper that is mostly news, instead of a fat paper that is mostly ads. An exception are coupons.
Newspapers need to be part of the community. This means that people call the newspaper when something is happening, or is going to happen. The newspaper can also shell out a little money to sponsor local events.
Newspapers aren’t rocket science. More money has to flow in than is paid out. It isn’t the newspaper’s job to ruin lives and make people angry, to tout local radicals or to twist elections.
87% of the revenue newspapers receive is from advertising. There is no way they can replace it with subscriptions.
The fact is that print newspapers are becoming obsolete because younger generations are getting their news from the electronic media and the Internet. And there are far more sources of news from around the globe. As a result, advertising revenue are being shifted to these media. Those of us in the older generations who grew up with newspapers as our main source of news are dying out and we are not being replaced by sufficient numbers of young people as readers.
Print newspapers are becoming as obsolete as the buggy whip. A number of newspapers in Europe are free and certainly in the Washington DC area we have free newspapers like the Examiner and the Express. They are fully supported by advertising.
the reporters love reading what they’ve written, however the subscribers find the content unreliable and full of total hogwash so you have to pay the readers to read it
"They have the possibility of nearly unending losses. ... I do not see anything on the horizon that sees that erosion coming to an end."
Then this:
Buffett said Berkshire would hold on to the Buffalo News, a daily newspaper in the New York state city of the same name, if only because Berkshire buys businesses for the long term and does not sell simply because the companies hit a rough patch.
So he's going to hold The Buffalo News and WPO until they go to zero? This is a see change not a rough patch. Buffett had one of the best runs in history. Guess even the Oracle regresses to the mean.
That is using the existing newspaper paradigm. It is reliant on national and international news wires that can be accessed online days before they could be printed. So obviously the news wires are outdated.
Instead, a newspaper could easily set up its own news wire, just a website, with which it could exchange original news nationally and around the world with independent sources not published elsewhere, or widely distributed on the Internet. Such a site could be set up like a file sharing site, with upload/download ratios, reliability and credibility ratings for sources, and only available by password.
Newspaper writing style also has to change. The pyramid news story format is dead. A bullet or almost-Twitter format, with a much higher story volume, “just the facts, Ma’am”, with most stories limited to a paragraph. This is already seen on the front page of the WSJ.
As far as advertising goes, much of the profits from advertising goes to the printing of advertising. If you shift away from advertising, the profits do indeed go down, but so do the expenses.
In past, I’ve even suggested the PayPal route for “grandmother” submission. Say a reporter has the SE beat, a suburb with a lot of retirees. He makes friends with a lot of little old ladies with time on their hands. They are the ones who go to P&Z meetings, garden clubs, and time consuming stuff like that. Then they phone in the highlights, with maybe a few pictures, and he credits their PayPal account with a dollar or two. It cost them a lot more to do that, but they are thrilled with the entertainment value of being published.
Most of what they send in is crap, but it is crap that grandmothers like. And she gets all her friends to play along, feeding her stories, and buying newspapers.
Newspapers can still survive, but they have to let go of how they do things today, and become more pragmatic. They can survive, but only if they can figure out how.
It still provided print newspapers, but the advantage is that the newspaper would be available to the customers no matter where in the world they were. There are other companies that provide the customer with the electronic version of the newspaper.
What you suggest would have a very limited appeal and not be profitable.
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