In among all of Warren Buffett’s famous annual comments to his shareholders, amidst the success of the business and the announcement that he was looking for his own replacement, were his comments on the newspaper industry. It started with the statement that "Not all of our businesses are destined to improve profits." Berkshire (BRK-A) owns the Buffalo paper. He went on to says that "most newspaper owners realize that they are constantly losing ground in the battle for eyeballs".
Although many newspaper companies like The Tribune (TRB), The New York Times (NYT), and McClatchy (MNI) are trading at multiple year lows, there has been some hope that their online properties could fill in for the loses of circulation and advertising at their newspapers. A look at the earnings of these companies and others in the business would indicate that this is a long way off, if it happens at all.
What can newspapers companies do? One thing would be to sharply cut back circulation so that only the most profitable customers received the printed paper. The magazine industry has been doing this kind of retrenching for years. The marginal customers can read the paper online and pay for its by looking at advertising or ponying up for premium content.
It will take something radical to get Wall St. back in the newspaper industry’s corner, and it has to happen very soon.
Douglas A. McIntyre
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