“I read the local paper, I read the FT, I read the Wall Street Journal, I read the New York Times, and I read USA Today.” — Warren Buffett, 2012. 

Warren Buffett is famously loath to sell businesses that are part of his Berkshire Hathaway empire. Unlike private equity practitioners, his preferred strategy is one of buy-and-hold. “Regardless of price, we have no interest at all in selling any good businesses that Berkshire owns,” he states in his Owner’s Manual. “We are also very reluctant to sell sub-par businesses as long as we expect them to generate at least some cash and as long as we feel good about their managers and labor relations.”

In 2019, he sold a small insurance subsidiary back to its founder because it was increasingly competing with other Berkshire-owned insurers. Then, in January 2020, he sold a business he loves: his newspaper business.

Buffett had been in the newspaper industry for a long time, having bought the Buffalo News in 1977 for around $34 million. In its first few years of his ownership, the paper bled red ink as Buffett slashed its price in an effort to win market share. As competitors folded, profitability grew and by 1983 it had recouped all prior losses, before going on to become the most profitable newspaper in the US. By 2000, it was the only remaining local daily newspaper in Buffalo, with 80% of the population reading it on a Sunday and 64% on weekdays. At the time, it was doing $53 million a year of pre-tax profit on a revenue base of $157 million. 

“Newspapers [were] ‘survival of the fattest’,” Buffett explained. “Whichever paper was the fattest, won, because they had the most ads…and ads are news to people. They want to know what supermarket is having the bargain on Coke or Pepsi this week. It upsets the people in the newsroom to talk that way but the ads were the most important editorial content from the standpoint of the reader. If you were looking for a job, you had one place basically to look and that was the classified section.”

By 2012, the competitive environment had changed. It was clear that the internet was a faster and cheaper way to deliver news, both traditional news and the ads that Buffett categorized as news. Yet there was still value in newspaper franchises. Charlie Munger analogised the industry to an oil well that depletes over time, but throws off cash as it does so. In the period around 2012, Buffett acquired 28 additional daily newspapers for a sum of $344 million. They included the Tulsa World in Oklahoma, the Richmond Times-Dispatch in Virginia and his hometown paper in Nebraska, the Omaha World-Herald.

Over the next eight years, Buffett squeezed what he could out of these papers even as conditions deteriorated further. The industry “went from monopoly to franchise to competitive to…toast.” When he eventually sold in 2020, it was for a consideration of only $140 million.

But not all newspapers were toast. In particular, business papers continued to do quite well. The Financial Times saw its revenues dip in 2020 as the pandemic took hold, but revenue quickly rebounded to £458 million in 2022, 12% above the 2019 level. Operating profits remained stable at between £28 million and £31 million per year. Dow Jones, which operates the Wall Street Journal and Barron’s, posted circulation revenues of $937 million in its financial year to June 2022, up 34% from 2019. 

So is there a secret to business newspapers that makes them a more sustainable business? And as other sources of business news and analysis proliferate (including Substacks such as this one) what is the outlook for flagships like the Financial Times and the Wall Street Journal? We’ve explored Bloomberg here before; this week, let’s take a look at the financial press.