Net Interest - The Business of News
“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. Subscribe to Net Interest to read the rest.Become a paying subscriber of Net Interest to get access to this post and other subscriber-only content. A subscription gets you:
|
Older messages
Monetising an Algorithm
Friday, December 15, 2023
The Story of FICO
Battle of the Buttons
Friday, December 8, 2023
How PayPal, Amazon and Shopify are Changing the Checkout
Lenders of Last Resort
Friday, December 1, 2023
The $1.3 trillion institution that backstops American banks
The Data Exchange
Friday, November 24, 2023
How the Market for Financial Data Changed
Slicing and Dicing
Friday, November 17, 2023
How Apollo is Creating a Deconstructed Bank
You Might Also Like
Longreads + Open Thread
Saturday, May 4, 2024
Shorting, Archegos, Journalism, Mercenaries, Rust, Moonshots, AI, Reformation Longreads + Open Thread By Byrne Hobart • 4 May 2024 View in browser View in browser Longreads In The New Yorker, Clare
‘Forever war’
Saturday, May 4, 2024
Bloomberg Weekend Reading View in browser Bloomberg College and university administrators around the US called the police on protestors this week, looking to tear down encampments and, in the case of
🇺🇸 Europe vs. the US
Friday, May 3, 2024
OECD predicted that the global economy will pick up | US job numbers weren't as high as expected, but they're not to be scoffed at | Finimize TOGETHER WITH Hi Reader, here's what you need
Too much data
Friday, May 3, 2024
Bloomberg Evening Briefing View in browser Bloomberg Wall Street traders trying to front run the Federal Reserve should be happy this week is finally over. Having pulled money out of credit and crypto
Will your debt burden your loved ones when you die?
Friday, May 3, 2024
Here's how you could secure your family's future. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Harry's Rant 5-3-24 Millennials Go Boom?
Friday, May 3, 2024
image Harry's Rant May 3, 2024 We've had the greatest, longest market bubble ever... But what goes up must come down. What will the recovery look like? In this Rant, Harry Dent explores this
The Private Equity Machine
Friday, May 3, 2024
From Formula One to Six Nations: How CVC Does Private Equity ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Panic Patterns - 1987, 2020 and 2024? {VIDEO}
Friday, May 3, 2024
The following is a third-party sponsored message. It should not be considered a recommendation or endorsement by HS Dent Publishing. May 2024 Edition of The Market Timing Report Watch this special
62 Nuclear Plants Send Uranium Prices Soaring 74%
Friday, May 3, 2024
The following is a third-party sponsored message. It should not be considered a recommendation or endorsement by HS Dent Publishing. Reactors smoking 62+ Nuclear Reactors Under Construction In America.
The $26 billion bid
Thursday, May 2, 2024
Bloomberg Evening Briefing View in browser Bloomberg Sony Group and Apollo Global Management are said to have made a $26 billion proposal to buy Paramount Global, the owner of CBS and MTV. The offer