Why is Mr. Buffett buying newspapers? Is he just collecting quaint old businesses out of sentimentality, like someone might collect old baseball cards? I don’t think so.
Yesterday Christine Haughney of the New York Times wrote “Three years after telling his shareholders that he would not buy a newspaper at any price, Mr. Buffett has moved aggressively into the business, buying 63 papers and revealing a 3 percent stake in Lee Enterprises, a chain of mostly small dailies based in Iowa.” (http://nyti.ms/MnAtpX)
What has changed in three years? Well for one, given the steady downward spiral of the newspaper industry, newspaper companies are certainly cheaper to buy these days. Buffet himself is somewhat vague about his motivations:
“I do not have any secret sauce,” Mr. Buffett said in a phone interview. “There are still 1,400 daily papers in the United States. The nice thing about it is that somebody can think about the best answer and we can copy him. Two or three years from now, you’ll see a much better-defined pattern of operations online and in print by papers.” (Haughney, NYT, ibid)
I believe this to be a bit disingenuous. Buffett is picking primarily local newspapers, ones with deep roots in the community. This isn’t sentimental, this is a business strategy. And I don’t think it has to do with faith in the resurrection of print journalism.
Local newspapers have powerful assets, currently undervalued and underutilized, that can be leveraged in a digital world. They have strong brand identities, longstanding ties to the community, a loyal readership, and rolodexes full of advertisers.
The smart money is on those who make this connection, who understand that news is part of an advertising ecosystem. Gannett is moving aggressively to capture the local business advertiser with Gannett Digital Marketing Services (and ShopLocal). Patch.com is steadily growing its hyperlocal news network.
There is value in those small local newspapers, but the value isn’t the paper itself; it’s in the interplay of valued content, consumer attention, and relationships with local businesses.