Buffett: “The math is tough” on newspapers

Warren Buffett has been a longtime investor in newspapers.  He owns my hometown Buffalo News, along with being a major shareholder at the Washington Post.

But even he is beginning to understand that newspapers are on their way out.

The reason, he says, is that in the past, 75 percent of newspaper revenue came from advertisements.  Now, with Google and free advertising systems like Craigslist, newspapers are hurting.

The effects are being felt even at the Stony Brook Statesman, which lost 50 percent of its ad revenue in the last year, resulting in the current financial crisis. But I digress.

Buffett is one of the old guard, the really rich guys that used to read the newspaper every day and assume that most people stil do.  But Buffet got a peek at the books, and realized that things aren’t how they used to be.  The troubling question is, how long will it be before he pulls the plug altogether?

The Buffalo News is, in my opinion, a safe investment for a few years.  There is no news website that covers local news and sports the way that the Buff News does, and sports is an important aspect in a drinking town with a sports problem.  There is no ESPNBuffalo, although there could be (Bills, Sabres, Bisons and a rich sporting culture).  There is no Patch, although this would really cover the suburbs and put the weeklies out of business.

In other words, The Buffalo News still has a monopoly on the news aspect (ads are, of course, another story–the internet is everywhere).  The question moving forward is, how much is that worth to people? 

Only time will tell.  Local papers will have to take the initiative and be proactive in business if they want to stay alive.

To come: Musings on Paul Gillin’s  How to Save Local Newspapers

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