The Media Oxpecker: Why Warren Buffett is Investing in Newspapers Instead of Facebook

may 18, 2012  01:20 pm
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Every week we round up industry news you may have missed while you were going Hollywood on us.
  • Does Warren Buffett's $142 million purchase of 63 newspapers from Media General mean the legendary investor sees growth potential for newspapers? Not quite:
    [Ken] Doctor notes that the deal includes an enormous loan and credit line to the newspapers’ former owner, Media General, in which Berkshire Hathaway will earn 10.5 percent. Buffett’s company also obtained stock warrants that will likely pay out handsomely as Media General works on becoming a full-time broadcasting company. But what of the newspapers themselves? Doctor says that Buffett got them for a steal, noting that they sold on average for about $2 million a pop — or the price of an expensive home in each of the towns where they’re printed.

    That 10.5% loan, at a time of record low interest rates, is where Buffett will get the most return on his investment, regardless of how the newly-acquired newspapers perform in the years to come. His investment in battered-down Bank of America was structured with a similar interest guarantee not available to ordinary folk.

    Further, these "small-ish" papers occupy a unique sweet spot in the media landscape, says Gawker's Hamilton Nolan:
    There are only so many struggling newspaper chains of reasonable size out there, meaning that they have a certain scarcity that can be attractive to the ultrarich. Their price is piddling, compared to their potential influence. It's no longer just the big papers that can envision a safe, comfortable future in the welcoming arms of a rich savior who's willing to write off their steady losses (and, crucially, to abandon the old illusion of turning papers into profit centers that afflicts the immediate past generation of newspaper buyers) in exchange for the validation of being a real live mogul.

  • "The younger the person you ask, the less likely it is you'll find that link between wanting to know what’s going on and grabbing a paper or opening up a news website," says Stijn Debrouwere in a piece that falls in the 'if you read nothing else this week read this' category. "If things that are not journalism entertain, inform and facilitate agency better than things that are, don’t bet on journalism to thrive."

  • The financial woes of the U.S. Postal Service are forcing magazine publishers to weigh alternatives, reports Lauren Kirchner.

  • 52% of media professionals abandon websites when they hit a paywall.

  • New York Times buddies Brian Stelter and David Carr on how we do media now:
    I keep telling myself not to care about the microscoops," [Stelter] noted with a hint of exasperation. Carr, the veteran, seemed less concerned. "Consumers don't even know where the news came from," he argued. "Scoops are fleeting points of pride for the reporters only. The race to be first, especially in commodity news, is not nutritiously advantageous to readers."

  • We won't be discussing a certain IPO today, instead we'll point out General Motors' decision to stop advertising on Facebook, "after deciding that paid ads on the site have little impact on consumers' car purchases." More from Reuters:
    GM's decision followed Facebook officials' failure to convince top marketing executives at the U.S. automaker of the benefits of Facebook's paid ads at a meeting that took place in the past few weeks, people familiar with the meeting said on Thursday. That was after Facebook officials focused more on touting the social networking website's free pages, the sources said. "It kind of backfires on them in a funny way," said one of the sources, who asked not to be identified, of the emphasis on the free pages.

  • Some, but not all, bloggers qualify as journalists under Oregon's shield law, says the judge who ruled in November that "investigative blogger" Crystal Cox didn't qualify.

  • "The hard part of solution journalism is agreeing on the problems," writes Jonathan Stray.

  • With the closing of Seattle news website PubliCola, The Stranger's Eli Sanders asks, "Is online local news a dead business model?"

  • 5 tools local publishers can use to improve online ad sales.

  • Want high engagement on Facebook? Offer coupons.

  • Grammar geeks and fans of copy-editing literature will enjoy this New Yorker post.

  • And finally, don't learn to code, just learn to write. Period.

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