Warren Buffet, Doug Manchester, Tom Gores buy newspapers

Now the nabobs can natter in the newspapers they have purchased

All of these papers have been bought by millionaires and billionaires.
  • All of these papers have been bought by millionaires and billionaires.

Fat cats are buying newspapers. Should journalists rejoice? Not yet. The nabobs’ widely varying strategies for turning around their papers have not yet been tested.

Warren Buffet

Warren Buffet

Warren Buffett, the multibillionaire wizard of Omaha, has his company, Berkshire Hathaway, buying newspapers, which he once said were dinosaurs. Jeff Bezos, the Amazon.com founder who is worth $28 billion, bought the Washington Post. Billionaire John Henry bought the Boston Globe.

Billionaire Tom Gores’s Platinum Equity bought the Union-Tribune but quickly abandoned ambitious plans to expand a newspaper empire and sold the U-T to multimillionaire Papa Doug Manchester, who then picked up the North County Times to create a monopoly in county daily newspapers. The U-T has just bought eight county weeklies and proclaimed it will concentrate on “hyperlocal” or community-dominant news.

Tom Gores

Tom Gores

Aaron Kushner, Eric Spitz, and well-heeled silent partners bought the Orange County Register and shocked the industry by doubling its reporting staff. Then the entrepreneurs launched a new paper in Long Beach and recently bought the Riverside Press-Enterprise.

However, these nabobs are buying papers cheap. Buffett told Berkshire shareholders that cash earnings from papers will recede over time but the investments should pay off because of the low prices he paid. He is buying medium- and small-sized papers.

Doug Manchester

Doug Manchester

Bezos paid a low price for the Post and admits newspapers are a “challenged business.” His strategy for turning around that paper is not yet clear. Henry paid only $70 million for the Globe. The print editions of Manchester’s U-T are losing circulation alarmingly, but the real estate mogul expects to make money on electronic platforms. Kushner is betting big that presenting the news intelligently — most importantly, in print editions — will pay off. Skepticism abounds.

Aaron Kushner

Aaron Kushner

As the Pew Research Center’s “State of the News Media 2013” points out, there are positives in the industry. Stocks of several media companies have gone up stoutly, and sellers of newspapers are getting better prices than they formerly did. About one-third of newspapers are setting up so-called paywalls — that is, preventing internet users from accessing articles without shelling out money. Thus far, this seems to be working well, says Pew, particularly at nationally distributed papers with special audiences, such as the Wall Street Journal and New York Times. However, other dailies are now backing away from paywalls.

Jeff Bezos

Jeff Bezos

Unfortunately, according to Pew data, the bad news outweighs the good. Print advertising fell 8.5 percent last year — the sixth straight year of declines. Digital advertising, which is now only 15 percent of total newspaper ad revenue, has grown weakly the past two years “and does not come close to covering print ad losses,” says Pew.

Newspapers have snagged readers on mobile devices such as smartphones, but advertising hasn’t come through. Papers such as the U-T boast about the many platforms they operate on, but as Pew points out, those platforms require a lot of money and frequent updates.

John W. Henry

John W. Henry

Nationally, the number of newsroom employees has dropped 30 percent since the year 2000. And Buffett warns, “Skimpy news coverage will almost certainly lead to skimpy readership.”

Newspapers’ profits are pulled down by high pension obligations. When Henry and Buffett bought papers recently, they did not assume pension obligations. Those obligations remained with the papers’ sellers.

There is little doubt that medium- and small-sized papers are doing better financially than the big metro dailies that have more online competition. That’s why Buffett, for the most part, wants the smaller papers.

But there is another side to that coin, too. In Fairport, New York, a suburb of Rochester, a company named GateHouse Media specializes in small- and medium-sized newspapers hyperlocal in the extreme. In fact, when the Union-Tribune was run by the Copley family, GateHouse paid more than $380 million for money-losing Copley papers in Illinois and Ohio. It was the smartest move Copley management ever made but only one of many dumb moves GateHouse made.

Backed by a onetime Wall Street darling, Fortress Investment Group, which owns almost 40 percent of its stock, GateHouse went out and gobbled up small- and medium-sized newspapers around the country. It now has 408 publications, mostly weeklies. The company is proud that its losses have dropped from $673 million in 2008 to $29.8 million last year.

It piled up massive debt to buy all those papers. At the end of September, it filed for Chapter 11 bankruptcy with three times as many liabilities as assets. The chief executive officer declared that the bankruptcy was “not a reflection of any operational difficulties” at the company. Huh? The stock closed Monday at 4 cents a share.

Some optimists think that the paywall is newspapers’ savior. Gannett, the largest newspaper chain, has moved to the paywall. Ditto for newspapers belonging to McClatchy and Lee Enterprises. The New York Times is now getting more revenue from circulation than advertising. Formerly, newspapers counted on getting 80 percent of revenues from ads and 20 percent from circulation. But for the industry, 85 percent of ad revenues come from the print product, which is fading.

Some papers believe they can gain more online ad revenue by knocking down paywalls. In August, the San Francisco Chronicle dropped its paywall strategy after only four months. In October, the Dallas Morning News, one of the first regional papers to erect a paywall, junked it. An executive conceded that selling content had not created a “massive groundswell” of digital revenue.

Wall Street remains unimpressed with the future of the newspaper business. For example, McClatchy Co. has stuck to newspapers, both print and digital. The stock was selling above $50 until it bought Knight Ridder in 2006. McClatchy stock got below 50 cents in 2009 and Monday closed at $2.86.

On the other hand, Gannett keeps diversifying widely into TV. The stock got below $2 in 2009, when the future of newspapers looked the bleakest. After a rush into TV, its stock jumped and closed Monday at $28.04.

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"For some of these buyers...there are huge political and egotistical motivations that make controlling local news so attractive."

Hasn't that pretty much ALWAYS been a key motivator for publishers, going back to the first newspapers?

Certainly Bezos, in buying the Post, had to have been quite excited about becoming an instant power player in Washington. He surely didn't do it for the money. I would bet that a study of newspaper history would show that all the big newspapers were built by men (yes, it was men only in those days) with strong political views and even bigger egos. At some point the bean counters began to take over, but now that the papers aren't worth beans, they're being picked up people with an agenda other than profits.

"Balanced reporting" is a bit of a myth and an oxymoron. Newspapers have agendas, editors have agendas, reporters have agendas and all of that plays into what stories are covered and they are covered. I was a newspaper junkie back in the days when you could visit most large cities and buy two or three daily newspapers, I edited and reported for papers, scrutinized their editorial policies as a political flak, and I can't see anything in the current UT that isn't pretty consistent with what I've seen in papers from coast-to-coast.

The difference now is that San Diego has a vocal liberal community now and they have voices such as the Reader, Voice of San Diego and City Beat where they can feign surprise at their realization the daily newspaper has an editorial spin!

Bob: Centuries ago, papers were founded specifically to push a point of view. That's why you still see names like the Podunk Democrat of the Poop County Republican.

Actually, some of the wealthy paper owners MADE their money by starting the papers; Hearst is just one example. They weren't rich people buying papers that were already successful. That's more of a modern-day phenomenon.

I do think the U-T under its current management is far more blatant in pushing its agendas than newspapers in other cities. Best, Don Bauder

Hearst may have made a good profit from his papers and may have ended up richer than when he started out. But his father, George Hearst, was a very rich man himself, and bought a paper or some papers for his son to tun. Wasn't his first paper the San Francisco Examiner?

George Hearst had made millions in western mining; he was part of the initial syndicate that eventually became Anaconda Copper, and he was awash in riches. So, son W R Hearst didn't start from humble beginnings at all.

I would say that the Chandler family in LA did very well in owning the LA Times while using it to promote things that bolstered the value of their real estate holdings. And the Sulzberger family that dominated the NY Times seemed to get along very well.

Visduh: I stand corrected on Hearst. It appears he did start with his daddy's money. The Chandlers and Sulzburgers would be examples of families that made much of their money in the newspaper business. Best, Don Bauder

Don, a great piece that sums up the current newspaper situation in a few thousand words. I've not seen anything in the financial press that brings the industry into focus better, or more concisely. And as an individual investor, I'm not the slightest bit interested in buying the stocks. (Yes, there may be opportunities for short-term profits in some of them, but I don't look for that kind of deals.)

I fully agree with Bob Hudson's remarks above, except that I would not equate the Reader with a liberal community. I'm sure not a liberal, and Don Bauder and I agree far more often than we disagree. "Truth seekers" would be a more apt description.

Visduh: Actually, the owner/editor/publisher of the Reader is not a political liberal, but he is liberal-minded. That is, he is willing to have his writers express their own points of view. Our views don't have to agree with his.

Best, Don Bauder

Don, the decline in printed newspapers and books is something to regret.

The bigger question is whether the newest communications technologies are producing more people who read and think in a world that is producing greater challenges to our future quality of life than ever before.

Anon92107: You have fingered the critical question. As the vehicle shifts from printed newspapers, magazines and books, to the Web, Kindle, etc., will people still read as much as they once did, or will they read less? Or maybe more? Right now, unfortunately, it looks like reading will decline, but it's too early to make a call. Best, Don Bauder

Required reading for Papa Doug, especially the third graph in "The future of newspapers" portion. If only.......


Duhbya: He talks as if owning a newspaper carries a sacred obligation apart from making money -- then he seems to talk to the same way about owning the Red Sox. Best, Don Bauder

I noticed that, too. I do believe that he is sincere in his pledge to sustain and improve upon the Globe's journalistic strong points.

Duhbya: Yes, I believe he is committed to sustaining and improving on the Globe's strong points. If he does the same with the Red Sox, fans from all other Major League cities may be unhappy for many years. Best, Don Bauder

"Then the entrepreneurs launched a new paper in Long Beach and recently bought the Riverside Press-Enterprise." A little ahead of yourself on this one, it seems;


danfogel: I think this Tuesday item is too iffy to change what was written. As of now, it's still a deal, although the terms may change. Best, Don Bauder

Thanks for the news about news. It's a brave new world. Remember that "news" wasn't always brought to us by ad-supported corporations. Truth and profit-driven commerce aren't naturally aligned, so let's not assume our current news industry model is, as the people wearing American flag pins say, "exceptional." San Diegan's got a good dose of professional news (present company excepted) gone bad in the mayoral fiasco.

Furthermore, printing newspapers will soon enough seem like a terrible way to treat the environment, cutting down a tree that took years to grow to make land fill that will never be as lovely as a tree, just to show happened yesterday, probably.

I show my college typography students Newseum's glorious gallery of the day's front pages on-line, an example of times a-changing. They don't read our newspapers but they certainly do "consume media." They seem impressed by Newseum's lively display of small town enterprise. Editorial and reportorial issues aside, among all the other front pages the U-T just isn't a competitive product. Without getting into the rapidly evolving world of graphic design, there are papers that look like they're worth their cellulose, and our U-T is not among them.

News business has always been highly competitive, which promotes evolution. I have no idea what all that news gathering and publishing energy will evolve into, but it won't disappear. People will want to tell their story. Now they don't have to be crazy rich and own a newspaper. They can blog to the world, free. And everybody wants to know what's happening, so quality of information will always be recognized as a value. It will get sorted, billionaires notwithstanding.

rehftmann: Layout and design are lesser problems of the U-T. In its gross slanting of the news, and printing hate-filled and illogical editorials (often appearing on page one), the U-T is appealing to a fading audience. There are more Democrats than Republicans in the City of San Diego and the County is almost evenly split. By propagandizing so overtly, the U-T is driving down its own readership, and statistics show it. Best, Don Bauder

Paywalls really don't work. Newspapers have to let users view at some level (5-10 articles per month) or they won't get many online readers and anyone with a little internet savvy knows how to get past those limitations. It takes me about two minutes to read what I want to on the UT (some days less) and maybe a bit longer on the Wa. Post & NYTimes. Most of the news of the day is freely available on CNN or other sites. NY Times ads on TV boast of their coverage of happenings in NYC but unless you live there who cares? Comparing online revenues to print doesn't really make sense. Online only news does not have the costs associated with printing a daily paper and should be profitable with lower revenues. In a few more years print editions will be the buggy whips of the 21st century.

Dennis: Your view that print editions will be buggy whips is shared by many -- perhaps the majority -- in the newspaper industry. Some say give print editions another generation -- some say it won't be that long.

But newspaper companies still make their money off print. Online profits are hard to come by, and digital ad growth is slowing sharply. It's a real dilemma, and explains why companies stressing print are often worth one-tenth what they once were worth. Best, Don Bauder

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