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May 29, 2012 • eBooks

Warren Buffett Sees a Profitable Future for Local News

Think books have a cloud of doom over them? It is a beautiful sunshine-y day compared to the forecast for newspapers. AOL’s local news experiment Patch is imploding, and newspapers are struggling badly to convert free online readers to subscribers via paywall and other means. Despite all the ugly news, there are some that see potential; in fact, Warren Buffett has announced that Berkshire Hathaway will be investing in several newspapers!

From The Verge and Bloomberg:

Warren Buffett, whose Berkshire Hathaway Inc. (BRK/A) struck a deal this month to acquire 63 newspapers, said he may buy more publications as the industry rethinks whether to offer free content on the Internet.

“This is an unsustainable model and certain of our papers are already making progress in moving to something that makes more sense,” Buffett wrote in a letter to editors and publishers of Berkshire’s daily newspapers. “We want your best thinking as we work out the blend of digital and print that will attract both the audience and the revenue we need.”

Buffett is adding to Berkshire’s newspaper holdings with the $142 million deal announced May 17 for Media General Inc. (MEG) publications including the Richmond Times-Dispatch of Virginia. The billionaire, who bought the Buffalo News in 1977 and said in 2009 that newspapers have the potential for unending losses, is now betting that papers with a community focus can profit as they change their models.

 

This is huge for local newspapers. If Buffett’s investment helps these papers turn a profit, this could lead to a model that other papers can replicate. And it makes sense that the focus is on local news, since there’s a niche there worth pursuing.

When I first read this news, I started thinking about my childhood, and how many papers my parents read when I was a kid. We received three papers: the local New Jersey paper, the New York Times, and The Wall Street Journal. I am willing to guess that most households were fairly similar, with one local paper, and maybe one or two national ones. Of the two, I would argue the local paper is the more important one. If the New York Times wasn’t available on vacation, my parents read USA Today or something similar. But even on vacation down in Cape May, NJ, they went out of their way to seek out the local paper. The national news is the national news, but local papers are often so specific to the area it was important to skim through it.

Even today I see a similar pattern in my life. I pay for The Wall Street Journal and Businessweek because it’s part of my professional life. But Sarah reads NJ.com religiously because she likes to stay on top of the local news. If NJ.com put up a paywall tomorrow, we would be paying for it. The Wall Street Journal is nice, but they aren’t reporting on local events, crime, traffic changes, town politics, etc. This is a global world, but what happens down to street is just as, if not more important, to everyday life.

It will be very interesting to see how Warren Buffett plans to make struggling local papers profitable. I think over time the majority of subscribers will be willing to pay for access, for the reasons I mentioned above, but the hard part is getting from the initial pushback to a base of paying readers. Perhaps tie-ins with daily deals sites, or a partnership with Nixle to expand coverage of local traffic, weather, and police alerts? There is a lot of potential here, and I am looking forward to see if this investment reinvigorates local reporting!

 

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