Warren Buffett and The Buffalo News - What's Next?

Warren Buffett and The Buffalo News - What's Next?

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Warren Buffett enjoys near universal praise for everything he does. Popularly known as the Oracle of Omaha, Mr. Buffett is widely considered the greatest investor of all time as his holding company, Berkshire Hathaway, has generated eye-popping annualized returns of 25%+ over the past 30 years. Mr. Buffett has shrewdly purchased large interests in blue-chip American companies when other investors were fleeing. He owns huge stakes in Coca Cola, American Express, Wells Fargo, Fruit of the Loom and The Washington Post. Buffett also seems to have a fondness for Buffalo - he is a large shareholder of M&T Bank, his Geico opened a new $40M operations center in Amherst in 2004 and, of course, he owns The Buffalo News and serves as the paper's Chairman.

The Berkshire Hathaway operating model is quite simple - acquire safe, boring businesses that generate excess cash, send the cash to Omaha for Warren to invest in other companies, and watch Berkshire Hathaway's value rise. From the perspective of any investor - and certainly from that of a Berkshire shareholder - the Buffett model has worked flawlessly.

There is, however, a criticism of how Mr. Buffett runs his businesses. He is famously frugal - his 2001 Lincoln cruised around with the vanity plate "Thrifty" - and, when seeking out companies to acquire, he only invests in companies with equally thrifty management. Indeed, Buffett purchased National Indemnity Corporation after one brief meeting with the CEO of the company. Buffett was sold, he said, as soon as the CEO showed up late to their meeting because he was driving around looking for a parking meter with unexpired time. Said Buffett "that was a magic moment for me. I knew then that Jack (the CEO) was going to be my kind of manager." This kind of maniacal money-saving mindset can help a business save precious capital, but it can also jeopardize a business' long-term viability and value.

Which brings us to his ownership of our only local newspaper of record - The Buffalo News. The newspaper industry faces tremendous headwinds as circulation declines and younger people go elsewhere for their news. As a result, advertising revenue declines and a viscous cycle ensures - circulation declines lead to advertising declines and advertising declines lead to circulation declines. It's nothing more than the reverse of the process that made newspapers money-making machines decades ago and led Mr. Buffett to purchase The Buffalo News in 1977. So, of course, newspapers across the country are cutting costs in an attempt to maintain profitability. The Buffalo News, given it's owner and his frugal management style, is likely cutting costs even more. Unfortunately, Berkshire Hathaway only sporadically reveals details about The Buffalo News' operating condition. From annual report filings, we know that employment at the News has fallen from 1005 employees in 2003 to 822 in 2007 - an 18% cut in 4 years. It's difficult to determine which departments have suffered the most losses, but clearly the quality of reporting has to be affected as the News undergoes this transformation. Indeed, when you lose Tom Toles and roll out a new American Idol blog, you might well help Berkshire's bottom line but you surely don't help the readership of the News gain insight into the substantive issues of the day.

Of course, these cost-cutting tactics seem appropriate for a business losing traction and they seem entirely typical for a Berkshire-owned enterprise. But journalism isn't just any business - it's the Fourth Estate. And Buffalo, like almost every other mid-sized city, is a one newspaper town. So this wind-down of our local newspaper isn't like a slowdown at Fruit of the Loom or Dairy Queen - other Berkshire franchises - as it raises far-reaching issues as to how Western New York will deal with our fundamental need for news. Real news. Real insight. Real journalism.

Yes, individual blogs and other citizen journalism efforts can help supplement a primary news-gathering source but they haven't shown the ability to fully replace one.

So what's next for The Buffalo News? Is there a path back to relevancy that actually includes quality journalism?

HOlcberg

What Others Have To Say

  1. RisingDamp666

    6 ratings12345
    May 11th, 09:46

    When it sinks to the point that only a fool would turn down an offer of $5 million for it, that's the time to buy it, rename it The Courier Express, and bring journalism back to Buffalo.

    And no, Elena, you need not apply.

  2. Keith

    2 ratings12345
    May 11th, 10:57

    Interesting article but there are three different thought threads in it that can be teased apart for clarity.

    1. The Buffalo News is a profitable company. The headlines about the problems with media companies are primarily about publicly traded media companies. The newspaper business is still very profitable especially compared to many other industries, but not growing and Wall Street hates that. It is likely that the Buffalo News will survive for a long time because it is a private company. It will never again be the cash cow it was in past decades though.

    2. Real news Real insight Real journalism? The Buffalo News is a hit and miss kind of thing, but even in the pre-web 1980's I could flip through a weekday edition in 5 minutes. It is easy to criticize but there is no doubt the Buffalo News is an average newspaper.

    3. Newspapers are the fourth estate? True, but I actually think that hurt American democracy. Instead of working to get information about what is happening in the community, people outsourced that to journalists. The journalists filtered the info though, and like a game of telephone it was different in the minds of the readers than the original event. Have you ever been to a speech or seen something that was later in the news? I was shocked the time I saw Gov Pataki speak at Roswell Park and then read about it in the news.

    Newspapers are still quite profitable, so I wouldn't count out the Buffalo News just yet. I am looking forward to the day people treat them as the average source of news that they are, and get off their butt and learn for themselves what is going on in their community.

  3. urbanesque

    3 ratings12345
    May 11th, 11:03

    The decline in the relevancy of newspapers in our daily lives has been widely covered by almost all media outlets. Fast Company and Forbes both came to the same conclusion that the proliferation of the 24x7 television news channels, like CNN, MSNBC, FOX, and Headline News, have changed the entire landscape for news media. Newspapers are unable to keep up with the instant gratification and over-saturation that these channels offer. Former newspaper readers can get their news fix as things happen, this is something that many newspapers have tried to keep up with via interactive websites, local blogs hosted by the paper, amateur local reporters, and gimmicks aimed at pulling in new readers. According to Forbes and Fast Company, these tactics have only served to slow the bleeding. Newspaper readership is down tremendously throughout the world, and I believe that the entire industry will go the way of AM radio in the near future.

    I am not sure what Berkshire Hathaway will do with the newspapers that they own, I do know that they have limited the subsidization of these companies over the past few years, and I can only speculate that they will probably be sold-off to a media giant who will consolidate and close the unprofitable local papers. We have seen a movement towards recycled press (via news syndicates) over the past few decades, with only a sprinkling of local news and advertisements added to the local papers. Journalists and other professionals have left the local papers to work for more meaningful and lucrative companies, which leaves the local papers to the amateurs, sort of like our local television news outlets. There is a hierarchy in the media, and the local papers are close to the lowest rung of the ladder. This leaves us with people like Donn Esmonde and others who probably should be on their own blog instead of pulling a paycheck from a somewhat credible news outlet.

    One thing that was mentioned in the Fast Company article is the backlash towards amateur journalists from the newspaper staff. Most of the papers are closed to the outsiders, so adding a blog about American Idol, or the New Mom blog in Cleveland are safe bets, but they still create a stir with the staff. The papers cannot add more credible blogs to their papers without alienating their existing staff. So the papers are stuck and struggling, they need to move towards tomorrow, but they are struggling with the anchors of the past.

  4. completelyoverplayed

    3 ratings12345
    May 11th, 11:08

    Why doesn't someone start a citizen-based news portal. We're 75% of the way there with Buffalo Rising, just copy the infrastructure and tweak the editorial focus a bit. The online newspaper will be defined by it's editor and its contributors. Make news-gathering democratic. If enough advertising is sold, some or many of the more valuable contributors can be paid. You'll already be way ahead of the Buffalo news in terms of low operating expenses, and maybe you can pick up some of those downsized staff members from the News.

  5. Hoss

    3 ratings12345
    May 11th, 11:12

    He'll hold onto it as long is there is money to be made here in Buffalo. The kind of money one can make when the only local "newspaper of record" has the ability to not report all the facts. Take for instance that GEICO call center. It should have been located in Buffalo, where folks need jobs. Instead they take a prime piece of Amherst real estate, turn it into an Empire Zone, and he gets it built and funded by us taxpayers. Free money. Direct revenue from circulation isn't the only way one can profit from newspaper ownership.

    That said, I generally like to read the Buffalo News. There are some talented journalists on board there. I just wish they'd get a bigger sack sometimes. It's too bad they don't have any competition. That would be good for everyone. I'd like to see some online only outfit start-up and report some quality journalism here in Buffalo. I'm not talking some little one man blog either. Without the traditional printing and distributing hassles, it wouldn't be too, too costly to get one rolling. I'm surprised we haven't seen more of that yet. When the NY Times goes online only in about 7 years, that will initiate respect for the new business model. Guaranteed.

  6. NBJOHN

    2 ratings12345
    May 11th, 11:35

    Just some thoughts... Cancelled the BFLO News awhile ago. TV news and breaking news alerts across my email (at work where I spend most of my life) work very well, where the News cannot do that. Stop the presses died awhile ago. Wonder if Stop the presses will be a permanent term soon. I am paying for TV anyways, why get two news sources when I am paying for one already.

    Online sources seem to be making print news obsolete for ads and the shear depth of the news

    WGRZ seems like it does a great job "creating news"

  7. WNYMedia

    9 ratings12345
    May 11th, 12:09

    @ completelyoverplayed :

    Why doesn't someone start a citizen-based news portal.

    If you stepped off Elmwood Avenue once in a while, you would probably know its already been started. its called WNYmedia.net

  8. platt4

    5 ratings12345
    May 11th, 13:06

    WNYM- You're kidding, right? Thanks for the laugh anyway!

  9. chris69

    6 ratings12345
    May 11th, 13:44

    The Buffalo News is for all intensive purposes a DEAD business. Why?

    1) The majority of the newspaper is advertising which people can get on the internet

    2) The stories are written at a grammer school reading level (not high school, not college but probably around 3rd, 4th or 5th grade level) which makes it extremely boring to read.

    3) There isnt a single story that seems well researched and well thought out. 99% of the stories appear to have come off the fax machine as some sort of promotion disquised as news. If it comes from the Mayors office then its not journalism but public service advertising.

    4) There isnt a single story that is politically balanced. Al stories are sympathetic to more government, more taxes, more union demands and all stories are blind to criticisms of nothing being accomplished.

    For that matter when was the last time you read a story that had a libertarian or republican perspective about less government and lower taxes especially when it comes to publishing voting records.

    5) the Buffalo News isnt worth reading because it has never had the ear or the voice of the public.

  10. mybuffalo

    2 ratings12345
    May 11th, 15:02

    chris69 obviously doesn't read the editorial section of the buffalo news.. every single day there is an editorial ripping the unions or the bloated size of NYS gov't. its hilarious that every bashes the Buffalo News because they think they are smarter than everyone else and can do a better job at everything. give it up

  11. AtwaterLouse

    1 ratings12345
    May 11th, 17:16

    Keith - The Buffalo News is not a private co. It's part of publicly-traded Bershire-Hathaway.

    It is likely that the Buffalo News will survive for a long time because it is a private company.

    From Buffett's letter to B-H shareholders in 2006:

    ...In Berkshire’s world, Stan Lipsey does a terrific job running the Buffalo News, and I am enormously proud of its editor, Margaret Sullivan.

    The News’ penetration of its market is the highest among that of this country’s large newspapers. We also do better financially than most metropolitan newspapers, even though Buffalo’s population and business trends are not good.

    Nevertheless, this operation faces unrelenting pressures that will cause profit margins to slide. True, we have the leading online news operation in Buffalo, and it will continue to attract more viewers and ads.

    However, the economic potential of a newspaper internet site – given the many alternative sources of information and entertainment that are free and only a click away - is at best a small fraction of that existing in the past for a print newspaper facing no competition.

    ...Unless we face an irreversible cash drain, we will stick with the News, just as we’ve said that we would. ...Charlie and I love newspapers – we each read five a day - and believe that a free and energetic press is a key ingredient for maintaining a great democracy.

    We hope that some combination of print and online will ward off economic doomsday for newspapers, and we will work hard in Buffalo to develop sustainable business model. I think we will be successful. But the days of lush profits from our newspaper are over.

    http://www.berkshirehathaway.com/letters/2006ltr.pdf

  12. eliotspitzer

    6 ratings12345
    May 11th, 17:35

    wnymedia -

    you made a typo, i believe. i thought you guys had an office ON elmwood avenue. or did you guys shut that down?

  13. BuffaloNY

    9 ratings12345
    May 11th, 17:44

    I like how this website constantly rips on the News saying it's not real journalism. The Buffalo News is Buffalo's only source of news, not Buffalo Rising. The Buffalo News sells millions of papers per week, compared to the couple hundred Buffalo Rising distrubutes for free at coffee shops. Yeah Buffalo Rising has some nice opinionated articles once in a while, but 90% of what you guys post on this website is garbarge. And the Buffalo News actually pays their journalist when they're suppose to.

  14. WNYMedia

    6 ratings12345
    May 11th, 18:15

    @platt:

    What's to laugh about? They asked for a citizen run "news" portal... I said it exists. Sorry it doesn't blow sunshine up everyone's ass like this website does... But feel free to supply the sunshine for us

  15. Buffalopundit

    2 ratings12345
    May 11th, 20:53

    The Buffalo News doesn't need a path to relevancy. Its relevance is automatic. It's the only paper in town, as you point out, and it's accessible to anyone with 50 cents, as opposed to internet sites and blogs, which have the attention of 2% of the regional population.

    While I'm sure Buffett doesn't care, it's funny that the post mocks him and B-H's frugality, as it's partly indicative of a mind-set that simply doesn't exist in this area. While Buffett rides around in an aging car and reimburses his company for personal calls, some local startups buy $1,000 coffee machines. Chacun a son gout.

    The Buffalo News is a daily paper that covers what happens in a region of over a million people. Story choices are one thing, but the News is active in the community whether you agree with it or not. It has taken some unpopular positions in its editorials, but it always has the community's best interests at heart.

    While some of what the News does is sub-par, it is a professional paper that's populated by smart, insightful, hard-working journalists who want to inform the public about what's going on. Matt Spina? Andrew Galarneau? Mike Beebe? Many, many more. For every American Idol liveblog, there's an in-depth series on the bike path killer or state reform.

    There are some things the News could do better - nobody's perfect. Frankly, I think this town is in desperate need of a NY Post-style edgy daily tabloid. In any event, all of the news outlets and blogs and indy weeklies in town do what they can to inform, educate, entertain, and provoke thought.

    I wish I could do it and be an Omaha-based gajillionaire, too.

  16. Buffalopundit

    6 ratings12345
    May 11th, 21:01

    And as for the critiques of WNYMedia - we're not perfect either. Turns out we didn't need an office on Elmwood because everything we do is easily done from home. In the end, though, we do remain a portal offering local news and opinion from average people who simply signed up to do it. If pratt or eliotspitzer wanted to, they could start a blog about how awesome Buffalo Rising is and how fat I am or stupid WNYMedia is. It's all good.

    The point is that the internet gives voice to many people who, in the past, had no outlet. If people choose to read it, that's even better. If the writer chooses to try to implement change as well as write, then something special has happened.

    Definitely we deserve ribbing, as does everybody. But most of our contributors are out there in the community trying to implement change, whether it's something as micro as improving the Seneca Street corridor to something as big as the CTRC, Broadway Fillmore Alive, Buffalo Homecoming, Revitalize Buffalo, or exposing East Side flipping. We all try and we fail more often than we succeed. With more help, there'd be more success.

  17. enamel

    2 ratings12345
    May 11th, 22:09

    It's difficult to compare this site to the Buffalo News or WNYMedia. All have varried business models and try to attract different audiences. If you want to read factual news stories stick with the Buffalo News or WNYMedia. Sadly, BRO's mainstay of late is promoting the popularity of the same 4-5 citizens (any regular reader knows which 4-5) who they think are driving positive change in this city, subsequently deteriorating the quality of news being reported.

  18. AtwaterLouse

    1 ratings12345
    May 11th, 23:00

    Matt Spina? Andrew Galarneau? Mike Beebe? Many, many more. ...

    I'd add in Vanessa Thomas, David Robinson, Michelle Kearns, Tom Precious, Gene Warner. Professional journalists who at least make a good effort at presenting attributed facts, citing sources, separating fact from opinion, including multiple sides of controversies, and following up stories as they unfold. "Citizen journalists" are often notoriously weak at all of those.

    Where the News is weakest currently is their columnists and editorial writers. There's definitely some people writing opinion on the web in WNY better than that bunch. Also quite a few who do it even worse, of course. Which brings us to this article.

    BluDevil's topic here was potentially good - what TBN is doing well, what it's not, directions it's going, etc. But he made a very weak case, saying the TBN lacks relevance and quality journalism - but not even trying to back those opinions with meaningful specifics. Tom Toles leaving for the Wash Post was hardly a black eye for them.

    ...Its relevance is automatic. It's the only paper in town, ...

    Not only the only paper in town, but among the leading U.S. papers in percent of market penetration - both for print editions and their web site. They must be doing some things right.

  19. georgethomasapfel

    1 ratings12345
    May 11th, 23:28

    Indications are The Buffalo News is working on expanding their online presence, recently they advertised for new positions of a webmaster and web designers. The print medium to survive has to adapt to the ever-changing media landscape. "Stop the presses" and two-newspaper towns are a thing of the past, people are now able to get instant news gratification on the internet.

  20. Mark144

    4 ratings12345
    May 12th, 00:00

    You people are absolutely ridiculous. You are rank amateurs. The Buffalo News -- and any major newspaper -- has professional journalists with college journalism degrees and decades of experience. So yes, that makes them far more qualified to report on ANY issue than anyone at Buffalo Rising, WNYmedia.net or anywhere else where you're just on a computer in mommy's house in the basement in your pajamas.

    Get your facts straight: The News' reporting staff is not down. Most of the difference is when they put in their new presses a couple years ago and many older, computer illiterate pressmen retired. Sure the News lost Tom Toles but he went to the Washington Post. That's like a professor leaving UB to go to Harvard. It's a feather in the cap for UB just like it is for the News.

    The Courier closed in 1982 people. It's not coming back. Most cities like ours have ONE -- count it -- one paper. And plenty of bigger ones do too like St. Louis, Cleveland, Kansas City, Phoenix, etc. Don't believe the one-paper town garbage constantly spun on radio. It's a fallacy.

    You want quality journalism? Where did we learn about the Bike Path Rapist or the failings of Sabres management of the Living Poor series or dozens of other projects we've read? In the News, not with Ch. 2's red coats or on radio. Yes, I have friends that work there (i'm in the private sector) but do you know how many awards The News has won? Dozens of state and national awards. I said DOZENS. The sports section just got named a national top 10 paper for its size.

    Do any of you people ever get out of mommy's basement and go to other cities? Read some other papers, then come home and tell me if you still think the News is so bad. The comparisons are eye-popping. Try it sometime -- if any of you have a driver's license or money to buy a plane ticket someday.

    The News lacks relevance? It's only the No. 1 media source in town. Gimme a break.

    Hope you enjoy your night's sleep in the cold, drafty basement. What a joke.

  21. RisingDamp666

    2 ratings12345
    May 12th, 01:48

    So, Mark144, does this mean you're finally going to subscribe?

  22. NBJOHN

    3 ratings12345
    May 12th, 09:37

    Mark144

    "Us people" touch a nerve with you?

    yikes.... it's a f'ing paper... Becuase it is old news, by the end of the day my doq would crap on it... If I subscibed

  23. JohnnyWalker

    1 ratings12345
    May 12th, 09:44

    Thank God for BBC America and the McClatchy Newspapers. Where you can find out what is really going on in the world.

  24. Sal

    3 ratings12345
    May 12th, 09:47

    I became frustrated with The Buffalo News after sending in several letters to the editor with no response:

    1. The wedding section always reminds me of present-day discrimination. If you call to place a picture in you will encounter these old battleaxes whom guard every word they say in telling you that only heterosexual old wealthy families matter in Buffalo.

    2. I believe it is relevant, when reporting that the Mayor and the Fire Union President are having a spat, that we tell the public what is paid for in firefighters' benefits, specifically cosmetic surgery for their spouses. It's also important to let others know WHY the Buffalo Fire Union doesn't want to be privatized, allow volunteers in, or use controlled burns to rid the city of abandoned structures.

    3. In light of Buffalo's Common Council going against Carl Paladino's statement about the school board's superintendant hiring practices, it's interesting to discuss the fact that an admissions director at UB Law told me that 18 out of 100 first-year law student seats were reserved for minorities only and if not filled, they go empty.

    4. The Buffalo News also slammed a volunteer architectural salvage group in a one-sided article by Emma Sapong. This is not in reference to Buffalo RE/USE but rather Buffalo Architectural Salvage Committee which was started years before the former. There's not been any mention of this group since, not even when it paid for the live tree in Soldier's Place after the October Storm. The Olmstead Parks Conservancy got all the credit.

    I could go on but don't want to be boring.

    ARTVOICE has put out some great well-researched articles over the years also. It's advertising is a much better deal for urban apartment rentals.

    In any event, I have great respect for Warren Buffett and his wife Doris. They are true salt-of-the Earth hardworking people from what I've seen.

  25. BuffaloBloviator

    1 ratings12345
    May 12th, 12:43

    This is my advise to a newspaper that is concerned with their future:

    1) Abandon the liberal bias that exists in non-editorial sections of most newspapers. This practice makes a large segment of the population feel disenfranchised. There is a silenced majority out there that resents major media for this reason. Also, political correctness further filtered through liberal sensibilities results in most of the ink winding up on the editing room floor. There isn’t much a journalist can leave in anymore. Note: Buffalo may be the exception for this advice because here we can play to the crowd. Readership is very high here.

    2) Define the products and services that you actually are in the business to produce. Most newspaper people that I know think they are literally in the newspaper business. It amazes me how many journalists are afraid that the Internet is making them irrelevant because the Internet is not printed on paper. They should realize that newspapers are in the content business and that they are equipped with capacities that cannot be easily equaled. The other business that newspapers are in is the advertising business. Think about it. Revenues are down but readership is not. The Buffalo News enjoys an 86% readership. I believe that is the highest in the country. That tells me that the content and readership are not the problems. The problem is that business has other options for advertising now. The newspapers have been late to get involved with innovating Internet advertising or partnering with other Internet advertising firms. This should be their highest priority. If newspapers had properly defined themselves earlier on, they could have been early partners in the Internet revolution.

    3) My third piece of advice. Newspapers need to be managed by entrepreneurs. Quit being a victim! As the old saying goes, the only constant is change. Change provides new opportunities for creative aggressive risk-takers. Rolling yourself up in a ball because the old business model is getting stale is not the model for success. Newspapers should be hiring entrepreneurs to man skunk-works projects. Some of these trial balloons will be the business models of the future. Embrace the future and lead the industry forward.

  26. RisingDamp666

    0 ratings12345
    May 12th, 19:49

    "Skunk-works projects", BuffaloBloviator? Like what? A new linotype machine?

  27. eliz

    2 ratings12345
    May 12th, 22:34

    There are many Buffalo News writers I admire. Their coverage of local news is at times excellent, at times inadequate, but compared to other papers in similar markets, we could do far, far worse. Some of the comments here seem to be just kneejerk bashing.

    The News's online presence is much improved. There is simply no way any of the local websites and blogs could begin to replace what they do locally; indeed a good portion of the stuff I see here and on other blogs has been sourced from the News (even if not credited). For my national, international, gardening, and arts news I look to other sources.

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