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Lilla Zuill, Jonathan Stempel03 May 2009 09:47
Warren Buffett is fond of newspapers—he reads five a day—but the billionaire investor warned shareholders of his Berkshire Hathaway that the reeling industry may never recover because it lacks a sustainable business model.
At Saturday’s annual meeting of Berkshire, which owns the Buffalo News and has a big stake in the Washington Post, Buffett said that as readership falls, so does the attraction of newspapers for advertisers, and for investors in the companies that publish them.
“For most newspapers in the United States, we would not buy them at any price,” Buffett said. “They have the possibility of nearly unending losses.
I do not see anything on the horizon that sees that erosion coming to an end.”
Many US newspapers have lost 20% or more of their advertising revenue as changes in technology and reading habits shrink circulation and more readers to get their news online.
Several newspapers in large US cities have closed in recent months, and the future of the money-losing Boston Globe, owned by the New York Times Company, remains up in the air.
“Twenty, thirty years ago, they were a product that had pricing power that was essential,” said Buffett.
Buffett said Berkshire would hold on to the Buffalo News, a daily newspaper in the New York state city of the same name, if only because Berkshire buys businesses for the long term and does not sell simply because the companies hit a rough patch.
He did not rule out having to squeeze out excess costs, including possible job cuts, or eventually shuttering the paper if it goes too deeply into the red.
“On an economic basis you should sell this business. I said I agree 100% but I am not going to do it,” he said. “The union has been cooperative in having an economic model that will at least give us a little bit of money.”
Charlie Munger, Berkshire’s vice-chairman, called the decline of the newspaper industry “a national tragedy”.
“What replaces it will not be as desirable as what we are losing,” he said. - Reuters
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