Newspapers are yesterday’s news in a digital world, or so many believe. Warren Buffett, one of the world’s savviest investors, begs to differ.
Richmond-based Media General said Thursday morning that it was selling 63 daily and weekly newspapers, including its flagship Richmond Times-Dispatch, to Buffett’s Berkshire Hathaway for $142 million in cash.
The deal continues Buffett’s long infatuation with newspapers. He was an early investor in (and remains a major shareholder of) the Washington Post Co., on whose board of directors he has served. He has owned the Buffalo (N.Y.) News for decades.
Last fall, Berkshire bought the Omaha World-Herald, Buffett’s hometown paper, for a hefty $200 million. Although many chalked up that purchase to sentimentality, the 81-year-old “Oracle of Omaha” said he was serious about investing in newspapers.
“I think there is a future for newspapers that exist in an area where there is a sense of community,” Buffett told Berkshire’s annual shareholders meeting this month. “We may buy more newspapers. I think the economics will be okay, but it will be nothing like the old days.”
That much has been obvious in an industry that has been racked by years of falling profits, fleeing advertisers and massive newsroom layoffs. Over-leveraged chains such as Chicago-based Tribune Co. have entered bankruptcy protection.
On the other hand, even with all their well-documented troubles, few daily newspapers have folded amid a recession that has ground down other industries. Many newspapers, especially those outside metropolitan areas where competition for readers and ad dollars is most intense, still generate profits, albeit at lower levels than in the boom years of the 1980s and 1990s. They also have valuable real-estate assets and printing operations.
“In towns and cities where there is a strong sense of community, there is no more important institution than the local paper,” Buffett said in a statement Thursday about the Media General purchase. “The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”
Some, including Buffett, also see hope in charging for newspaper content online.
The sale of the Times-Dispatch is especially surprising given that Media General’s identity and history have been so closely associated with the paper. It was founded as the Richmond Dispatch in 1850 and became one of the leading exponents of the Confederate cause during the Civil War. It was the only paper to survive the economic devastation that followed the war.
It became the Times-Dispatch in 1903 with the merger of the Dispatch with its rival Richmond Times, whose owner, Joseph Bryan, was the patriarch of the family that still controls the company. For a century, it has been the semi-official voice of the establishment in Virginia’s capital.
Media General was formed in 1969 as the company expanded into radio, broadcast and cable TV, and printing and newsprint. It said in a statement Thursday morning that it intends to focus on its 18 TV stations — located mainly in the southeast — and its digital operations.
Among the dozens of newspapers Buffett is acquiring is the Manassas-based News and Messenger.
However, another major Media General-owned paper, the Tampa Tribune, isn’t part of the sale. The company said it is considering a separate sale of that paper.
The deal includes an agreement in which Berkshire Hathaway will provide Media General with a $400 million loan and a $45 million revolving credit line.