Buffett says “No”: Another nail in the newspaper coffin?

May 5, 2009

Investment guru Warren Buffett has made a damning pronouncement on the future of newspapers and, given the authority with which he speaks, it might trigger another downward spiral in the value of news stocks.

Speaking at the annual meeting of his Berkshire Hathaway group, Buffett responded to a question from New York Times business blogger Andrew Ross Sorkin on behalf of shareholders and readers of his DealBook blog.

I (somewhat selfishly) asked this question from Dennis Wallace:

“Given the current economic conditions in the newspaper and publishing business, can you please provide some of your thoughts on its impact on Berkshire. Given, that our investee, Washington Post Company has had a substantial decline in its stock value, is it still a good use of capital? And, given the ‘cheap’ trading prices of newspapers in the current climate, would Berkshire consider purchasing additional newspapers to add to its Buffalo News and Washington Post properties? At what price does it become compelling to invest in the newspaper business? Or is there no price where it becomes compelling in today environment?”

The answers from Mr. Buffett and Mr. Munger were not very encouraging for those in the newspaper business.

“For most newspapers in the United States, we would not buy them at any price,” said Mr. Buffett, whose company owns a large stake in The Washington Post Company. He added that he sees the possibility of “nearly unending losses” for newspaper companies. Mr. Munger called the industry’s decline “a national tragedy” and said that “what replaces it will not be as desirable as what we are losing.”

That just about says it all really, but there’s a bit more. This from another American blog with the long and confusing name The end of elite liberal media empires and the rise of citizen journalism:

“As long as newspapers were essential to readers, they were essential to advertisers,” he said. “But news today is now available in many other venues,” [Buffett] said.
“….These monopoly daily newspapers have been an important sinew to our civilization…” said one of Buffett’s executives at the Berkshire investors meeting.

The blog with the long name appears to be some form of rightwing citizen journalism hybrid, but there’s not much info about it.